-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M1kL9/pbD7jgQIonDNkj6gWWcQLWr6pdpeTH0jpm+3ZeGtiBV67a2SwB37MSgMEw vaaoLMSibdnDHRcZeZyedA== 0001027574-01-500021.txt : 20010815 0001027574-01-500021.hdr.sgml : 20010815 ACCESSION NUMBER: 0001027574-01-500021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH SHORE AGENCY INC CENTRAL INDEX KEY: 0001067125 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 113399772 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-15867-42 FILM NUMBER: 1708617 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: C/O OUTSOURCING SOLUTIONS INC STREET 2: 390 SOUTH WOODS MILL RD STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN RECOVERY CO INC CENTRAL INDEX KEY: 0001058629 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 520937211 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-34 FILM NUMBER: 1708622 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UCO PROPERTIES INC CENTRAL INDEX KEY: 0001058627 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 941728881 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-32 FILM NUMBER: 1708624 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSWORLD SYSTEMS INC CENTRAL INDEX KEY: 0001058626 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 941728881 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-31 FILM NUMBER: 1708625 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAYCO AMERICAN INTERNATIONAL CORP CENTRAL INDEX KEY: 0001029391 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 953850888 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-22 FILM NUMBER: 1708629 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUALINK INC CENTRAL INDEX KEY: 0001029389 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 953850888 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-20 FILM NUMBER: 1708631 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JENNIFER LOOMIS & ASSOCIATES INC CENTRAL INDEX KEY: 0001029387 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 953850888 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-18 FILM NUMBER: 1708632 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRABLE GREINER & WOLFF INC CENTRAL INDEX KEY: 0001029386 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 391758997 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-17 FILM NUMBER: 1708633 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FORMER COMPANY: FORMER CONFORMED NAME: FURST & FURST INC DATE OF NAME CHANGE: 19961219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSITY ACCOUNTING SERVICE INC CENTRAL INDEX KEY: 0001029318 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 391357406 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-14 FILM NUMBER: 1708636 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION FINANCIAL SERVICES GROUP INC CENTRAL INDEX KEY: 0001058628 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 222630947 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-33 FILM NUMBER: 1708623 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSI OUTSOURCING SERVICES INC CENTRAL INDEX KEY: 0001058624 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 133861550 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-29 FILM NUMBER: 1708627 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FORMER COMPANY: FORMER CONFORMED NAME: INTERACTIVE PERFORMANCE INC DATE OF NAME CHANGE: 19980326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION CORP CENTRAL INDEX KEY: 0000100817 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CONSUMER CREDIT REPORTING, COLLECTION AGENCIES [7320] IRS NUMBER: 250848970 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-27974 FILM NUMBER: 1708639 BUSINESS ADDRESS: STREET 1: C/O OUTSOURCING SOLUTIONS STREET 2: 390 SOUTH WOOD MILL ROAD STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: C/O OUTSOURCING SOLUTIONS STREET 2: 390 SOUTH WOODS MILL RD STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FORMER COMPANY: FORMER CONFORMED NAME: SUPER ELECTRIC PRODUCTS INC DATE OF NAME CHANGE: 19661121 FORMER COMPANY: FORMER CONFORMED NAME: UNION SPRING & MANUFACTURING CO DATE OF NAME CHANGE: 19660921 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSI SUPPORT SERVICES INC CENTRAL INDEX KEY: 0000076741 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CONSUMER CREDIT REPORTING, COLLECTION AGENCIES [7320] IRS NUMBER: 391133219 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05589 FILM NUMBER: 1708616 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FORMER COMPANY: FORMER CONFORMED NAME: PAYCO AMERICAN CORP DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UCO MBA CORP CENTRAL INDEX KEY: 0001058632 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 231704744 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-37 FILM NUMBER: 1708619 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSI PORTFOLIO SERVICES INC CENTRAL INDEX KEY: 0001029715 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 510369044 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-07 FILM NUMBER: 1708628 BUSINESS ADDRESS: STREET 1: 3300 NORTHEAST EXPRESSWAY STREET 2: BUILDING 1 STE M CITY: ATLANTA STATE: GA ZIP: 30341 BUSINESS PHONE: 7704514862 MAIL ADDRESS: STREET 1: 3300 NORTHEAST EXPRESSWAY STREET 2: BUILDING 1 STE M CITY: ATLANTA STATE: GA ZIP: 30341 FORMER COMPANY: FORMER CONFORMED NAME: ACCOUNT PORTFOLIOS GP INC DATE OF NAME CHANGE: 19961227 FORMER COMPANY: FORMER CONFORMED NAME: ACCOUNT PORTFOLIOS INC /NEW DATE OF NAME CHANGE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDIANA MUTUAL CREDIT ASSOCIATION INC CENTRAL INDEX KEY: 0001029320 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 391357406 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-16 FILM NUMBER: 1708634 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASSET RECOVERY & MANAGEMENT CORP CENTRAL INDEX KEY: 0001029319 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 391357406 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-15 FILM NUMBER: 1708635 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION SPECIAL STEEL CASTING CORP CENTRAL INDEX KEY: 0001058633 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 251154811 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-15867-38 FILM NUMBER: 1708618 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OSI COLLECTION SERVICES INC CENTRAL INDEX KEY: 0001029315 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 391314048 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-12 FILM NUMBER: 1708637 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FORMER COMPANY: FORMER CONFORMED NAME: PAYCO GENERAL AMERICAN CREDITS INC DATE OF NAME CHANGE: 19961219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROFESSIONAL RECOVERIES INC CENTRAL INDEX KEY: 0001029390 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 953850888 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-21 FILM NUMBER: 1708630 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CSN CORP CENTRAL INDEX KEY: 0001058630 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 251319485 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-35 FILM NUMBER: 1708621 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OUTSOURCING SOLUTIONS INC CENTRAL INDEX KEY: 0001027574 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 582197161 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867 FILM NUMBER: 1708638 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENAD CONNECTOR CORP CENTRAL INDEX KEY: 0001058631 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 042428227 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-16867-36 FILM NUMBER: 1708620 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 10-Q 1 f10q-063001.txt SECOND QUARTER 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 June 30, 2001 -------------------------------- 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 incorporation or organization) Identification Number) 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 June 30, 2001 - ----------------------- -------------- Senior common stock 489,795.93 Voting common stock 6,088,479.30 Non-voting common stock 480,321.30 ------------ 7,058,596.53 ============ OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES TABLE OF CONTENTS Part I. Financial Information Page Item 1. Financial Statements (unaudited) Condensed Consolidated Balance Sheets June 30, 2001 and December 31, 2000...............................3 Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2001 and 2000.............4 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2001 and 2000.......................5 Notes to Condensed Consolidated Financial Statements..............6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.........................................9 Item 3. Quantitative and Qualitative Disclosures About Market Risk.......13 Part II. Other Information..................................................14 OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share and per share amounts) - -------------------------------------------------------------------------------- June 30, December 31, 2001 2000 ------------- ------------- ASSETS Cash and cash equivalents $ 8,260 $ 10,273 Cash and cash equivalents held for clients 23,209 21,970 Accounts receivable - trade, less allowance for 70,404 62,876 doubtful receivables of $324 and $447 Purchased loans and accounts receivable portfolios 19,390 24,690 Property and equipment, net 45,390 46,601 Intangible assets, net 429,547 417,084 Deferred financing costs, less accumulated 20,889 22,934 amortization of $6,745 and $4,538 Other assets 37,923 30,426 ------- ------- TOTAL $655,012 $636,854 ======== ======== LIABILITIES AND STOCKHOLDERS' DEFICIT Accounts payable - trade $13,836 $14,446 Collections due to clients 23,209 21,970 Accrued salaries, wages and benefits 17,039 15,195 Debt 534,841 539,463 Other liabilities 74,794 71,080 Commitments and contingencies (Note 2 and 4) Mandatorily redeemable preferred stock; redemption amount of $131,545 and $123,115 113,165 103,455 Stockholders' deficit: Senior common stock; $.01 par value; authorized 900,000 shares, 489,795.93 issued in 2001 and outstanding 5 - Voting common stock; $.01 par value; authorized 20,000,000 shares, 9,166,728.37 shares issued 92 92 Non-voting common stock; $.01 par value; authorized 2,000,000 shares, 480,321.30 issued and outstanding 5 5 Paid-in capital 223,277 200,537 Accumulated deficit (201,871) (192,715) Accumulated other comprehensive income (6,621) - ------- ------- 14,887 7,919 Notes receivable from management for shares sold (1,902) (1,817) Common stock in treasury, at cost; 3,078,249.07 shares (134,857) (134,857) ------- ------- Total stockholders' deficit (121,872) (128,755) ------- ------- TOTAL $655,012 $636,854 ======== ======== The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands) - --------------------------------------------------------------------------------
Three Months Ended Six Months Ended June 30, June 30, --------------------- -------------------- 2001 2000 2001 2000 REVENUES $ 157,433 $ 137,373 $309,019 $270,623 EXPENSES: Salaries and benefits 80,566 66,598 154,890 132,604 Service fees and other operating and administrative expenses 48,015 43,414 95,634 85,011 Amortization of purchased loans and accounts receivable portfolios 5,012 8,109 11,991 14,785 Amortization of goodwill and other intangibles 4,161 3,979 8,213 7,949 Depreciation expense 3,605 4,098 7,307 8,111 Nonrecurring realignment expenses - 1,000 - 1,000 ------- ------- ------- ------- Total expenses 141,359 127,198 278,035 249,460 ------- ------- ------- ------- OPERATING INCOME 16,074 10,175 30,984 21,163 INTEREST EXPENSE - Net 13,819 15,209 30,080 29,452 ------- ------- ------- ------- INCOME (LOSS) BEFORE INCOME TAXES 2,255 (5,034) 904 (8,289) PROVISION FOR INCOME TAXES 175 169 350 294 ------- ------- ------- ------- NET INCOME (LOSS) 2,080 (5,203) 554 (8,583) PREFERRED STOCK DIVIDEND REQUIREMENTS AND ACCRETION OF SENIOR PREFERRED STOCK 4,928 4,364 9,710 8,607 ------- ------- ------- ------- NET LOSS TO COMMON STOCKHOLDERS $(2,848) $(9,567) $(9,156) $(17,190) ======== ======== ======= ========
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) - --------------------------------------------------------------------------------
Six Months Ended June 30, --------------------- 2001 2000 OPERATING ACTIVITIES AND PORTFOLIO PURCHASING: Net income (loss) $ 554 $ (8,583) Adjustments to reconcile net income (loss) to net cash from operating activities and portfolio purchasing: Depreciation and amortization 17,727 18,268 Amortization of purchased loans and accounts receivable portfolios 11,991 14,785 Non-cash compensation expense related to variable stock options 741 - Change in assets and liabilities excluding the effects of acquisitions: Purchases of loans and accounts receivable portfolios (6,691) (5,328) Accounts receivable and other assets (11,572) (8,242) Accounts payable, accrued expenses and other liabilities (1,943) (3,322) -------- --------- Net cash from operating activities and portfolio purchasing 10,807 7,578 ------- -------- INVESTING ACTIVITIES: Acquisition of property and equipment (5,657) (8,955) Payment for acquisitions, net of cash acquired (21,254) - Purchases of loans and accounts receivable portfolios for resale to FINCO (43,629) (54,306) Sales of loans and accounts receivable portfolios to FINCO 43,629 54,306 Other (3,025) (1,577) ------- -------- Net cash used by investing activities (29,936) (10,532) ------- -------- FINANCING ACTIVITIES: Borrowings under revolving credit agreement 160,800 174,650 Repayments under revolving credit agreement (160,400) (165,650) Repayments of debt (5,126) (1,705) Proceeds from issuance of common stock 22,004 201 Deferred financing fees (162) - -------- -------- Net cash from financing activities 17,116 7,496 ------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,013) 4,542 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 10,273 6,059 ------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,260 $ 10,601 ======= ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during period for interest $28,647 $ 27,621 ======= ======== Net cash paid during period for taxes $ 321 $ 181 ======= ======== SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION: Accrued dividends on mandatorily redeemable preferred stock $ 8,430 $ 7,366 ======= ======== Accretion of mandatorily redeemable preferred stock $ 1,280 $ 1,241 ======= ======== 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 except for share and per share amounts) - -------------------------------------------------------------------------------- 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 six months ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. 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, 2000. 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 June 30, 2001. NOTE 3. PURCHASED LOANS AND ACCOUNTS RECEIVABLE PORTFOLIOS FINANCING OSI Funding LLC ("FINCO") is a special-purpose finance company with the Company having approximately 29% of the voting rights. The following summarizes the transactions between the Company and FINCO for the periods ended June 30: Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2001 2000 2001 2000 Sales of purchased loans and accounts receivable portfolios by the Company to FINCO $27,007 $37,782 $43,629 $54,306 Servicing fees paid by FINCO to the Company $ 9,170 $ 5,032 $20,169 $ 9,337 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 $10,920 at June 30, 2001 and was $5,612 at December 31, 2000. At June 30, 2001 and December 31, 2000, FINCO had unamortized Receivables of $84,899 and $76,908, respectively. At June 30, 2001 and December 31, 2000, FINCO had outstanding borrowings of $74,000 and $67,636, respectively, under its revolving warehouse financing arrangement. FINCO's summarized results from operations for the periods ended June 30 are as follows: Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2001 2000 2001 2000 Revenues $32,220 $14,581 $59,190 $26,902 Income from operations 3,009 997 4,631 1,863 Net income 1,977 303 2,437 564 NOTE 4: ACQUISITIONS On March 12, 2001, the Company through a newly formed limited liability company, Coast to Coast Consulting, LLC, acquired certain assets and assumed certain liabilities of Coast to Coast Consulting, Inc. ("CCC"), a service company providing highly skilled experts to health care clients to assist with their on-site, back office functions such as billing, collections, special projects and other areas. Total cash consideration for CCC was approximately $16,300 including transaction costs of $150. 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, is expected to be accounted for as additional goodwill as the payment is made. On April 30, 2001, the Company through a newly formed limited liability company, Pacific Software Consulting, LLC, acquired (i) certain assets and assumed certain liabilities of Pacific Software Consulting, Inc. ("PSC"), a service company providing highly skilled consultants to banks to assist in their back office functions, and (ii) associated patentable property. Total cash consideration for these acquisitions was approximately $4,954 including transaction costs of $45. In connection with these acquisitions, the Company agreed to certain contingent payment obligations based on the attainment of certain financial performance targets through June 2002. The future contingent payment obligations, if any, are expected to be accounted for as additional goodwill as the payments are made. The above acquisitions were accounted for under the purchase method. The excess of cost over the fair value of net assets of businesses acquired is being amortized on a straight-line basis over 30 years. The purchase price of the acquisitions was financed under the Company's revolving credit facility. Results of operations for the acquired businesses were included in the consolidated financial statements from their respective acquisition dates. NOTE 5: DERIVATIVES AND HEDGING ACTIVITIES At June 30, 2001 and December 31, 2000, the Company had interest rate swap and collared swap agreements outstanding in the notional amounts of $50,000 and $150,000, respectively. Since December 31, 2000, there have been no material changes in these agreements. On January 1, 2001, the Company implemented Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137 and SFAS No. 138 (collectively, the Statement). This Statement requires all derivatives to be recognized in the balance sheet at fair value, with changes in that fair value to be recorded in current earnings or deferred in other comprehensive income, depending on whether the derivative instrument qualifies as a hedge and, if so, the nature of the hedging activity. The Company's transition adjustment upon adoption of the Statement required the recording of a liability of $3,691 with an offset of the same amount to accumulated other comprehensive income. As of June 30, 2001, the liability is $6,621 and is included in other liabilities and accumulated other comprehensive income. 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 and loss. The Company's interest rate hedges are primarily classified as cash flow hedges. For a cash flow hedge of an anticipated transaction, the ineffective portion of the change in fair value of the derivative is recorded in earnings as incurred, whereas the effective portion is deferred in accumulated other comprehensive income on the balance sheet until the transaction is realized, at which time any deferred hedging gains or losses are recorded in earnings. During the quarter ended June 30, 2001, the Company recorded, as part of interest expense, a gain of $518 due to the hedges' effectiveness. For the six months ended June 30, 2001, there was no net impact on interest expense. NOTE 6: COMPREHENSIVE INCOME The components of total comprehensive income for the periods ended June 30 are as follows: Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2001 2000 2001 2000 Net income (loss) $ 2,080 $(5,203) $ 554 $(8,583) Other comprehensive income item: Net loss on cash flow hedging instruments (83) - (6,621) - ------- ------- ------- ------- Total comprehensive income (loss) $ 1,997 $(5,203) $(6,067) $(8,583) ======= ======= ======= ======= NOTE 7: STOCKHOLDERS' DEFICIT In April 2001, the Company completed a sale of 489,795.93 shares of senior common stock for $24,000 ($22,004 after all related expenses) to a private equity firm and to certain members of its existing private investor group, including Madison Dearborn Capital Partners III, L.P., the Company's majority stockholder. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000 - ----------------------------------------------------------------------------- Revenues for the three months ended June 30, 2001 were $157.4 million compared to $137.4 million in the same period last year - an increase of 14.6%. The revenue increase of $20.0 million was due primarily to increased outsourcing services revenues offset partially by lower portfolio services revenues. Revenues from outsourcing services increased 99.3% to $43.2 million for the three months ended June 30, 2001 from $21.7 million for the comparable period in 2000. The increased outsourcing services revenues of $21.5 million were due primarily to new and increased existing business and the acquisitions of RWC Consulting Group ("RWC"), Coast to Coast Consulting ("CCC") and Pacific Software Consulting ("PSC"). Revenues from portfolio services of $21.7 million compared unfavorably to $23.7 million in 2000 due primarily to the continued negative effect on revenues resulting from the shift to off-balance sheet purchased portfolios partially offset by increased collections from the cumulative increase in off-balance sheet purchased loans and accounts receivable portfolios during 1999, 2000 and 2001. The collection services revenues increased slightly, 0.5%, to $92.5 million for the three months ended June 30, 2001 from $92.0 million in 2000. Operating expenses, inclusive of salaries and benefits, service fees and other operating and administrative expenses, were $128.6 million for the three months ended June 30, 2001 and $110.0 million for the comparable period in 2000 - an increase of 16.9%. The increase in these operating expenses resulted primarily from the RWC, CCC and PSC acquisitions and the increased expenses due to the increased revenues of outsourcing services. Operating expenses for the three months ended June 30, 2001 also included non-cash compensation expense related to variable stock options of approximately $0.7 million. Included in operating expenses for the three months ended June 30, 2000, the Company incurred approximately $0.2 million of additional compensation expense resulting from the redemption of vested stock options. For the three months ended June 30, 2001, amortization and depreciation charges of $12.8 million were lower than the $16.2 million for the comparable period in 2000 by $3.4 million. The lower amortization and depreciation charges resulted primarily from lower portfolio amortization as a result of lower strategic sales of portfolios and the shift towards off-balance sheet purchased loans and accounts receivable portfolios. In the three months ended June 30, 2000, the Company incurred nonrecurring realignment expenses of $1.0 million which included costs for closure of certain call centers, severance associated with these office closures and certain other one-time costs. Earnings before interest expense, taxes, depreciation and amortization (EBITDA) for the three months ended June 30, 2001 was $28.9 million compared to $26.4 million for the same period in 2000. The increase was primarily attributable to the three acquisitions and the higher outsourcing services revenues. Adding back the non-cash stock compensation expense, EBITDA was $29.6 million for the three months ended June 30, 2001; this compared favorably to $27.5 million for the same period in 2000 after adding back the nonrecurring charges and the additional compensation expense. As a result of the above, the Company's operating income of $16.1 million for the three months ended June 30, 2001 compared favorably to $10.2 million for the same period in 2000. Net interest expense for the three months ended June 30, 2001 was $13.8 million compared to $15.2 million for the comparable period in 2000. The decrease was due primarily to lower interest rates and lower amortization of deferred financing fees. The provision for income taxes of $0.2 million was provided for certain state and foreign income tax obligations. The net deferred tax assets at June 30, 2001 are fully offset by a valuation allowance. During the three months ended June 30, 2001, the net deferred tax assets and the valuation allowance decreased by $0.9 million. The decrease was caused by a reduction of deductible temporary differences that exceeded the taxable net operating loss generated during the current period by $0.9 million. The Company generated a net taxable operating loss for federal and certain state income tax purposes for which a full valuation allowance was provided. Due to the factors stated above, the Company had net income for the three months ended June 30, 2001 of $2.1 million which compared favorably to the net loss of $5.2 million for the three months ended June 30, 2000. Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000 - ------------------------------------------------------------------------- Revenues for the six months ended June 30, 2001 were $309.0 million compared to $270.6 million in the same period last year - an increase of 14.2%. The revenue increase of $38.4 million was due to increased outsourcing and portfolio services revenues offset partially by lower collection services revenues. Revenues from outsourcing services increased 94.9% to $81.3 million for the six months ended June 30, 2001 from $41.7 million for the comparable period in 2000. The increased outsourcing services revenues of $39.6 million were due primarily to new and increased existing business of the acquisitions of RWC, CCC and PSC. Revenues from portfolio services of $43.4 million compared favorably to $43.2 million in 2000 due primarily to increased collections from the cumulative increase in off-balance sheet purchased loans and accounts receivable portfolios during 1999, 2000 and 2001 partially offset by the continued negative effect on revenues resulting from the shift to off-balance sheet purchased portfolios. The collection services revenues decreased 0.8% to $184.3 million for the six months ended June 30, 2001 from $185.7 million in 2000. The decreased revenues were due primarily to lower bank card, student loan and telecommunications business offset partially by increased government and letter series business. Operating expenses, inclusive of salaries and benefits, service fees and other operating and administrative expenses, were $250.5 million for the six months ended June 30, 2001 and $217.6 million for the comparable period in 2000 - an increase of 15.1%. The increase in these operating expenses resulted primarily from the RWC, CCC and PSC acquisitions and the increased expenses due to the increased revenues of outsourcing services. Operating expenses for the six months ended June 30, 2001 included non-cash compensation expense related to variable stock options of approximately $0.7 million. Included in operating expenses for the six months ended June 30, 2000, the Company incurred approximately $0.2 million of additional compensation expense resulting from the redemption of vested stock options. For the six months ended June 30, 2001, amortization and depreciation charges of $27.5 million were lower than the $30.8 million for the comparable period in 2000 by $3.3 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 the six months ended June 30, 2000, the Company incurred nonrecurring realignment expenses of $1.0 million which included costs for closure of certain call centers, severance associated with these call centers and certain other one-time costs. Earnings before interest expense, taxes, depreciation and amortization (EBITDA) for the six months ended June 30, 2001 was $58.5 million compared to $52.0 million for the same period in 2000. The increase was primarily attributable to the three acquisitions and the higher outsourcing services revenues. Adding back the non-cash stock compensation expense, EBITDA was $59.2 million for the six months ended June 30, 2001; this compared favorably to $53.2 million for the same period in 2000 after adding back the nonrecurring charges and the additional compensation expense. As a result of the above, the Company's operating income of $31.0 million for the six months ended June 30, 2001 compared favorably to $21.2 million for the same period in 2000. Net interest expense for the six months ended June 30, 2001 was $30.1 million compared to $29.5 million for the comparable period in 2000. The increase was due primarily to higher debt balances offset partially by lower interest rates. There was no net impact on interest expense as a result of the Company's hedging activities. The provision for income taxes of $0.4 million was provided for certain state and foreign income tax obligations. The net deferred tax assets at June 30, 2001 are fully offset by a valuation allowance. During the six months ended June 30, 2001, the net deferred tax assets and the valuation allowance decreased by $0.4 million. The decrease was caused by a reduction of deductible temporary differences that exceeded the taxable new operating loss generated during the current period by $0.4 million. The Company generated a net taxable operating loss for federal and certain state income tax purposes for which a full valuation allowance was provided. Due to the factors stated above, the Company had net income for the six months ended June 30, 2001 of $0.6 million which compared favorably to the net loss of $8.6 million for the six months ended June 30, 2000. Financial Condition, Liquidity and Capital Resources - ---------------------------------------------------- At June 30, 2001, the Company had cash and cash equivalents of $8.3 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 June 30, 2001, the Company had $32.4 million outstanding under the revolving credit facility leaving $35.8 million, after outstanding letters of credit, available under the revolving credit facility. In April 2001, the Company completed a sale of $24.0 million of senior common stock to a private equity firm and to certain members of its existing private investor group, including Madison Dearborn Capital Partners III, L.P., the Company's majority stockholder. The net proceeds of $22.0 million from the sale were used to repay debt under the Company's bank credit facility. Since December 31, 2000, cash and cash equivalents decreased $2.0 million primarily due to cash utilized for the CCC and PSC acquisitions of $21.3 million, debt repayments of $5.1 million, an earnout payment of $3.0 million and capital expenditures of $5.7 million offset by cash from operating activities and portfolio purchasing of $10.8 million and net proceeds from the issuance of senior common stock of $22.0 million. The Company also held $25.9 million of cash for clients in restricted trust accounts at June 30, 2001. For the six months ended June 30, 2000, cash and cash equivalents increased $4.5 million primarily due to cash from operating activities and portfolio purchasing of $7.6 million and net cash from financing activities of $7.5 million, primarily borrowings under the revolving credit facility, offset by the use of cash of $10.5 million primarily for capital expenditures. For the first six months in 2001, the Company made capital expenditures of $5.7 million primarily for the replacement and upgrading of equipment, expansion of facilities and expansion of the Company's information services systems. The Company anticipates capital spending of approximately $13.8 million during 2001, which the Company intends to fund from cash flow from operations and if necessary, borrowings under the revolving credit facility. Recent Accounting Pronouncements - -------------------------------- In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 ("SFAS 141"), Business Combinations. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and establishes specific criteria for recognition of intangible assets separately from goodwill. For business combinations initiated after June 30, 2001, SFAS 141 also requires that unallocated negative goodwill be written off immediately as an extraordinary gain. Any unamortized deferred credit arising from a business combination completed before July 1, 2001 will be recognized as the cumulative effect of a change in accounting principle. The Company is currently evaluating the impact of SFAS 141 on its financial statements. Also in July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets. SFAS 142 eliminates the amortization of goodwill and instead requires goodwill to be tested for impairment annually at the reporting unit level. Also, intangible assets are required to be amortized over their useful lives and reviewed for impairment in accordance with Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Under SFAS 142, if the intangible asset has an indefinite useful life, it is not amortized until its life is determined to be finite. The Company is required to adopt SFAS on January 1, 2002, and earlier adoption is not permitted. The Company is currently evaluating the impact of SFAS 142 on its financial statements. Goodwill amortization recorded for the quarter and six months ended June 30, 2001 was $4.2 million and $8.2 million, respectively, compared to $4.0 million and $7.9 million for the respective periods ending June 30, 2000. Forward-Looking Statements - -------------------------- The following statements in this entire 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) statements regarding the Company's ability to fund its future operating expenses and meet its debt service requirements as they become due, (4) any statements preceded by, followed by or that include the word "believes," "expects," "anticipates," "intends," "should," "may," or similar expressions; and (5) other statements contained or incorporated by reference in this document regarding matters that are not historical facts. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to: (1) the demand for the Company's services, (2) the demand for accounts receivable management generally, (3) general economic conditions, (4) changes in interest rates, (5) competition, including but not limited to pricing pressures, (6) changes in governmental regulations including, but not limited to the federal Fair Debt Collection Practices Act and comparable state statutes, (7) 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, 2000 (the most recent completed fiscal year), the Company had interest rate swap and collared swap agreements outstanding. Since December 31, 2000, there have been no material changes in these agreements. 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, 2000. Item 2. Changes in Securities See Note 7 of the Condensed Consolidated Financial Statements included elsewhere herein. The net proceeds from the sale of senior common stock (see Item 4 below) were used to repay debt. Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders The following matters were submitted to a vote of security holders during the quarter ended June 30, 2001: (1) On April 2, 2001, pursuant to written consent of the shareholders of the Company's voting common stock, the shareholders approved an amendment of the Company's Certificate of Incorporation to provide for the authorization of 900,000 shares of Senior Common Stock and to set forth the voting powers, designations, preferences and other rights, qualifications and restrictions of such Senior Common Stock. (2) On April 16,2001, pursuant to written consent of the shareholders of the Company's voting common stock, the shareholders (i) increased the size of the Company's Board of Directors to seven persons, and (ii) elected the following persons as directors of the Company to hold office until the next annual meeting of the shareholders of the Company and until their successors shall have been elected and shall have qualified: R. David Andrews, Timothy Beffa, William Hewitt, Timothy Hurd, Scott Marks, Jr., Richard Thomas and Paul Wood. Both of these shareholder consents were executed by holders of 4,536,367.84 shares of the Company's voting common stock. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a). Exhibits Exhibit 2.1 Asset Purchase Agreement and Patentable Property Purchase Agreement dated April 30, 2001 by and among Outsourcing Solutions Inc., Pacific Software Consulting, LLC, Pacific Software Consulting, Inc., and Edward F. Lambert. Exhibit 2.2 Stock Subscription Agreement by and among Gryphon Partners II, L.P., Gryphon Partners II-A, L.P., Outsourcing Solutions Inc., and the additional investors, dated April 3, 2001. Exhibit 3 Fourth Amended and Restated Certificate of Incorporation of the Company, as amended by the Certificate of Amendment dated as of April 16, 2001. Exhibit 4 Fifth Supplemental Indenture dated as of April 30, 2001 by and among the Company, the Additional Guarantor and Wilmington Trust Company, as trustee. Exhibit 10 2001 Management Incentive Plan. (b). Reports on Form 8-K There were no reports on Form 8-K filed for the three-month period ended June 30, 2001. 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: August 14, 2001 EX-2 3 apappp_10q-063001.txt ASSET AND PATENTABLE PROPERTY PURCHASE AGREEMENTS ASSET PURCHASE AGREEMENT by and among Outsourcing Solutions Inc., Pacific Software Consulting, LLC Pacific Software Consulting, Inc., and Edward F. Lambert Dated April 30, 2001 TABLE OF CONTENTS ASSET PURCHASE AGREEMENT SECTION PAGE - ------- ---- ARTICLE I DEFINITIONS.........................................................1 Affiliate.................................................................1 Affiliated Group..........................................................1 Agreement.................................................................1 Arbiter...................................................................1 Assets....................................................................1 Assignment and Assumption Agreement.......................................1 Assumed Liabilities.......................................................2 Bill of Sale..............................................................2 Business..................................................................2 Buyer.....................................................................2 Buyer Indemnified Persons.................................................2 Closing...................................................................2 Closing Balance Sheet.....................................................2 Closing Date..............................................................2 Closing Financial Statements..............................................2 Closing Review............................................................2 Closing Statement.........................................................2 Code......................................................................2 Confidential Information..................................................2 Contract..................................................................2 Court.....................................................................2 Covenant Not to Compete...................................................3 Current Assets............................................................3 Current Liabilities.......................................................3 Dispute Period............................................................3 Dollars...................................................................3 Effective Time............................................................3 Employment Agreement......................................................3 Environmental Laws........................................................3 ERISA.....................................................................3 Excluded Assets...........................................................3 Final Payment.............................................................3 Financial Statements......................................................3 GAAP......................................................................3 Government................................................................3 Hazardous Materials.......................................................3 Indemnified Losses........................................................4 Indemnified Party.........................................................4 Indemnifying Party........................................................4 Initial Payment...........................................................4 Intellectual Property.....................................................4 Interim Balance Sheet.....................................................4 Interim Statements........................................................4 IRCA......................................................................4 Law.......................................................................4 Liabilities...............................................................4 Lien......................................................................4 Losses....................................................................4 Net Worth.................................................................5 Net Worth Target..........................................................5 Notice of Dispute.........................................................5 OSI.......................................................................5 Ordinary Course...........................................................5 Party.....................................................................5 Patentable Property Purchase Agreement....................................5 Person....................................................................5 Plan......................................................................5 Property..................................................................5 Purchased Assets..........................................................5 Restricted Period.........................................................5 Returns...................................................................6 Seller....................................................................6 Seller Indemnified Persons................................................6 Shareholder...............................................................6 Shareholder Patentable Property...........................................6 Tax Affiliate.............................................................6 Taxes.....................................................................6 Third Person..............................................................6 Third Person Claim........................................................6 Trade Names...............................................................6 ARTICLE II PURCHASE AND SALE OF ASSETS........................................6 2.1 Assets to be Purchased..............................................6 2.2 Assumed Liabilities.................................................6 2.3 Consideration.......................................................7 2.4 Post-Closing Adjustments to the Initial Payment.....................7 2.5 Allocation of Consideration.........................................8 2.6 Closing.............................................................8 2.7 Deliveries of Seller at the Closing.................................8 2.8 Deliveries of Buyer at the Closing..................................8 2.9 The Closing Balance Sheet and the Closing Statement.................8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER...........9 3.1 Corporate Existence and Power of Seller.............................9 3.2 Approval and Enforceability of Agreement...........................10 3.3 Financial Statements...............................................10 3.4 Events Subsequent to December 31, 1999.............................10 3.5 Assets in Possession of Others.....................................11 3.6 Accounts and Notes Receivable......................................11 3.7 Undisclosed Liabilities............................................12 3.8 Taxes..............................................................12 3.9 Real Property - Owned..............................................13 3.10 Personal Property - Owned..........................................13 3.11 Real and Personal Property - Leased from Seller....................13 3.12 Real and Personal Property - Leased to Seller......................13 3.13 Intellectual Property..............................................13 3.14 Necessary Property and Transfer of Assets..........................14 3.15 Use and Condition of Property......................................14 3.16 Licenses and Permits...............................................14 3.17 Contracts--Disclosure..............................................15 3.18 Customer Contracts.................................................16 3.19 Contracts--Validity, Etc...........................................16 3.20 No Breach of Law or Governing Document.............................16 3.21 Litigation and Arbitration.........................................17 3.22 Directors, Officers, Employees and Consultants.....................17 3.23 Indebtedness to and from Directors, Officers and Others............17 3.24 Outside Financial Interests........................................17 3.25 Payments, Compensation and Perquisites of Agents and Employees....................................................18 3.26 Labor Contracts....................................................18 3.27 Employee Benefit Plans.............................................18 3.28 Overtime, Back Wages, Vacation and Minimum Wages...................18 3.29 Discrimination, Workers Compensation and Occupational Safety and Health...................................18 3.30 Alien Employment Eligibility.......................................19 3.31 Labor Disputes; Unfair Labor Practices.............................19 3.32 Insurance Policies.................................................19 3.33 Guarantees.........................................................19 3.34 Environmental Matters..............................................19 3.35 Broker's Fees......................................................20 3.36 Foreign Assets and Operations......................................20 3.37 Service Warranties and Guarantees..................................21 3.38 Books and Records..................................................21 3.39 Truthfulness.......................................................21 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER............................21 4.1 Corporate Existence of Buyer.......................................21 4.2 Approval of Agreement..............................................21 4.3 No Breach of Articles or Indentures................................22 4.4 Broker's Fees......................................................22 ARTICLE V COVENANTS CONCERNING SELLER.........................................22 5.1 Operation of the Business..........................................22 5.2 Preservation of Business...........................................23 5.3 Insurance and Maintenance of Property..............................24 5.4 Full Access........................................................24 5.5 Books, Records and Financial Statements............................24 5.6 Governmental Filings...............................................24 5.7 Tax Matters........................................................24 ARTICLE VI OTHER AGREEMENTS...................................................25 6.1 Change of Seller's Name............................................25 6.2 Seller's Employees.................................................25 ARTICLE VII COVENANT NOT TO COMPETE...........................................26 7.1 Covenant Not to Compete............................................26 7.2 Employees..........................................................26 7.3 Confidentiality....................................................26 7.4 Remedies...........................................................27 7.5 Permitted Exceptions...............................................27 ARTICLE VIII CONDITIONS TO BUYER'S OBLIGATIONS................................27 8.1 Representations and Warranties of Seller and Shareholder...........................................27 8.2 Approval by Buyer's Board..........................................28 8.3 Performance of this Agreement......................................28 8.4 No Material Adverse Change and No Extraordinary Distributions......................................28 8.5 Certificate of Seller and Shareholder..............................28 8.6 Employment Agreements..............................................28 8.7 Financial Review...................................................28 8.8 No Lawsuits........................................................28 8.9 No Restrictions....................................................28 8.10 Consents...........................................................29 8.11 Releases...........................................................29 8.12 Documents..........................................................29 8.13 Due Diligence......................................................29 8.14 Employees and Independent Contractors..............................29 8.15 Closing Patentable Property Purchase Agreement.....................29 8.16 Further Assurances.................................................29 ARTICLE IX CONDITIONS TO SELLER'S OBLIGATIONS.................................30 9.1 Representations and Warranties of Buyer and OSI....................30 9.2 Performance of this Agreement......................................30 9.3 Certificate of Buyer...............................................30 9.4 Employment Agreements..............................................30 9.5 Payment of Initial Payment.........................................30 9.6 No Lawsuits........................................................30 9.7 Documents..........................................................30 9.8 Closing Patentable Property Purchase Agreement.....................31 9.9 Further Assurances.................................................31 ARTICLE X INDEMNIFICATION.....................................................31 10.1 Survival of Representations and Warranties.........................31 10.2 Seller's Indemnification...........................................32 10.3 Buyer's Indemnification............................................33 10.4 Notice of Claim....................................................34 10.5 Right to Contest Claims of Third Persons...........................34 10.6 Set-Off Rights.....................................................35 ARTICLE XI MISCELLANEOUS......................................................35 11.1 Assignment; Binding Agreement......................................35 11.2 Termination of Agreement...........................................36 11.3 Manner and Effect of Termination...................................36 11.4 Non-Disclosure of Information......................................36 11.5 Bulk Sales.........................................................36 11.6 Remedies...........................................................37 11.7 Entire Agreement and Modification..................................37 11.8 Severability.......................................................37 11.9 Counterparts.......................................................37 11.10 Headings; Interpretation...........................................37 11.11 Choice of Forum and Governing Law..................................37 11.12 Payment of Fees and Expenses.......................................37 11.13 Notices............................................................38 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of this 30th day of April, 2001, by and among, on one hand, Outsourcing Solutions Inc., a Delaware corporation ("OSI") and Pacific Software Consulting, LLC, a Delaware limited liability company owned by OSI ("Buyer"), and on the other hand, Pacific Software Consulting, Inc., a California corporation ("Seller") and Edward F. Lambert ("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; B. Seller desires to sell to Buyer the Purchased Assets and to assign to Buyer the Assumed Liabilities, on the following terms and conditions; and C. Simultaneously with the Closing, Buyer will purchase certain intellectual property from Shareholder pursuant to the Patentable Property Purchase Agreement. 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 "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). (a) "Assets" has the meaning set forth in Schedule 2.1. "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 quantified on the Closing Balance Sheet and the Closing Statement; 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. "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 "Pacific Software Consulting, 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 Balance Sheet" has the meaning set forth in Section 2.9(a). "Closing Date" means April 30, 2001 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 Review" has the meaning set forth in 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 GAAP and shall mean (a) accounts receivable (less an allowance for doubtful accounts) and (b) prepaid expenses and supplies. "Current Liabilities" shall be determined in accordance with GAAP and shall mean accounts payable and accrued expenses. "Dispute Period" has the meaning set forth in Section 2.9(b). "Dollars" or "$" means United States Dollars. "Effective Time" means as of 11:59 p.m. on April 30, 2001. "Employment Agreement" means the form of employment and non-competition agreement set forth as Exhibit C. "Environmental Laws" has the meaning set forth in Section 3.34(a). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Excluded Assets" means the Assets identified in Schedule 1.1(b). "Final Payment" means the Initial Payment as adjusted pursuant to Section 2.4(a). "Financial Statements" means the 2000 Financial Statements, 1999 Financial Statements and the 1998 Financial Statements. "2000 Financial Statements" means Seller's balance sheet at December 31, 2000 and the related statements of income and retained earnings and combined statements of cash flows for the 12 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 statements of income and retained earnings 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 statements of income and retained earnings 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 3.34(e). "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 Twenty Eight Thousand Seven Hundred Fifty Dollars ($28,750). "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 March 31, 2001 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 three month period then ended, together with any notes or schedules thereto. "IRCA" means the Immigration Reform and Control Act of 1986, and the rules and regulations thereunder. "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, 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. "OSI" has the meaning set forth in the Preamble. "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) 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. "Patentable Property Purchase Agreement" means the Patentable Property Purchase Agreement, dated the date hereof, among OSI, Buyer, and Edward F. Lambert, as seller. "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. "Property" has the meaning set forth in Section 3.34(a). "Purchased Assets" means the Assets set forth in Schedule 2.1, 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. "Shareholder Patentable Property" means the Intellectual Property purchased from Edward F. Lambert pursuant to the Patentable Property Purchase Agreement simultaneously with the Closing under this Agreement. "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. "Trade Names" has the meaning set forth in Section 3.13. 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. The allocation of the consideration for the Purchased Assets is set forth on Schedule 2.1. 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 and (b) 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 (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 and (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. 2.9 The Closing Balance Sheet and the Closing Statement.. (a) Beginning on or after the Closing Date and as of the Effective Time, Buyer shall conduct a review and examination of the Purchased Assets and Assumed Liabilities (the "Closing Review") 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 Review. On the basis of such Closing Review, Buyer shall prepare a balance sheet as of the Effective Time ("Closing Balance Sheet") and a statement of net assets as of the Effective Time (the "Closing Statement"), reflecting the book value, as of the Effective Time, 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. If Ernst & Young LLP is the auditor for OSI and its subsidiaries (or is providing a material amount of consulting services to OSI and its subsidiaries) at the time of the dispute, the Parties will mutually agree upon another nationally recognized accounting firm to serve as Arbiter. 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 Commercial Rules of the American Arbitration Association. 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. 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. 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 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 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, 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. 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 in all material respects, (b) present fairly in all material respects the financial position, results of operations and cash flows of the Business at the dates and for the periods indicated, (c) have been prepared in accordance with GAAP applied on a basis consistent with previous periods, and (d) do not include any untrue statement of a material fact required to be stated or reflected therein or omit to state or reflect any material fact necessary to make any statements therein not misleading. 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) loss or threatened loss of a material customer Contract; (c) damage, destruction or loss, whether covered by insurance or not, affecting any Purchased Asset; (d) declaration, setting aside or payment of any dividend or any distribution (in cash or in kind) with respect to any securities of Seller; (e) 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; (f) transaction entered into or carried out by Seller other than in the Ordinary Course of the Business; (g) 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; (h) change made by Seller in its Tax or financial accounting or any Tax election; (i) grant of any Lien with respect to the Purchased Assets; (j) transfer of any Assets other than arm's length sales, leases or dispositions in the Ordinary Course of the Business; (k) modification or termination (other than a termination due to expiration) of any Contract or any material term thereof; (l) lease or acquisition of any capital assets included in the Purchased Assets with a value greater than $10,000 per item; (m) loan or advance to any Person; or (n) commitment or agreement by Seller to do any of the foregoing items (d) through (m). 3.5 Assets in Possession of Others. 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 Effective 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 Lien, and (d) except to the extent of any reserve for bad debt allowances on the Closing Financial Statements, current and fully collectible. All accounts or notes receivable of Seller in existence on the Closing Date will be paid in full, net of applicable reserves, on or before 60 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 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 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 as of the Effective Time 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 not 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. 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. Except as set forth on Schedule 3.10 hereto, 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. 3.11 Personal Property - Leased from Seller. There is no lease under which Seller is the lessor or sublessor of any personal property. 3.12 Real and Personal Property - Leased to Seller. There is no lease under which Seller is the lessee of any real property. There is no lease under which Seller is the lessee of any personal property. 3.13 Intellectual Property. (a) Except for the trade names listed on Schedule 3.13 ("Trade Names"), Seller does not own any Intellectual Property. Other than the Shareholder Patentable Property and the Trade Names, Seller does not use any Intellectual Property in connection with the Business. (b) Seller represents and warrants as follows: (i) there has been no claim made against Seller asserting the invalidity, misuse or unenforceability of any of the Trade Names or challenging Seller's right to use or ownership of any of the Trade Names, and there are no grounds for any such claim or challenge; (ii) Seller is not aware of any infringement or misappropriation of any of the Trade Names or of any facts raising a likelihood of infringement or misappropriation; (iii) 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; and (iv) to the knowledge of Seller and Shareholder, the consummation of the transactions contemplated by this Agreement will not alter or impair Buyer's right to use any of the Trade Names. 3.14 Necessary Property and Transfer of Assets. The Purchased Assets, the Assumed Liabilities and the Shareholder Patentable Property constitute all the 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 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. 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) 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 (a) is at a price which would result in a net loss on the sale of such products or providing of such services or (b) is pursuant to terms or conditions which Seller cannot reasonably expect to satisfy or fulfill in their entirety, or (d) 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 previously delivered to OSI a true, correct and complete copy 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 contract. On the Closing Date, Schedule 3.18 shall set forth all Customer Contracts of Seller as of the Closing Date. There are no retainers or prepayments required or paid under any Customer Contract as of the date hereof. Except as provided in any Customer Contract, there are no obligations of Seller, in writing or otherwise, to perform any material services. Customer Contracts are entered into in the Ordinary Course on a project by project basis, are performed and terminated in accordance with their terms and may be modified, renewed or extended based upon mutual agreement. 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) Seller is not, and to the knowledge of Seller and Shareholder the other party to each Contract, including each Customer Contract, is not, in breach or violation thereof or default under any Contract. To the knowledge of Seller and Shareholder, no event has occurred which, through the passage of time or the giving of notice, or both, would 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. Except for the consents referred to on Schedule 3.19, 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 had continued the Business. 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 Customer Contract or to materially diminish the terms of such Customer Contract or that any party to a Customer Contract will not continue to be a customer of the Business after the Closing in accordance with the terms of such Customer Contract. (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 3.19, 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. 3.21 Litigation and Arbitration. There is no suit, claim, action or proceeding now pending or threatened before any Court, nor or 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 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. Attached to Schedule 3.22 is a true, correct and complete copy of the standard form employment agreement of Seller. Except as set forth on Schedule 3.22, Seller is not a party to any employment agreement which has terms that vary in any respect from the terms set forth in the standard form of employment agreement attached hereto in Schedule 3.22. 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. 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. 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. There are no Liabilities related to or that could arise from any 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 (or within the last two years has had) any claim against Seller (whether under any Law, Contract or otherwise) on account of or for (a) 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, (b) vacation, time off or pay in lieu of vacation or time off, other than that earned in respect of the current fiscal year or (c) 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 (or within the last two years has had) 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 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 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. 3.30 Alien Employment Eligibility. With respect to each Person employed by Seller on or after May 1, 1987, and who actually commenced such employment on or after November 6, 1986, (a) Seller hired such Person in compliance with the IRCA and (b) Seller has complied with all recordkeeping and other regulatory requirements under IRCA. 3.31 Labor Disputes; Unfair Labor Practices. There is neither pending nor 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. 3.32 Insurance Policies. Set forth on Schedule 3.32 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. 3.33 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. 3.34 Environmental Matters. (a) Seller's use of the real property used in connection with the Business ("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 and has not violated, in connection with the ownership, use, maintenance or operation of the Property and the conduct of the Business, of any Environmental Laws. (b) There are no past, pending or threatened investigations, inquiries, notices or other proceedings by any Government 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) 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. 3.35 Broker's Fees. 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. 3.36 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. 3.37 Service Warranties and Guarantees. Set forth on Schedule 3.37 are the standard forms of service warranties and guarantees used by Seller and copies of all other outstanding service warranties and guarantees. Except as set forth on Schedule 3.37, no service warranty or similar claims have been made against Seller except routine claims as to which, in the aggregate, losses and expenses in respect thereto have not and will not exceed $5,000. The aggregate loss and expense attributable to all service, warranty and similar claims now pending or hereafter asserted with respect to services provided on or prior to the Closing Date will not exceed the amount reserved therefor on the Closing Balance Sheet. 3.38 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. 3.39 Truthfulness. 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 Buyer and OSI hereby make 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 sale 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 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 action of Buyer and OSI, and such authorization and approval have not been revoked. Pursuant to such authorization and approval, each of Buyer and OSI has full 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, this Agreement is the legal, valid and binding obligation of each 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 charter documents 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. 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) Other than in the Ordinary Course, 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 not in the usual and Ordinary Course. (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) Declare or pay any dividend or make any sale of or distribution in respect of its capital stock or directly or indirectly redeem, purchase or otherwise acquire any of its capital stock or issue any of its capital stock or other securities. (i) Make or institute any unusual method of transacting business or change any accounting procedures or practices or its financial structure. (j) Make any amendments to or changes in its articles or certificate of incorporation or association or bylaws. (k) 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. (l) Take any action or incur any Liability or obligation which, if taken or incurred prior to the date of this Agreement, would be required to be disclosed on any Schedule hereto. 5.2 Preservation of Business. Seller shall carry on the Business diligently and substantially in the same manner as heretofore conducted and shall 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 in accordance with GAAP consistently applied, and 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. Seller shall furnish to Buyer promptly, as available, the Financial Statements and operating reports applicable to the Business since January 1, 1998, all of which shall be prepared in accordance with GAAP consistently applied and shall present fairly the financial position and results of operations of the Business at the dates and for the periods indicated. 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 and file the appropriate Form 8594, attached as Schedule 5.7 with their respective income tax returns. To the extent Buyer determines that a Form 1099 should be sent to Seller, it shall be only on Form 1099-MISC with respect to the Internal Revenue with no filing being made in Missouri; and, Seller and Buyer shall not take any contrary income tax positions. (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, Seller's United States taxpayer identification number and that Seller is not a foreign person. ARTICLE VI OTHER AGREEMENTS 6.1 Change of Seller's Name. Within ten business days after the Closing Date, Seller, in such manner as is reasonably requested by Buyer, shall change its name to some name other than "Pacific Software Consulting, Inc." or any variation or abbreviation thereof, and file appropriate notification of its change of name in all jurisdictions where such notification is required. Seller will take all steps as may be appropriate to insure to Buyer the continued right to use the name "Pacific Software Consulting, Inc." and all variants thereof in connection with Buyer's operation of the Business. 6.2 Seller's Employees. To the extent that Buyer has not entered into employment agreements or independent contractor agreements as of the Closing, Seller and Shareholder shall indemnify and hold Buyer Indemnified Persons harmless from all Liabilities and obligations related to such employees and independent contractors except for Ordinary Course payroll and related expenses of such employees and costs and wages of such independent contractors since the last payroll disbursement date before the Closing Date which will be assumed by Buyer. 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 payroll disbursement date before the Closing Date which will be assumed by Buyer. The 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 six 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 in the United States of America which is in competition with the Business or any business in which OSI and its subsidiaries are engaged; or (ii) solicit or accept 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. 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 prior to 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 or continue in such employment. 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 Exceptions. Nothing contained herein shall restrict (A) 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 or (B) Shareholder from providing systems consulting services to non-financial services entities provided such systems consulting shall not directly or indirectly involve accounts receivable management. 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 Approval by Buyer's and OSI's Boards. This Agreement and the transactions contemplated hereby shall have been approved by or under the authority of Buyer's and OSI's respective Boards of Directors. 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 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. Between the date of this Agreement and the Closing Date, there shall have been no extraordinary distribution by Seller, by the officers of Seller, of any Assets or dividends of the Business. 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, 8.2, 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 Agreement. Edward F. Lambert shall have executed and delivered an Employment Agreement in substantially the form attached hereto as Exhibit C. 8.7. Financial Review. OSI shall have completed the reviews and examinations of Seller's financial statements for the year ended December 31, 2000 and the interim period ended March 31, 2001 and Buyer shall be satisfied in all respects with the results of such reviews. 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 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 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) A certificate of good standing of Seller dated within five days of the Closing Date, from the Secretary of State of the State of California. (d) 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 due diligence review of the Business and its condition, including without limitation customer, vendor, and other third Person relationships and environmental, tort, securities, corporate, product liability, employee benefits, taxation and insurance matters. 8.14 Employees and Independent Contractors. [Intentionally deleted.] 8.15 Closing Patentable Property Purchase Agreement. The transactions contemplated under the Patentable Property Purchase Agreement shall have been consummated. 8.16 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 9.6 hereof have been fully satisfied. Such certificate shall be deemed a representation and warranty of Buyer and OSI hereunder. 9.4 Employment Agreement. Buyer shall have executed and delivered the Employment Agreement in substantially the form attached hereto as Exhibits C. 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 on the Closing Date: (a) The Assignment and Assumption Agreement, duly executed by Buyer. (b) 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. (c) A certificate of good standing of OSI dated within five days of the Closing Date, from the Secretary of State of Delaware. (d) A copy, certified by the Secretary of Buyer to be true, complete and correct as of the Closing Date, of the certificate or articles of incorporation and bylaws of Buyer and all resolutions, authorizations, consents, approvals and/or ratifications of the directors 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. (e) 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 bylaws 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 Closing Patentable Property Purchase Agreement. The transactions contemplated under the Patentable Property Purchase Agreement shall have been consummated. 9.9 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 three 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, 3.13, 3.14, 3.27 and 3.34; 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. The expiration of any representation or warranty made in this Agreement or in any exhibit, statement, Schedule, certificate, instrument or document delivered pursuant hereto shall not impair or restrict the rights that any Party could assert with respect to any and all remedies at law or in equity in the absence of such representation or warranty. All representations and warranties hereunder shall be deemed to be material and, except as otherwise specifically provided herein, relied upon by the Parties with or to whom the same were made, notwithstanding any investigation or inspection made by or on behalf of such Party or Parties. which shall survive until the expiration of the applicable statute of limitations. 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 plus 2% 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; (v) the assertion of any claim by any person related to or arising out of the transactions contemplated in the Agreement of Purchases and Sale of Stock, dated December 31, 2000 between Shareholder and Edward L. Witt; (vi) any claim by a present or former employee of Seller (whether under any Law, Contract or otherwise) on account of or for overtime pay prior to the Closing Date, (vii) any claim Buyer may have against Shareholder in connection with the Patentable Property Purchase Agreement; and (viii)without being limited by the foregoing subsections (i) through (vii) and without regard to whether any one or more of the items listed in this subsection (viii) 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 Effective Time, except to the extent such Taxes are reflected as a Tax Liability on the Closing Statement of Net Assets, (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 Effective Time arising out of the settlement or other resolution of a proposed tax adjustment which relates to a tax period ending on or before the Effective Time; and (B) Seller's termination of any of its employees prior to the Closing Date, 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, Section 3.14, Section 3.27 and Section 10.2(a)(iv)) unless such Indemnified Losses exceed $50,000 in the aggregate, but upon reaching such amount, from the first dollar to the full extent of all Indemnified Losses; or (ii) to the extent such Indemnified Losses exceed the aggregate consideration paid for (i)the Purchased Assets as contemplated under Section 2.3 of this Agreement and (ii) the Shareholder Patentable Property as contemplated under Section 2.3 of the Patentable Property Purchase 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. (a) Buyer and OSI hereby 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: (i) 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 (ii) any Liability of Buyer with respect to the Assumed Liabilities. (b) The Seller Indemnified Persons shall not be entitled to recover Indemnified Losses for a breach of a representation or warranty of Buyer or OSI contained in this Agreement unless such Indemnified Losses exceed $50,000 in the aggregate, but upon reaching such amount, from the first dollar to the full extent of all Losses. 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, (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. 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 any "Earn-Out" payment which may be due to pursuant to Section 2.8 of the Patentable Property Purchase Agreement. 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 May 31, 2001, or such other date, if any, as Buyer and Seller shall agree upon. (c) By Buyer if: (i) Either Buyer's or OSI's Board of Directors declines to approve this Agreement and the transaction contemplated hereby, or (ii) Buyer determines, in its sole discretion, that the transaction contemplated hereby has become inadvisable or impractical (A) as a result of Buyer's investigation of the Business prior to the Closing or (B) 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 Chairman of the Board, 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 Remedies. Nothing contained herein is intended to or shall be construed to limit the remedies which either Party may have against the other in the event of a breach of or default under this Agreement, it being intended that any remedies shall be cumulative and not exclusive. 11.7 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. 11.8 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. 11.9 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. 11.10 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. 11.11 Choice of Forum and Governing Law. 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: (a) any litigation involving any noncompliance with or breach of this Agreement, or regarding the interpretation, validity and/or enforceability of this Agreement, shall be filed and conducted in the state or federal courts in St. Louis, Missouri; and (b) the Agreement shall be interpreted in accordance with and governed by the laws of the State of Missouri, without regard for any conflict of law principles. 11.12 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. 11.13 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: Pacific Software Consulting, Inc. 254 6th Street Seal Beach, California 90740 Attention: Edward F. Lambert copy to (which shall not constitute notice): Cheadle & Garrett 4041 Macarthur Boulevard Newport Beach, CA 92660 Attention: C. Tucker Cheadle Fax: (949) 833-1292 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. PACIFIC SOFTWARE CONSULTING, INC. By:/s/ Edward F. Lambert ----------------------- Name: Edward F. Lambert Title: President /s/ Edward F. Lambert - -------------------------- Edward F. Lambert OUTSOURCING SOLUTIONS INC. By:/s/ Gary L. Weller ----------------------- Name: Gary L. Weller ------------------- Title: EVP-CFO ------------------- PACIFIC SOFTWARE CONSULTING, LLC By:/s/ Eric R. Fencl ----------------------- Name: Eric R. Fencl ------------------- Title: Secretary ------------------- 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 Edward F. Lambert Schedules Schedule 1.1(a) Assumed Liabilities Schedule 1.1(b) Excluded Assets Schedule 2.1 Allocation of Consideration Schedule 2.9(a) Closing Financial Statements Principles and Procedures Schedule 3.3 Financial Statements Schedule 3.4 Events Subsequent to December 31, 1999 Schedule 3.7 Undisclosed Liabilities Schedule 3.10 Personal Property - Owned Schedule 3.13 Trade Names 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 3.19 Contracts - Validity Schedule 3.22 Directors, Officers, Employees and Consultants Schedule 3.32 Insurance Policies Schedule 3.37 Service Warranties and Guarantees PATENTABLE PROPERTY PURCHASE AGREEMENT by and among Outsourcing Solutions Inc., Pacific Software Consulting, LLC, and Edward F. Lambert, Dated April 30, 2001 TABLE OF CONTENTS PATENTABLE PROPERTY PURCHASE AGREEMENT SECTION PAGE - ------- ---- ARTICLE I DEFINITIONS.........................................................1 Affiliate.................................................................1 Affiliated Group..........................................................1 Agreement.................................................................1 Arbiter...................................................................1 Asset Purchase Agreement..................................................1 Business..................................................................1 Buyer.....................................................................2 Buyer Indemnified Persons.................................................2 Closing...................................................................2 Closing Date..............................................................2 Closing Payment...........................................................2 Confidential Information..................................................2 Contract..................................................................2 Court.....................................................................2 Covenant Not to Compete...................................................2 Dollars...................................................................2 Earnings..................................................................2 Earn-Out Payments.........................................................2 EBITDA....................................................................2 Effective Time............................................................2 Employment Agreements.....................................................2 First Earn-Out Payment....................................................2 First Payment Period......................................................2 Government................................................................2 Indemnified Losses........................................................3 Indemnified Party.........................................................3 Indemnifying Party........................................................3 Intellectual Property.....................................................3 Law.......................................................................3 Liabilities...............................................................3 Lien......................................................................3 Losses....................................................................3 OSI.......................................................................3 Ordinary Course...........................................................3 Party.....................................................................4 Patentable Property.......................................................4 Person....................................................................4 Plan......................................................................4 Purchased Assets..........................................................4 Restricted Period.........................................................4 Returns...................................................................4 Second Earn-Out Payment...................................................4 Second Payment Period.....................................................4 Seller....................................................................4 Seller Indemnified Persons................................................4 Tax Affiliate.............................................................4 Taxes.....................................................................4 Third Person..............................................................5 Third Person Claim........................................................5 ARTICLE II PURCHASE AND SALE OF ASSETS........................................5 2.1 Assets to be Purchased..............................................5 2.2 No Assumed Liabilities..............................................5 2.3 Consideration.......................................................5 2.4 Allocation of Consideration.........................................5 2.5 Closing.............................................................5 2.6 Deliveries of Seller at the Closing.................................5 2.7 Deliveries of Buyer at the Closing..................................6 2.8 Earn-Out Payments...................................................6 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER...........................9 3.1 Corporate Existence and Power of Company............................9 3.2 Approval and Enforceability of Agreement............................9 3.3 Undisclosed Liabilities.............................................9 3.4 Intellectual Property..............................................10 3.5 Necessary Property and Transfer of Assets..........................10 3.6 Notice of Violation................................................11 3.7 No Breach of Law or Governing Document.............................11 3.8 Litigation and Arbitration.........................................11 3.9 Broker's Fees......................................................11 3.10 Truthfulness.......................................................11 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER............................11 4.1 Corporate Existence of Buyer.......................................11 4.2 Approval of Agreement..............................................12 4.3 No Breach of Articles or Indentures................................12 4.4 Broker's Fees......................................................12 ARTICLE V COVENANTS CONCERNING SELLER.........................................12 5.1 Operation of the Business..........................................13 5.2 Preservation of Business...........................................13 5.3 Full Access........................................................13 5.4 Governmental Filings...............................................13 ARTICLE VI OTHER AGREEMENTS...................................................13 6.1 Tax Matters........................................................13 ARTICLE VII COVENANT NOT TO COMPETE...........................................14 7.1 Covenant Not to Compete............................................14 7.2 Employees..........................................................15 7.3 Confidentiality....................................................15 7.4 Remedies...........................................................15 7.5 Permitted Exceptions...............................................15 ARTICLE VIII CONDITIONS TO BUYER'S OBLIGATIONS................................16 8.1 Representations and Warranties of Seller...........................16 8.2 Approval by Buyer's Board..........................................16 8.3 Performance of this Agreement......................................16 8.4 No Material Adverse Change and No Extraordinary Distributions......16 8.5 Certificate of Seller..............................................16 8.6 Employment Agreements..............................................16 8.7 No Lawsuits........................................................16 8.8 No Restrictions....................................................17 8.9 Consents...........................................................17 8.10 Releases...........................................................17 8.11 Documents..........................................................17 8.12 Closing Asset Purchase Agreement...................................17 8.13 Further Assurances.................................................17 ARTICLE IX CONDITIONS TO SELLER'S OBLIGATIONS.................................17 9.1 Representations and Warranties of Buyer and OSI....................17 9.2 Performance of this Agreement......................................18 9.3 Certificate of Buyer...............................................18 9.4 Payment of Closing Payment.........................................18 9.5 No Lawsuits........................................................18 9.6 Documents..........................................................18 9.7 Closing Asset Purchase Agreement...................................19 9.8 Further Assurances.................................................19 ARTICLE X INDEMNIFICATION.....................................................19 10.1 Survival of Representations and Warranties.........................19 10.2 Seller's Indemnification...........................................19 10.3 Buyer's Indemnification............................................20 10.4 Notice of Claim....................................................21 10.5 Right to Contest Claims of Third Persons...........................21 10.6 Set-Off Rights.....................................................22 ARTICLE XI MISCELLANEOUS......................................................22 11.1 Assignment; Binding Agreement......................................22 11.2 Termination of Agreement...........................................22 11.3 Manner and Effect of Termination...................................23 11.4 Non-Disclosure of Information......................................23 11.5 Bulk Sales.........................................................23 11.6 Remedies...........................................................23 11.7 Entire Agreement and Modification..................................24 11.8 Severability.......................................................24 11.9 Counterparts.......................................................24 11.10 Headings; Interpretation...........................................24 11.11 Choice of Forum and Governing Law..................................24 11.12 Payment of Fees and Expenses.......................................24 11.13 Notices............................................................24 PATENTABLE PROPERTY PURCHASE AGREEMENT THIS PATENTABLE PROPERTY PURCHASE AGREEMENT (the "Agreement") is made as of this 30th day of April, 2001, by and among, on one hand, Outsourcing Solutions Inc., a Delaware corporation ("OSI") and Pacific Software Consulting, LLC, a Delaware limited liability company owned by OSI ("Buyer"), and on the other hand, Edward F. Lambert ("Seller"). Certain defined terms are set forth in Article I. RECITALS A. Buyer desires to purchase from Seller the Patentable Property on the following terms and conditions; B. Seller desires to sell to Buyer the Patentable Property on the following terms and conditions; and C. Simultaneously with the Closing, Buyer will purchase certain assets from Pacific Software Consulting, Inc., a California corporation ("Company"), pursuant to the Asset Purchase Agreement. 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 "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 2.8(c). "Asset Purchase Agreement" means the Asset Purchase Agreement, dated the date hereof, among OSI, Buyer, Pacific Software Consulting, Inc., as seller, and Edward F. Lambert, shareholder. "Business" means the business and operations of Company including without limitation the business generally conducted under the trade name "Pacific Software Consulting, 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 Date" means April 30, 2001 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 Payment" means Three Million Nine Hundred Seventy One Thousand Two Hundred Fifty Dollars ($3,971,250). "Confidential Information" has the meaning set forth in Section 7.3. "Contract" means any contract, agreement, arrangement, understanding, lease, indenture, evidence of indebtedness, binding commitment or instrument, purchase order or offer, written or oral, entered into or made by or on behalf of Company, or to which Company is a party or by which it or its property is bound. "Court" means any court, grand jury, administrative or regulatory body, Government agency, arbitration or mediation panel or similar body. "Covenant Not to Compete" means the obligations of Seller under Article VII. "Dollars" or "$" means United States Dollars. "Earnings" shall mean earnings of Buyer for purposes of calculating the Earn-Out Payments (and, in the case of the First Payment Period, earnings of the Company from January 1, 2001 until the Effective Time). "Earn-Out Payments" has the meaning set forth in Section 2.8(d). "EBITDA" has the meaning set forth in Section 2.8(a). "Effective Time" means as of 11:59 p.m. on April 30, 2001. "Employment Agreement" means the form of employment and non-competition agreement set forth as Exhibit C to the Asset Purchase Agreement. "First Earn-Out Payment" has the meaning set forth in Section 2.8(a). "First Payment Period" has the meaning set forth in Section 2.8(a). "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. "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. "Intellectual Property" means all of the following (in whatever form or medium) which are used, owned by or licensed to Seller in connection with the Business: (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. "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). "OSI" has the meaning set forth in the Preamble. "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) 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, OSI or Seller and "Parties" means all of them. "Patentable Property" means the Intellectual Property set forth on Schedule 3.4, all of which shall be transferred to Buyer pursuant to this Agreement. "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. "Purchased Assets" has the meaning set forth in Asset Purchase Agreement. "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." "Second Earn-Out Payment" has the meaning set forth in Section 2.8(b). "Second Payment Period" has the meaning set forth in Section 2.8(b). "Seller" has the meaning set forth in the Preamble. "Seller Indemnified Persons" has the meaning set forth in Section 10.3(a). "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 Patentable Property. 2.2 No Assumed Liabilities. PURSUANT TO THIS AGREEMENT, 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 Patentable Property shall be the aggregate of (a) the Closing Payment and (b) the Earn-Out Payments, if any, contingent upon the productivity and use of such property provided for in Section 2.8. 2.4 Allocation of Consideration. The consideration provided for in Section 2.3 shall be allocated among the Patentable Property and Covenant Not to Compete as provided in Schedule 2.4 hereto. Such allocation shall be prepared in accordance with Section 1060 of the Code. 2.5 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. 2.6 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. 2.7 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 and (b) transfer the Closing 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. 2.8 Earn-Out Payments. (a) If the Company and Buyer achieve Earnings before interest expense, Taxes, depreciation and amortization, each item determined in accordance with GAAP consistently applied ("EBITDA"), in excess of $1,500,000, for the period beginning as of the first day January 2001 and continuing for 12 full months thereafter (the "First Payment Period") (that is, the aggregate of (i) EBITDA for the Company from January 1, 2001 until the Effective Time and (ii) EBITDA for Buyer from the Effective Time until December 31, 2001), Buyer will pay Seller in cash the amount set forth opposite the EBITDA obtained by Company and Buyer for the First Payment Period in the following table (the "First Earn-Out Payment"): Category EBITDA for the First Payment Period First Earn-Out Payment - -------- ----------------------------------- ---------------------- I $1,500,001 - $2,500,000 Two (2) times the amount by which the EBITDA exceeds $1,500,000 (for amounts up to $2,500,000 of EBITDA) II Equals or exceeds $2,500,001 One (1) times the amount by which the EBITDA exceeds $2,500,000, plus the amount determined for Category I (b) If Buyer achieves EBITDA in excess of $1,000,000, for the period beginning as of the first day January 2002 and continuing for 6 full months thereafter (the "Second Payment Period"), Buyer will pay Seller in cash the amount set forth opposite the EBITDA obtained by Buyer for the Second Payment Period in the following table (the "Second Earn-Out Payment"): Category EBITDA for the Second Payment Period Second Earn-Out Payment - -------- ------------------------------------ ----------------------- I $1,000,001 - $2,000,000 Two and one half (2.5) times the amount by which the EBITDA exceeds $1,000,000 (for amounts up to $2,000,000 of EBITDA) II Equals or exceeds $2,000,001 One (1) times the amount by which the EBITDA exceeds $2,000,000, plus the amount determined for Category I (c) Earnings shall be determined for purposes of this Agreement with the earn-out principles and procedures set forth on Schedule 2.8. (d) To the extent OSI determines an First or Second Earn-Out Payment (collectively, the First Earn-Out Payment and the Second Earn-Out Payment are the "Earn-Out Payments" and individually, 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 2.8(a) or 2.8(b) on the date Buyer submits its preliminary determination to Seller pursuant to Section 2.8(e). Buyer shall pay any additional payments required pursuant to Section 2.8(a) or 2.8(b) promptly following the final and binding determination, pursuant to this Agreement, of the applicable Earn-Out Payment for the applicable Payment Period. To the extent the amount of any Earn-Out Payment is less than the preliminary payment previously paid for the applicable Payment Period, Seller shall refund the amount in excess to Buyer promptly following the final and binding determination, pursuant to this Agreement, of the applicable Earn-Out Payment. (e) The determination of the amount of the applicable Earn-Out Payment shall be determined by OSI promptly after the completion of the applicable Payment Period based on the financial statements of Buyer for the applicable Payment Period (and, in the case of the First Payment Period, the financial statements of the Company from January 1, 2001 through the Effective Time). The determination of the amount of any Earn-Out Payment shall be submitted to Seller within 60 calendar days after end of the applicable 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 applicable Earn-Out Payment. If Seller does not object to the determination by OSI of the applicable 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 an 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 applicable Earn-Out Payment, Seller and OSI shall negotiate in good faith to resolve any differences. During such negotiation, Seller shall have the right to demand an audit and examination of the applicable financial statements of Buyer, which shall be conducted at OSI's sole cost and expense. Such audit shall be conducted as soon as practicable after written demand by Seller and, upon completion, delivered to Seller ("Audit Delivery Date"). If after 15 calendar days following such notice any of the Audit Delivery Date (or, if Seller waives or fails to exercise the right to cause an audit to be conducted, 30 calendar days after delivery of the Notice of Objection) have not been resolved (the "Disputed Matters"), then such Disputed Matters shall be submitted to arbitration in Chicago, Illinois. A partner in Ernst & Young LLP, certified public accountants (the "Arbiter") 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. If Ernst & Young LLP is the auditor for OSI and its subsidiaries (or is providing a material amount of consulting services to OSI and its subsidiaries) at the time of the dispute, the Parties will mutually agree upon another nationally recognized accounting firm to serve as Arbiter. 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 an 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 applicable Earn-Out Payment shall be distributed to Seller, or any decrease in the applicable Earn-Out Payment shall be repaid to OSI by Seller. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby makes the following representations and warranties, each of which Seller represents and warrants 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 Company. (a) Company is a corporation duly organized, validly existing and in good standing under the Laws of the state of its incorporation. (b) Company 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. Company has the corporate power to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. 3.2 Approval and Enforceability of Agreement. (a) Seller 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, this Agreement is the legal, valid and binding obligation of Seller, enforceable against Seller 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. 3.3 Undisclosed Liabilities. In connection with the Business and the Patentable Property, 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 to the extent set forth on Schedule 3.3. 3.4 Intellectual Property. (a) Seller does not own or use any Intellectual Property other than the Patentable Property. Schedule 3.4 contains a true and accurate description of the Patentable Property in the form of a draft business method patent application (the "Application"). There are no all licenses or other rights granted by any Seller to any third party with respect to any item of the Patentable Property. (b) Seller represents and warrants as follows: (i) the Patentable Property along with the related goodwill and the Trade Names (as defined in the Asset Purchase Agreement) encompasses all proprietary rights necessary or desirable for the conduct of the Business as presently conducted or proposed to be conducted (in each case free and clear of all Liens); (ii) Seller has good and marketable title to the Patentable Property free and clear of all Liens and, to Seller's knowledge, Seller has taken all actions necessary to maintain and protect the Patentable Property; (iii) there has been no claim made against Seller or Company asserting the invalidity, misuse or unenforceability of the Patentable Property or challenging Seller's right to use or ownership of the Patentable Property, and there are no grounds for any such claim or challenge; (iv) Seller is not aware of any infringement or misappropriation of the Patentable Property or of any facts raising a likelihood of infringement or misappropriation; (v) Seller's use of the Patentable Property has not infringed or misappropriated, and does not infringe or misappropriate, any intellectual property or proprietary right of any other entity; (vi) no loss of the Patentable Property is threatened, pending or reasonably foreseeable; and (vii) the consummation of the transactions contemplated by this Agreement will not alter, impair or extinguish the Patentable Property. 3.5 Necessary Property and Transfer of Assets. The Purchased Assets, the Assumed Liabilities (as defined in the Asset Purchase Agreement) and the Patentable Property constitute all the 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 the Company and Seller. No consent is necessary to, and there exists no restriction on, the transfer of the Patentable Property to Buyer. There exists no condition, restriction or reservation affecting the title to or utility of the Patentable Property which would prevent Buyer from utilizing the Patentable Property, 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 Patentable Property shall be vested in Buyer free and clear of all taxes and Liens. Seller does not represent and warrant, or provide any other assurance, that the patent application will result in the issuance of a business method patent in accord with the patent application; and, if such patent is issued, that it will be enforceable in accord with its terms. After the Closing, Buyer shall, in its sole discretion, determine whether and in what form to file the Application with the U.S. Patent and Trademark Office ("PTO") and, if it so determines to file the Application with the PTO, Buyer be responsible for any prosecution and related fees and costs incurred by Buyer in connection with such filing. Seller understands that, if it so determines to file the Application with the PTO, such business method patent may not ultimately issue with the result that Buyer may have to rely solely on such other rights as may be available under applicable state and federal law. 3.6 Notice of Violation. No notice of any violation of any Law relating to the Patentable Property has been received by Seller. 3.7 No Breach of Law or Governing Document. In connection with the Patentable Property, Seller has complied with and is not in default under or in breach or violation of, (a) any applicable Law of any Government body or (b) any franchise or license. 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. 3.8 Litigation and Arbitration. There is no suit, claim, action or proceeding now pending or threatened before any Court, nor or 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 the Patentable Property 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 threatened before any Court which will, or could, prevent or hamper the consummation of the transactions contemplated by this Agreement. 3.9 Broker's Fees. Neither Seller nor Company 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. 3.10 Truthfulness. No representation or warranty of Seller herein and no statement or certificate furnished or to be furnished by or on behalf of Seller 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 Buyer and OSI hereby make 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 sale 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 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 action of Buyer and OSI, and such authorization and approval have not been revoked. Pursuant to such authorization and approval, each of Buyer and OSI has full 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, this Agreement is the legal, valid and binding obligation of each 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 charter documents 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. ARTICLE V COVENANTS CONCERNING SELLER Seller covenants and agrees with Buyer that: 5.1 Operation of the Business. Without the prior written consent of Buyer, Seller will not: (a) Enter into any Contract or engage in any transaction related to the Patentable Property. (b) Sell or dispose of or encumber any Patentable Property. (c) Take any action or incur any Liability or obligation which, if taken or incurred prior to the date of this Agreement, would be required to be disclosed on any Schedule hereto. 5.2 Preservation of Business. Company shall carry on the Business diligently and substantially in the same manner as heretofore conducted. 5.3 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 Patentable Property, and Seller will furnish to Buyer any information in respect of the Patentable Property as Buyer may from time to time request. Such examination and investigation by Buyer shall not affect the warranties and representations of Seller contained in this Agreement. 5.4 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. ARTICLE VI OTHER AGREEMENTS 6.1 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 Patentable Property hereunder, whether levied on Buyer, the Patentable Property or Seller. Seller, in the case of the Patentable Property, shall prepare, subject to Buyer's reasonable approval, and file any Returns required in respect of such Taxes. (b) All personal property, ad valorem and any other local or state Taxes relating to the Patentable Property 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 allocate Buyer's purchase of the Patentable Property pursuant to Section 1060 of the Code and other applicable Laws in a consistent manner and shall take no position contrary thereto and file the appropriate Form 8594, attached as Schedule 6.1 with their respective income tax returns. To the extent Buyer determines that a Form 1099 should be sent to Seller, it shall be only on Form 1099-B with respect to the Internal Revenue with no filing being made in Missouri; and, Seller and Buyer shall not take any contrary income tax positions. If the classes for Form 8594 are changed then the consideration shall be allocated as required for such new classes. (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 Patentable Property 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. ARTICLE VII COVENANT NOT TO COMPETE 7.1 Covenant Not to Compete. (a) As a further inducement to Buyer to purchase the Patentable Property and to enter into the transactions contemplated under the Asset Purchase Agreement, Seller agrees that for the period from the Closing Date until the expiration of six years from the Closing Date (the "Restricted Period"), Seller 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 in the United States of America which is in competition with the Business or any business in which OSI and its subsidiaries are engaged; or (ii) solicit or accept business from, or provide competitive products or services to, any customers (whether or not such Persons have done business with Company once or more than once) or accounts of Company (prior to the Closing Date) or Buyer (after the Closing Date). (b) It is expressly understood and agreed that although Seller 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. Seller 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 Company prior to 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 or continue in such employment. 7.3 Confidentiality. Seller 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. Seller recognizes and agrees that all documents and objects containing any Confidential Information, whether developed by Seller, Company 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, Seller 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 Exceptions. Nothing contained herein shall restrict Seller from (A) 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 or (B) providing systems consulting services to non-financial services entities provided such systems consulting shall not directly or indirectly involve accounts receivable management.. 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 . The representations and warranties of Seller 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 Approval by Buyer's and OSI's Boards. This Agreement and the transactions contemplated hereby shall have been approved by or under the authority of Buyer's and OSI's respective Boards of Directors. 8.3 Performance of this Agreement. Seller 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. 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 Patentable Property), whether or not covered by insurance, as a result of any cause whatsoever. 8.5 Certificate of Seller . Buyer shall have received a certificate signed by Seller dated as of the Closing Date and subject to no qualification certifying that the conditions set forth in Sections 8.1, 8.2, 8.3, 8.4, 8.7, 8.8, 8.9, and 8.10 hereof have been fully satisfied. Such certificate shall be deemed a representation and warranty of Seller under this Agreement. 8.6 Employment Agreement. Edward F. Lambert shall have executed and delivered an Employment Agreement in substantially the form attached as Exhibit C to the Asset Purchase Agreement. 8.7. 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. 8.8 No Restrictions. There shall exist no conditions, restrictions or reservations affecting the title to or utility of the Patentable Property which would prevent Buyer from occupying and utilizing the Patentable Property, 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. 8.9 Consents. All consents and approvals necessary to ensure that Buyer will continue to have the same full rights in respect to the Patentable Property as Seller had immediately prior to the consummation of the transactions contemplated hereunder shall have been obtained. 8.10 Releases. At or prior to the Closing Date, Seller shall have delivered to Buyer the written release of all Liens relating to the Patentable Property, 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. 8.11 Documents. Buyer shall have received from Seller on the Closing Date the Assignment to Buyer of the Patentable Property in the form of Exhibit A hereto, duly executed by Seller. 8.12 Closing Asset Purchase Agreement. The transactions contemplated under the Asset Purchase Agreement shall have been consummated. 8.13 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 Payment of Closing Payment. On the Closing Date, Seller shall have received from Buyer the Closing Payment to be delivered under Section 2.6 hereof. 9.5 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. 9.6 Documents. Seller shall have received from Buyer on the Closing Date: (a) 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. (b) A certificate of good standing of OSI dated within five days of the Closing Date, from the Secretary of State of Delaware. (c) A copy, certified by the Secretary of Buyer to be true, complete and correct as of the Closing Date, of the certificate or articles of incorporation and bylaws of Buyer and all resolutions, authorizations, consents, approvals and/or ratifications of the directors 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. (d) 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 bylaws 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. 9.7 Closing Asset Purchase Agreement. The transactions contemplated under the Asset Purchase Agreement shall have been consummated. 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 three 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, 3.4 and 3.5; 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. The expiration of any representation or warranty made in this Agreement or in any exhibit, statement, Schedule, certificate, instrument or document delivered pursuant hereto shall not impair or restrict the rights that any Party could assert with respect to any and all remedies at law or in equity in the absence of such representation or warranty. All representations and warranties hereunder shall be deemed to be material and, except as otherwise specifically provided herein, relied upon by the Parties with or to whom the same were made, notwithstanding any investigation or inspection made by or on behalf of such Party or Parties. which shall survive until the expiration of the applicable statute of limitations. 10.2 Seller's Indemnification. (a) Seller agrees 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 plus 2% 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 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, 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 any person related to or arising out of the transactions contemplated in the Agreement of Purchases and Sale of Stock, dated December 31, 2000 between Seller and Edward L. Witt; (v) any claim Buyer may have against Company or Seller in connection with the Asset Purchase Agreement; and (vi) without being limited by the foregoing subsections (i) through (v) and without regard to whether any one or more of the items listed in this subsection (vi) may be disclosed in the Schedules or otherwise known to Buyer as of the date of this Agreement or on the Closing Date: all Taxes of Seller and Seller'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 Patentable Property, (1) for any taxable period ending on or before the Effective Time or (2) sustained in a tax period of Buyer ending after the Effective Time arising out of the settlement or other resolution of a proposed tax adjustment which relates to a tax period ending on or before the Effective Time. (b) The Buyer Indemnified Persons shall not be entitled to recover Indemnified Losses to the extent such Indemnified Losses exceed the aggregate consideration paid for (i) the Patentable Property as contemplated under Section 2.3 of this Agreement and (ii) the Purchased Assets as contemplated under Section 2.3 of the Asset Purchase Agreement, once Seller 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 agree to hold Seller and his 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: (i) 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 and (ii) any default in making payment in which case Seller may pursue any remedies with Buyer and OSI concurrently without first exhausting any remedies against Buyer. 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, (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. 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 (b) by offsetting Indemnified Losses against any payments due under any Earn-Out Payments which may be due to Seller pursuant to Section 2.8. 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 May 31, 2001, or such other date, if any, as Buyer and Seller shall agree upon. (c) By Buyer if: (i) Either Buyer's or OSI's Board of Directors declines to approve this Agreement and the transaction contemplated hereby, or (ii) Buyer determines, in its sole discretion, that the transaction contemplated hereby has become inadvisable or impractical (A) as a result of Buyer's investigation of the Business prior to the Closing or (B) 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 Buyer to terminate this Agreement and the transactions contemplated hereby, as provided in Section 11.2 hereof, shall be taken by its Chairman of the Board, 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 Patentable Property sold 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 Remedies. Nothing contained herein is intended to or shall be construed to limit the remedies which either Party may have against the other in the event of a breach of or default under this Agreement, it being intended that any remedies shall be cumulative and not exclusive. 11.7 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. 11.8 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. 11.9 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. 11.10 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. 11.11 Choice of Forum and Governing Law. 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: (a) any litigation involving any noncompliance with or breach of this Agreement, or regarding the interpretation, validity and/or enforceability of this Agreement, shall be filed and conducted in the state or federal courts in St. Louis, Missouri; and (b) the Agreement shall be interpreted in accordance with and governed by the laws of the State of Missouri, without regard for any conflict of law principles. 11.12 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. 11.13 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: Edward F. Lambert 254 6th Street Seal Beach, California 90740 copy to (which shall not constitute notice): Cheadle & Garrett 4041 Macarthur Boulevard Newport Beach, CA 92660 Attention: C. Tucker Cheadle Fax: (949) 833-1292 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. /s/ Edward F. Lambert - -------------------------- Edward F. Lambert OUTSOURCING SOLUTIONS INC. By:/s/ Gary L. Weller ----------------------- Name: Gary L. Weller ------------------- Title: EVP & CFO ------------------- PACIFIC SOFTWARE CONSULTING, LLC By:/s/ Eric R. Fencl ----------------------- Name: Eric R. Fencl ------------------- Title: Secretary ------------------- TABLE OF EXHIBITS AND SCHEDULES Exhibits Exhibit A Form of Assignment of Patentable Property Schedules Schedule 2.4 Allocation of Consideration Schedule 2.8 Earn-Out Principles and Procedures Schedule 3.3 Undisclosed Liabilities Schedule 3.4 Patentable Property EX-2 4 ssa_10q-063001.txt STOCK SUBSCRIPTION AGREEMENT STOCK SUBSCRIPTION AGREEMENT This STOCK SUBSCRIPTION AGREEMENT, dated as of April 3, 2001 (this "Agreement"), is by and among Gryphon Partners II, L.P. ("GPII"), Gryphon Partners II-A, L.P. ("GPII-A" and together with GPII, the "Principal Purchaser"), Outsourcing Solutions Inc., a Delaware corporation (the "Company"), and the additional investors identified on the Schedule of Purchasers attached hereto as Exhibit A (the Principal Purchaser and each such additional investor individually a "Purchaser" and collectively the "Purchasers"). Pursuant to the terms and subject to the conditions set forth herein, the Purchasers desire to subscribe for, and the Company desires to issue to the Purchasers, shares of the Senior Common Stock, $.01 par value per share, of the Company (the "Senior Common Stock"). NOW, THEREFORE, IT IS AGREED: ARTICLE I ISSUANCE OF STOCK; PAYMENT OF SUBSCRIPTION PRICE; CLOSING 1.01 Issuance of Stock at the Initial Closing. (a) The Company shall adopt and, after obtaining the requisite stockholder approval, file with the Secretary of State of the State of Delaware on or before the Initial Closing (as defined below) an amendment to the Certificate of Incorporation (as defined below) in the form attached hereto as Exhibit B (the "Certificate Amendment"). (b) On or prior to the Initial Closing, the Company shall have authorized (i) the sale and issuance to the Purchasers hereunder at the Initial Closing and any Subsequent Closings (as defined below) of up to 881,952.79 shares of Senior Common Stock (as equitably adjusted for any stock splits, stock combinations, stock splits or the like). The Senior Common Stock shall have the rights, preferences, privileges and restrictions set forth in the Certificate of Incorporation (as defined below) as amended by the Certificate Amendment. The shares of Senior Common Stock to be sold pursuant to this Agreement are collectively referred to herein as the "Sale Shares." (c) Subject to the terms and conditions of this Agreement, including without limitation the satisfaction of each of the conditions set forth in Sections 5.01, 5.02 and 5.03 or the waiver thereof by the Company or the applicable Purchaser, as applicable, each Purchaser agrees, severally but not jointly, to purchase at the Initial Closing, and the Company agrees to sell and issue to each Purchaser at the Initial Closing, that number of Sale Shares set forth opposite each Purchaser's name on Exhibit A in the column entitled "Sale Shares To Be Purchased at Initial Closing" at a price equal to $49.00 per share. (d) At the Initial Closing, the Company and each Purchaser shall become a party to (i) the Amended and Restated Stockholders Agreement dated the Initial Closing Date in the form attached hereto as Exhibit C (the "Stockholders Agreement"), and (ii) the Amended and Restated Registration Rights Agreement dated the Initial Closing Date in the form attached hereto as Exhibit D (the "Registration Rights Agreement"), and the Company, Madison Dearborn Capital Partners III, L.P. and the Principal Purchaser shall each become a party to the Voting Agreement dated the Initial Closing Date in the form attached hereto as Exhibit E (the "Voting Agreement," and together with the Stockholders Agreement and the Registration Rights Agreement, the "Transaction Documents") and the Company and each Purchaser shall have the rights and obligations hereunder and thereunder. 1.02 Subsequent Closings. (a) In addition to any Sale Shares purchased by the Principal Purchaser at the Initial Closing, and pursuant to the terms and subject to the conditions of this Section 1.02, the Principal Purchaser shall have, at any time prior to the Termination Date, the right but not the obligation, to purchase from the Company up to an aggregate of 392,156.86 Sale Shares at a purchase price of $51.00 per share (such amounts as equitably adjusted for any stock splits, stock combinations, stock splits or the like) (the "Purchase Option"). (b) On or prior to the Termination Date, the Principal Purchaser may exercise the Purchase Option at any time and from time to time by written notice to the Company which written notice shall set forth (i) the number of Sale Shares to be purchased by the Principal Purchaser pursuant to such exercise of the Purchase Option, and (ii) the allocation of such Sale Shares between GPII and GPII-A (the "Purchase Option Notice"). The closing of such issuance and purchase of the Sale Shares specified in a Purchase Option Notice shall take place 10 business days from the date of the Purchase Option Notice or such later time and date as required by law or as the Principal Purchaser and the Company shall mutually determine. (c) With respect to the Sale Shares specified in any Purchase Option Notice, the Purchase Option shall be deemed to have been exercised as of 5 p.m. local time at the Company's address as specified pursuant to Section 8.06 on the on the day that such Purchase Option Notice is deemed received by the Company pursuant to Section 8.06. (d) In the event that the Company shall propose at any time: (i) to declare any dividend or distribution upon its capital stock, whether in cash, property, stock or other securities, whether or not a regular cash dividend and whether or not out of earnings or earned surplus; (ii) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (iii) to effect any reclassification or recapitalization of any shares of capital stock outstanding involving any change in such shares of capital stock; or (iv) to merge or consolidate with or into any other corporation, or sell, lease or convey all or substantially all its property or business, or to liquidate, dissolve or wind up; then, in connection with each such event, the Corporation shall send to the Principal Purchaser at least 10 business days prior written notice of the date on which a record shall be taken for such action or event (and specifying the date on which the holders of such capital stock shall be entitled thereto) or for determining rights to vote in respect of any such matters, as applicable. (e) Upon written notice from GPII or GPII-A, as applicable, each of GPII and GPII-A may assign their rights pursuant to this Section 1.02 with respect to some or all of the remaining Sale Shares subject to the Purchase Option to any "Affiliate" (as such term is defined in the Stockholders Agreement) of GPII or GPII-A, as the case may be, and such assignee shall be deemed a Principal Purchaser for purposes of this Section 1.02, but not for any other purposes hereunder. Any issuance of Sale Shares by the Company upon exercise of the Purchase Option by such assignee shall be treated for purposes of the Stockholders Agreement as if such Sale Shares had been transferred by GPII or GPII-A, as applicable, to such assignee and such deemed transfer shall be subject to the requirements of the Stockholders Agreement. (f) The Purchase Option shall expire, to the extent not previously exercised, as follows: (1) automatically on the first anniversary date of the Initial Closing; and (2) if earlier, by mutual consent of the Company and the Principal Purchaser (the earlier of (1) and (2) being referred to herein as the "Termination Date"). 1.03 Closings. At each Closing the Company shall deliver to each Purchaser (with respect to the Initial Closing) and to the Principal Purchaser (with respect to the Initial Closing and each Subsequent Closing) a certificate or certificates representing that number of Sale Shares sold to such Purchaser at such Closing against payment of the purchase price therefor by check or wire transfer; provided, however, that the delivery of such certificates shall be subject to any requirement that the Purchasers pledge such Sale Shares pursuant to and in conformance with that certain Credit Agreement dated as of November 30, 1999 among the Company, DLJ Capital Funding, Inc., Harris Trust and Savings Bank, Fleet National Bank, and the additional financial institutions and Persons parties thereto, as amended (the "DLJ Credit Agreement"). The closing of the purchase and sale of Sale Shares as provided in Section 1.01 and the consummation of the other transactions contemplated to occur at such closing as set forth herein (the "Initial Closing") and each closing of the purchase and sale of Sale Shares as provided in Section 1.02 and the consummation of the other transactions contemplated to occur at each such closing as set forth herein (each, a "Subsequent Closing") shall take place at the offices of Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois 60601. The Initial Closing shall take place upon the later of (i) 10 business days from the date hereof, and (ii) as soon as practicable after the last of the conditions set forth in Sections 5.01, 5.02 and 5.03 are fulfilled or waived (subject to applicable law), or at such later time and place and on such later date as the Principal Purchaser and the Company shall mutually determine. The Initial Closing and each Subsequent Closing are sometimes referred to herein individually as a "Closing" and collectively as the "Closings." The date of each such Closing is referred to herein as the "Initial Closing Date," "Subsequent Closing Date" or as a "Closing Date," as applicable. 1.04 Obligations are Several. All obligations of the Purchasers pursuant to this Article I shall be individual, and not joint and several. Without limiting any of the conditions set forth in Article V, the failure of any Purchaser to purchase the applicable Sale Shares at a Closing shall not increase any other Purchaser's obligation or commitment, if any, to purchase Sale Shares. ARTICLE II [RESERVED] ARTICLE III REPRESENTATIONS AND WARRANTIES 3.01 Representations and Warranties of the Company. Except as set forth in the Company's disclosure letter (the "Company's disclosure letter"), delivered concurrently with the delivery of this Agreement, the Company hereby represents and warrants to each Purchaser as of the date hereof and as of the Initial Closing Date as follows: (a) Due Organization, Good Standing and Corporate Power. Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and each such corporation has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of the Company and its Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be so qualified or licensed and in good standing would not have a material adverse effect on the business, prospects, operations, results of operations, or financial condition (the "Condition") of the Company and its Subsidiaries taken as a whole. The Company has made available complete and correct copies of the Certificate of Incorporation and By-Laws of the Company and the comparable governing documents of each of its Subsidiaries, in each case as amended and as in effect as of the date this representation and warranty is given (the "Certificate of Incorporation" and "By-Laws," respectively). (b) Authorization and Validity of Agreement. The Company has full power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company, and the consummation by it of the transactions contemplated hereby, have been duly authorized and approved by its Board of Directors and, to the extent required, its stockholders and no other corporate action on the part of the Company or any of its Subsidiaries is necessary to authorize the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and, assuming the due execution and delivery of this Agreement by the Purchasers, is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms. (c) Capitalization. (i) As of the Initial Closing, the authorized capital stock of the Company consists of 15,000,000 shares of Voting Common Stock, par value $0.01 per share (the "Voting Common Stock"), 2,000,000 shares of Non-Voting Stock, par value $0.01 per share (the "Non-Voting Common Stock"), 881,953 shares of Senior Common Stock, and 300,000 shares of Preferred Stock, no par value (the "Preferred Stock"). With respect to such 300,000 shares of Preferred Stock, (i) 50,000 shares are designated as Class A 14% Senior Mandatorily Redeemable Preferred Stock, of which 25,000 shares are designated as Class A 14% Senior Mandatorily Redeemable Preferred Stock, Series A; (ii) 150,000 shares are designated as Class B 14% Senior Mandatorily Redeemable Preferred Stock, of which 75,000 shares are designated as Class B 14% Senior Mandatorily Redeemable Preferred Stock, Series A, and (iii) 50,000 shares are designated as Junior Preferred Stock. The Company may issue up to one additional series of Class A 14% Senior Mandatorily Redeemable Preferred Stock and up to one additional series of Class B 14% Senior Mandatorily Redeemable Preferred Stock solely to holders of the Class A 14% Senior Mandatorily Redeemable Preferred Stock, Series A and the Class B 14% Senior Mandatorily Redeemable Preferred Stock, Series A, respectively. As of the date hereof, (A) 6,088,479.30 shares of Voting Common Stock were issued and outstanding; (B) 480,321.30 shares of Non-Voting Common Stock were issued and outstanding; (C) no shares of Senior Common Stock were issued and outstanding; (D) 25,000.00 shares of Class A 14% Senior Mandatorily Redeemable Preferred Stock were issued and outstanding, all of which were shares of Class A 14% Senior Mandatorily Redeemable Preferred Stock, Series A; (E) 75,000.00 shares of Class B 14% Senior Mandatorily Redeemable Preferred Stock were issued and outstanding, all of which were Class B 14% Senior Mandatorily Redeemable Preferred Stock, Series A; (F) no shares of Class A 14% Senior Mandatorily Redeemable Preferred Stock or shares of Class B 14% Senior Mandatorily Redeemable Preferred Stock of any series other than Series A (in each case) were issued and outstanding; and (G) 7,000.00 shares of Junior Preferred Stock were issued and outstanding. All issued and outstanding shares of capital stock of the Company have been validly issued and are fully paid and nonassessable. Except as set forth in this Section 3.01(c)(i) or in Section 3.01(c)(i) of the Company's disclosure letter, (a) there are no shares of capital stock of the Company authorized, issued or outstanding and (b) there are not as of the date hereof, and at the Initial Closing there will not be, any outstanding or authorized options, warrants, rights, subscriptions, agreements, convertible or exchangeable securities (which options, warrants, rights, subscriptions, agreements, convertible or exchangeable securities shall be disclosed only in aggregate number in Section 3.01(c)(i) of the Company's disclosure letter), obligations, claims of any character, preemptive rights, rights of first refusal, or other commitments, contingent or otherwise, relating to Common Stock or any other shares of capital stock of the Company, pursuant to which the Company is or may become obligated to issue shares of Common Stock, any other shares of its capital stock or any securities convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of the capital stock of the Company. All preemptive rights, rights of first refusal or similar rights that may be triggered by the transactions contemplated hereunder shall, with respect to each Closing, have been complied with or waived. The Company has no authorized or outstanding bonds, debentures, notes or other indebtedness the holders of which have the right to vote (or convertible or exchangeable into or exercisable for securities having the right to vote) with the stockholders of the Company or any of its Subsidiaries on any matter ("Voting Debt"). A true and complete table showing all of the equity security holders of record of all of the equity securities of the Company as of the date hereof is included in Section 3.01(c)(i) of the Company's disclosure letter and the Company shall deliver to the Principal Purchaser immediately prior to the Initial Closing a true and complete table showing all of the equity security holders of record of all of the equity securities of the Company as of the Initial Closing. The Company shall have reserved a total of 881,952.78 shares of Senior Common Stock (as equitably adjusted for any stock splits, stock combinations, stock splits or the like) for issuance pursuant to Sections 1.01 and 1.02 hereof, and a total of 881,952.78 shares of Voting Common Stock (as equitably adjusted for any stock splits, stock combinations, stock splits or the like and as may be adjusted as a result of any adjustment in the conversion rate of the Senior Common Stock pursuant to the Certificate of Incorporation as amended by the Certificate Amendment) for issuance upon conversion of the Senior Common Stock. (ii) Section 3.01(c)(ii) of the Company's disclosure letter lists all of the Company's Subsidiaries. Except as set forth on Section 3.01(c)(ii) of the Company's disclosure letter, all of the outstanding shares of capital stock of each of the Company's Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and are owned, of record and beneficially, by the Company, free and clear of all Encumbrances (as defined below), options or claims whatsoever, except for Encumbrances and claims created pursuant to the DLJ Credit Agreement. Except for such shares and except as set forth on Section 3.01(c)(ii) of the Company's disclosure letter, no shares of capital stock of any of the Company's Subsidiaries are reserved for issuance and there are no outstanding or authorized options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments, contingent or otherwise, relating to the capital stock of any Subsidiary, pursuant to which such Subsidiary is or may become obligated to issue any shares of capital stock of such Subsidiary or any securities convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of such Subsidiary. Except as set forth on Section 3.01(c)(ii) of the Company's disclosure letter, the Company does not own, directly or indirectly, any capital stock or other equity interest in any Person or have any direct or indirect equity or ownership interest in any Person and neither the Company nor any of its Subsidiaries is subject to any obligation or requirement to provide funds for or to make any investment (in the form of a loan, capital contribution or otherwise) to or in any Person. None of the Company's Subsidiaries have any authorized, issued or outstanding Voting Debt. (d) Consents and Approvals; No Violations. Assuming that, with respect to each applicable Closing, the filings, if any, required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), are made and the waiting period thereunder has been terminated or has expired, the execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby will not: (1) violate any provision of the Certificate of Incorporation, the Certificate Amendment or the By-Laws of the Company or the comparable governing documents of any of its Subsidiaries; (2) violate any statute, ordinance, rule, regulation, order or decree of any court or of any governmental or regulatory body, agency or authority applicable to the Company or any of its Subsidiaries or by which any of their respective properties or assets may be bound; (3) require any filing with, or permit, consent or approval of, or the giving of any notice to, or obtaining any new or additional licenses from any governmental or regulatory body, agency or authority; and (4) except as set forth in Section 3.01(d) of the Company's disclosure letter, result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a material default (or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any Encumbrance upon any of the properties or assets of the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, permit, agreement, lease, franchise agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party, or by which it or any of their respective properties or assets are bound or subject, except for, in the case of clauses (2), (3) and (4) above, such as would not have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole, and would not prevent or materially delay consummation of the transactions contemplated by this Agreement. (e) Financial Statements; Commission Filings. (i) The Company has heretofore furnished the Purchasers with the consolidated balance sheets of the Company and its Subsidiaries as at December 31, 2000 and 1999 and the related consolidated statements of operations, changes in stockholder's equity and cash flows for the periods then ended, audited by Deloitte & Touche LLP (with respect to the period ending December 31, 1999) and by PricewaterhouseCoopers LLP (with respect to the period ending December 31, 2000) (collectively, the "Audited Financial Statements") and the unaudited consolidated balance sheet of the Company as at February 28, 2001, and the related unaudited consolidated statements of operations, changes in stockholders' equity and cash flows for the two month period then ended (the "Unaudited Financial Statements" and together with the Audited Financial Statements, the "Financial Statements"). The consolidated unaudited balance sheet as at February 28, 2001, is sometimes referred to herein as the "Balance Sheet" and February 28, 2001, is sometimes herein referred to as the "Balance Sheet Date." Such Financial Statements including the footnotes thereto, except as indicated therein, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby, are consistent with the books and records of the Company, fairly present in all material respects the financial position of the Company and its Subsidiaries and the results of their operations and cash flows at such dates and for such periods, except that the Unaudited Financial Statements (including the Balance Sheet) do not contain footnotes and are subject to year-end adjustments. (ii) The Company has filed all forms, reports and documents with the Securities and Exchange Commission (the "Commission") required to be filed by it pursuant to the Federal securities laws and the Commission rules and regulations thereunder, and all forms, reports and documents filed with the Commission by the Company (collectively, the "Commission Filings") have complied in all material respects with the applicable requirements of the Federal securities laws and the Commission rules and regulations promulgated thereunder. As of their respective dates, the Commission Filings did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company has delivered or made available to the Purchasers true and complete copies of each Commission Filing filed after January 1, 1998. (f) Absence of Certain Changes. Other than as set forth in Section 3.01(f) of the Company's disclosure letter, since December 31, 2000, (i) there has been no material adverse change in the Condition of the Company and its Subsidiaries taken as a whole, and (ii) the business of the Company and its Subsidiaries has been conducted in the ordinary course and in a manner consistent with past practice. (g) Title to Properties; Encumbrances. Except as set forth in Section 3.01(g) of the Company's disclosure letter, the Company and each of its Subsidiaries has good and valid title to (i) all of its material tangible properties and assets (real and personal), including, without limitation, all material properties and assets (real and personal) reflected in the Balance Sheet except as indicated in the notes thereto and except for properties and assets reflected in the Balance Sheet which have been sold or otherwise disposed of in the ordinary course of business after the Balance Sheet Date, and (ii) all the material tangible properties and assets (real and personal) purchased by the Company or any of its Subsidiaries since the Balance Sheet Date except for such properties and assets which have been sold or otherwise disposed of in the ordinary course of business (collectively, the "Assets"); in each case subject to no encumbrance, lien, security interest, charge or other restriction of any kind or character (each an "Encumbrance") except (1) as reflected in Section 3.01(g) of the Company's disclosure letter, (2) Encumbrances reflected on the Balance Sheet, and (3) Encumbrances which do not materially detract from the value of, or materially impair the use of, any material property by the Company or any of its Subsidiaries in the operation of its respective business or which do not have a material adverse effect on the Condition of the Company and its Subsidiaries, taken as a whole. Following the consummation of the transactions contemplated by this Agreement, either the Company or a Subsidiary, as the case may be, will continue to own good and valid title to the Assets without incurring any material penalty or other adverse consequence, including, without limitation, any increase in rentals, royalties, or licenses or other fees imposed as a result of, or arising from, the consummation of the transactions contemplated by this Agreement. (h) Leases. Section 3.01(h) of the Company's disclosure letter contains a list of all leases to which the Company or any Subsidiary is a party requiring an annual aggregate payment of at least $200,000. The Company or its applicable Subsidiary has a good and valid leaseholder interest in and to all of the real property subject to any such lease with respect to which it is a lessee ("Leased Property"). Except as otherwise set forth in Section 3.01(h) of the Company's disclosure letter, each lease set forth therein is in full force and effect and is enforceable in accordance with its terms; there are no material leases, subleases, licenses, concessions or other agreements (written or oral) granting to any Person or entity (other than the Company or its Subsidiaries) the right to use or occupy the Leased Property; all rents and additional rents due to date from the Company or such Subsidiary on each such lease have been paid; in each case, neither the Company nor any Subsidiary has received notice that it is in material default thereunder; and, to the Knowledge of the Company there exists no material event, occurrence, condition or act (including the consummation of the transactions contemplated hereby) which, with the giving of notice, the lapse of time or the happening of any further event or condition, would become a material default by the Company or any Subsidiary under such lease. (i) Material Contracts. (i) Except as set forth in Section 3.01(h), 3.01(i)(i) or 3.01(m) of the Company's disclosure letter, or as listed in the exhibit index to the Company's Form 10-K for the year ended December 31, 2000, as supplemented by the Company's other reports filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") prior to the date hereof (collectively, the "Filed Contracts"), neither the Company nor any Subsidiary has or is bound by (a) any agreement, contract or commitment relating to the employment of any Person by the Company or any Subsidiary which cannot be terminated by the Company or the Subsidiary upon notice of 60 days or less without penalty or premium and involve compensation in excess of $150,000 on an annual basis, (b) any agreement, contract or commitment materially limiting the freedom of the Company or any Subsidiary to engage in any line of business or to compete with any other Person, (c) any agreement, contract or commitment not entered into in the ordinary course of business which materially affects the business of the Company and the Subsidiaries taken as a whole and is not cancelable without penalty within 90 days, or (d) any agreement, contract or commitment required to be filed with the Commission pursuant to any or Items 601(b)(2), 601(b)(4), 601(b)(9) or 601(b)(10) of Regulation S-K under the Exchange Act. The Filed Contracts and the contracts listed in Sections 3.01(h), 3.01(i)(i) and 3.01(m) of the Company's disclosure letter are collectively referred to herein as the "Material Contracts." (ii) True, correct and complete copies of all of the Material Contracts which are written, or written summaries of oral Material Contracts, including all amendments and supplements thereto, have been made available to the Purchasers. Each of the Material Contracts is in full force and effect and is valid, binding and enforceable in accordance with its terms except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditor's rights generally and except insofar as the availability of equitable remedies may be limited by applicable law and except as otherwise would not have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole. The Company and its Subsidiaries are not in breach of any Material Contract in any material respect and have fulfilled, or taken all action necessary to enable them to fulfill when due, all of their respective material obligations under each of the Material Contracts. To the Knowledge of the Company, all other parties to the Material Contracts have complied in all material respects with the provisions thereof, no party is in breach thereunder and no notice of any claim of breach thereunder has been given to the Company or its Subsidiaries which breach would be reasonably likely to have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole. The Company has no Knowledge of any intent by any party to any Material Contract to terminate or amend the terms thereof or to refuse to renew any such Material Contract upon expiration of its term which termination, amendment or expiration would be reasonably likely to have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole. (iii) The Company and its Subsidiaries are not in breach of any material term, right, privilege or preference of, and have fulfilled, or taken all action necessary to enable them to fulfill when due, all of their respective material obligations under all classes and/or series of Preferred Stock outstanding. (j) Compliance with Laws. (i) Except as set forth in Section 3.01(k) of the Company's disclosure letter, the Company and its Subsidiaries are in compliance with all applicable laws and regulations and all orders, judgments and decrees (including, but not limited to, the Fair Debt Collection Practices Act and any state or local counterpart or equivalent) relating to its business and operations (other than with respect to taxes, Environmental Laws, employee benefits, employee relations and federal securities laws which are the subject of specific representations contained in this Agreement) except where the failure to so comply would not have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole and would not prevent or materially delay consummation of the transactions contemplated by this Agreement. (ii) The Company and each of its Subsidiaries possess all licenses, certificates of authority, certificates of need, permits or other authorizations and regulatory approvals required by law (a "License") necessary for the ownership of its properties and the conduct of its business as presently conducted in each jurisdiction in which the Company and such Subsidiary is required to possess a License, except where the failure to possess such a License would not have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole. All such Licenses are in full force and effect and neither the Company nor any Subsidiary has received any written notice of any event, inquiry, investigation or proceeding threatening the validity of such Licenses, except where the failure of such Licenses to be in full force and effect or such event, inquiry, investigation or proceeding would not have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole. (k) Litigation. Except as set forth in Section 3.01(k) of the Company's disclosure letter, there is no action, suit, condemnation, expropriation or other proceeding at law or in equity, or any arbitration or any administrative or other proceeding by or before (or to the Knowledge of the Company any investigation by) any governmental or other instrumentality or agency, pending, or, to the Knowledge of the Company, threatened, against or affecting the Company or any of its Subsidiaries, or any of their properties (including, but not limited to, Leased Property) or rights which (i) has had or is reasonably likely to have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole; (ii) may reasonably prevent or materially delay consummation of the transactions contemplated by this Agreement, or (iii) is, or is seeking certification as, a class action. In addition, except as set forth in Section 3.01(k) of the Company's disclosure letter, neither the Company, any of its Subsidiaries nor any of their respective material tangible properties or assets is subject to any consent decrees or judicial or administrative order, including without limitation under the Fair Debt Collection Practice Act, any state law equivalent relating to the ongoing conduct of the Company's business. (l) Employee Benefit Plans. (i) Section 3.01(l) of the Company's disclosure letter contains an accurate and complete list of (a) each "employee benefit plan" (as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) contributed to, maintained or sponsored by the Company or any of its Subsidiaries, or with respect to which the Company or any of its Subsidiaries has any liability or potential liability; and (b) each other retirement, savings, thrift, deferred compensation, severance, stock ownership, stock purchase, stock option, performance, bonus, incentive, material fringe benefit, hospitalization or other medical, disability, life or other insurance, and any other welfare benefit policy, trust, understanding or arrangement contributed to, maintained or sponsored by the Company or any of its Subsidiaries for the benefit of any present or former employee, officer or director of the Company or any of its Subsidiaries, or with respect to which the Company or any of its Subsidiaries has any liability or potential liability. Each such item listed on Schedule 3.01(l) is referred to herein as a "Benefit Plan." (ii) Section 3.01(l) of the Company's disclosure letter also contains an accurate and complete list of each agreement or commitment of the Company or any Subsidiary of the Company or to which the Company or any of its Subsidiaries may have any liability, with or for the benefit of any current or former employee, officer or director of the Company or any of its Subsidiaries (including, without limitation, each employment, compensation or termination agreement or commitment but excluding employment agreements with annual payments of less than $150,000). Each such item listed on Schedule 3.01(l) is referred to herein as a "Compensation Commitment." (iii) With respect to each Benefit Plan that is intended to be qualified within the meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code") (a) it has received a determination letter, or in the case of a standardized prototype plan, such prototype plan has received a favorable determination letter from the Internal Revenue Service (the "IRS"), or has been timely submitted for a determination letter from the IRS, that such Benefit Plan is qualified under Section 401(a) of the Code, and, to the Knowledge of the Company and its Subsidiaries, nothing has occurred since the date of such determination letter or submission that could adversely affect the qualification of such Benefit Plan or the exemption from taxation of the related trust; and (b) no such Benefit Plan is a "defined benefit plan" (as defined in Section 3(35) of ERISA) or a "multiemployer plan" (as defined in Section 3(37) of ERISA). (iv) Except as described in Section 3.01(l) of the Company's disclosure letter (a) none of the Benefit Plans or Compensation Commitments obligates the Company or any of its Subsidiaries to pay any separation, severance, termination or similar benefit or accelerate the vesting or payment under any Benefit Plan or Compensation Commitment solely as a result of any transaction contemplated by this Agreement or solely as a result of a change in control or ownership within the meaning of Section 280G of the Code; and (b) there is no contract, agreement, plan or arrangement covering any employee or former employee of the Company or any of its Subsidiaries that provides for payment, prior to or in connection with this transaction by the Company or any of its Subsidiaries that is not deductible under Section 162 or 404 of the Code, or that is an "excess parachute payment" pursuant to Section 280G of the Code. (v) (a) Each Benefit Plan and any related trust, insurance contract or fund has been maintained and administered in substantial compliance with its respective terms and in substantial compliance with all applicable laws and regulations, including, but not limited to, ERISA and the Code; (b) there has been no application or waiver of the minimum funding standards imposed by Section 412 of the Code with respect to any Benefit Plan, and neither the Company nor any of its Subsidiaries is aware of any facts or circumstances that would materially change the funded status of any such Benefit Plan; (c) neither the Company nor any of its Subsidiaries has incurred any liability under Title IV of ERISA or to the Pension Benefit Guaranty Corporation; (d) there are no pending or, to the Knowledge of the Company and its Subsidiaries, threatened, material actions, suits, investigations or claims with respect to any Benefit Plan or Compensation Commitment (other than routine claims for benefits), and neither the Company nor any of its Subsidiaries has Knowledge of any facts which could give rise to (or reasonably be expected to give rise to) any such actions, suits, investigations or claims; (e) there have been no prohibited transactions as defined in Section 406 of ERISA or Section 4975 of the Code with respect to any Benefit Plan; and (f) all contributions which are due with respect to each Benefit Plan have been timely made, and all contributions for periods ending on the Initial Closing Date which are not then due have been accrued in accordance with GAAP. (vi) The Company and each of its Subsidiaries has complied in all material respects with the health care continuation requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA ("COBRA"); and the Company and its Subsidiaries have no obligation under any Benefit Plan, Compensation Commitment or otherwise to provide health or other welfare benefits to or with respect to former employees of the Company or any of its Subsidiaries or any other person, except as specifically required by COBRA. (vii) With respect to each Benefit Plan and Compensation Commitment, the Company has furnished or made available to the Purchaser true and complete copies, as applicable, of (a) the plan documents, summary plan descriptions and employee handbooks; (b) IRS Form 5500 Annual Report (including all attachments) for the most recent plan year; (c) all related trust agreements, insurance contracts or other funding arrangements; and (d) the most recent favorable determination letter issued by the IRS. (m) Employment Relations and Agreements. Except as set forth in Section 3.01(m) and 3.01(l) of the Company's disclosure letter, (i) each of the Company and its Subsidiaries is in compliance in all material respects with all federal, state or other applicable laws respecting employment and employment practices, terms and conditions of employment, workers' compensation, plant closing, and wages and hours, and has not and is not engaged in any unfair labor practice where the failure to be in compliance is reasonably likely to have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole; (ii) no representation question exists respecting the employees of the Company or any of its Subsidiaries; (iii) no collective bargaining agreement is currently being negotiated by the Company or any of its Subsidiaries and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement; and (iv) neither the Company nor any of its Subsidiaries has experienced any labor difficulty during the last year except (in the case of this clause (iv)) as would not have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole. Except as disclosed in Section 3.01(m) of the Company's disclosure letter (a) there exist no employment, consulting, severance, indemnification agreements or deferred compensation agreements between the Company and any director, officer or employee of the Company or any agreement that would give any Person the right to receive any payment from the Company as a result of the transactions pursuant to this Agreement, and (b) the Company has no Knowledge that any executive officer of the Company or any other management personnel of the Company having a title of vice president or more senior is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that obligates such person to provide services or render advice to any person other than the Company or any of its Subsidiaries, or would limit (other than for the benefit of the Company or any of its Subsidiaries) the freedom of such person to engage in any line of business or to compete with any other person, in each such case, with respect to any business currently conducted by the Company or its Subsidiaries or reasonably related to the current business of the Company or its Subsidiaries. No payments or obligations to make any payments by the Company to any of its employees or consultants shall arise as a result of the execution and delivery of this Agreement by the Company or the consummation of the transactions contemplated hereby. (n) Taxes. (i) Tax Returns. The Company and each of its Subsidiaries has filed or caused to be filed or will file or cause to be filed with the appropriate taxing authorities on a timely basis all material Tax Returns that are required to be filed by, or with respect to, the Company and each of its Subsidiaries on or prior to the Initial Closing Date (taking into account any extension of time to file granted to or on behalf of the Company or any of its Subsidiaries). All such Tax Returns have been prepared in compliance with all applicable laws and regulations and are true and accurate in all material respects. (ii) Payment of Taxes. All material Tax liabilities of the Company and its Subsidiaries due and payable with respect to all taxable years or other taxable periods (including portions thereof) ending on or prior to the Balance Sheet Date have been, or prior to the Initial Closing Date will be, paid or adequately disclosed as a liability on the Balance Sheet. All material Tax liabilities of the Company and its Subsidiaries due and payable with respect to all taxable years or taxable periods (including portions thereof) which did not end prior to the day after the Balance Sheet Date and which end on or prior to the Initial Closing Date have been, or prior to the Initial Closing Date will be, paid. (iii) Audit Matters. Section 3.01(n) of the Company's disclosure letter sets forth (I) each taxable year or other taxable period of the Company and its Subsidiaries for which an audit or other examination of Taxes by any taxing authority is currently in progress or, to the knowledge of the Company, threatened against or with respect to the Company or any of its Subsidiaries that, if determined adversely to the Company or its Subsidiaries, would result in a material Tax liability of the Company or its Subsidiaries after the Initial Closing Date, and (II) the taxable years or other taxable periods of the Company and its Subsidiaries which, for income tax purposes, will not be subject to the normally applicable statute of limitations because of written waivers or agreements given by the Company or its Subsidiaries. No deficiencies for Taxes have been claimed, proposed or assessed by any taxing authority against any of the Company and its Subsidiaries. The Company has delivered to the Principal Purchaser complete and accurate copies of all examination reports and statements of deficiencies assessed against or agreed to be the Company or any of its Subsidiaries since December 31, 1997. (iv) Other Tax Matters. Except as set forth in Section 3.01(n) of the Company's disclosure letter attached hereto: (1) neither the Company nor any of its Subsidiaries has made any payments, nor is or may become obligated (under any contract or agreement entered into on or before the Initial Closing Date) to make any payments, that will be non-deductible under Section 162(m) or 280G of the Code (or any analogous provisions of state, local or foreign Tax law); (2) the Company and each of its Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party other than such Taxes which in the aggregate, are not material, and all material Forms W-2 and 1099 required with respect thereto have been properly completed and timely filed; (3) there are no liens for material Taxes (other than current Taxes not yet due and payable) upon the assets or properties of the Company or any of its Subsidiaries; (4) the Company and its Subsidiaries are entitled to each Tax refund claimed or received by the Company or any Subsidiary on or prior to the Initial Closing Date, except to the extent the disallowance of which would not result in any material Tax liability or loss of a pending material Tax refund claim; (5) the Company and its Subsidiaries are not and will not become liable for any material Taxes as a result of the consummation of the transactions contemplated herein and such transactions will not create any material gains or income, the taxation of which is deferred under Treasury Regulation Sections 1.1502-13 (or any similar provision of state, local or foreign law); (6) neither the Company nor any of its Subsidiaries is a party to any Tax allocation, sharing, or similar agreement under which the Company or such Subsidiaries has any current or potential contractual obligation to indemnify any other Person with respect to Taxes; (7) the Company and each of its Subsidiaries has properly accrued on its respective financial statements all material Tax liabilities (determined in accordance with GAAP) and the amount so accrued is at least equal to its respective liability for such Taxes; and (8) neither the Company nor any of its Subsidiaries has any liability for material Taxes arising as a result of the Company or any of its Subsidiaries at any time being a member of an affiliated group (as defined in section 1504(a) of the Code and any analogous combined, consolidated or unitary group defined under state, local or foreign income Tax law) other than a group the common parent of which is the Company or any of its Subsidiaries. (o) Liabilities. Except as set forth in Section 3.01(o) of the Company's disclosure letter, neither the Company nor any of its Subsidiaries has any material claims, liabilities or indebtedness, contingent or otherwise, required to be set forth on the Balance Sheet in accordance with generally accepted accounting principles except as set forth in the Balance Sheet or referred to in the footnotes thereto, and except for liabilities incurred subsequent to the Balance Sheet Date in the ordinary course of business or, if incurred outside of the ordinary course of business, liabilities that would not have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole. (p) Intellectual Properties. (i) Section 3.01(p) of the Company's disclosure letter accurately sets forth all of the following used, held for use or otherwise covering or claiming any intellectual property rights used in connection with the business of the Company or its Subsidiaries as currently conducted: (i) patents, patent rights, and applications therefor; (ii) registered trademarks and registered service marks, and applications therefor; and (iii) other material intellectual property rights of any kind or nature, including without limitation copyrights, trade secrets, trade names, know how and other proprietary rights and information (all of the foregoing collectively the "OSI Intellectual Property"). (ii) The Company and its Subsidiaries own or possess adequate licenses or other valid rights to use all OSI Intellectual Property, all material computer software, all material collections of information (such as data bases), used in the conduct of the Company's or any Subsidiary's business, and the Company is unaware of any assertion or claim challenging the validity of any of the foregoing which would have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole. To the Knowledge of the Company, the conduct of the business of the Company and its Subsidiaries as currently conducted does not conflict with, infringe or misappropriate in any way any patent, patent right, license, trademark, trademark right, trade name, trade name right, service mark, copyright or trade secret of any third party that, individually or in the aggregate, would have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole. Except as set forth in Section 3.01(p) of the Company's disclosure letter, neither the Company nor any Subsidiary has received since December 10, 1999 any written notices of, and is not aware of any facts that would be reasonably likely to constitute, any infringement, misappropriation or conflict by the Company of any intellectual property rights of any third party or the invalidity of any OSI Intellectual Property (including, without limitation, any demand or request that the Company or any Subsidiary license or cease and desist from using any rights of any third party). Except as set forth in Section 3.01(p) of the Company's disclosure letter neither the Company nor any Subsidiary has received since December 10, 1999 any written notice of termination or expiration with respect to any OSI Intellectual Property, any material computer software (other than generally available mass market software) and any material collections of information (such as data bases) used in the Company's business from the owner thereof and the Company is unaware of any facts or circumstances that would be reasonably likely to result in such a termination or expiration notice. (q) Environmental Laws and Regulations. Except as set forth in Section 3.01(q) of the Company's disclosure letter (a) Hazardous Materials have not been (i) generated, used, treated or stored on, or transported to or from, any Company Property or (ii) Released or disposed of on or from any Company Property, except, in the case of clauses (i) or (ii) in a manner which could not reasonably be expected to give rise to material liabilities under Environmental Law, (b) the Company and each of its Subsidiaries have complied and are in compliance in all material respects with applicable Environmental Laws and the requirements of any permits or orders issued under such Environmental Laws, and (c) there are no past, pending or, to the Company's Knowledge, threatened claims under Environmental Law against the Company or any of its Subsidiaries. For purposes of this Agreement, the following terms shall have the following meanings: (A) "Company Property" means any real property and improvements at any time owned, leased, or operated by the Company or any of its affiliates, Subsidiaries or any of their respective predecessors; (B) "Hazardous Materials" means (i) any petroleum or petroleum products, radioactive materials or friable asbestos and (ii) any chemicals, materials or substances defined as "hazardous substances," under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 et seq. ("CERCLA") and (iii) all other materials or substances the Release of which is prohibited or regulated or as to which liability may be imposed under Environmental Laws; (C) "Environmental Law" means any federal, state or local statute, law, rule, regulation, ordinance or code, contractual obligation or common law or other legal requirement, in each case in effect and as amended as of the date hereof and the Initial Closing Date, relating to the environment or Hazardous Materials, including, without limitation, CERCLA; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Sections 6901 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Sections 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq.; the Clean Air Act, 42 U.S.C. Sections 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Sections 3808 et seq.; and (D) "Release" means disposing, discharging, injecting, spilling, leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing and the like, into or upon any land or water or air, or otherwise entering into the environment. (r) Conduct of Business. Since the Balance Sheet Date, except (a) as set forth in Section 3.01(r) of the Company's disclosure letter or (b) as contemplated or expressly required or permitted by this Agreement, the Company has not taken any action which, if taken subsequent to the execution of this Agreement and on or prior to the Initial Closing Date, would constitute a material breach of the Company's agreements set forth in Section 4.03 of this Agreement. (s) Broker's or Finder's Fee. Except as set forth in Section 3.01(s) of the Company's disclosure letter and except for the fees and expenses to be paid and/or reimbursed to the Principal Purchaser hereunder and under any Transaction Documents, no agent, broker, Person or firm acting on behalf of the Company is, or will be, entitled to any fee, commission or broker's or finder's fees from any of the parties hereto, or from any Person controlling, controlled by, or under common control with any of the parties hereto, in connection with this Agreement or any of the transactions contemplated hereby. (t) Collection and Portfolio Services Businesses. Since December 31, 2000, there has not been any change in the terms or conditions (including, without limitation, pricing) under which the Company performs either debt collection services or portfolio services that would be reasonably likely to have a material adverse effect on the Condition of the Company and its Subsidiaries taken as a whole. The Company is unaware of any facts that would be reasonably likely to cause a material impairment in the expected realization value of the Company's purchased portfolios taken as a whole. (u) Affiliate Transactions. The Commission Filings, together with Company's Form 10-K for the year ended December 31, 2000, a true and complete copy of which has been provided to the Purchasers, disclose all understandings, agreements or arrangements with any stockholder or its Affiliates which would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the Exchange Act, if an Annual Report on Form 10-K were made on the date hereof. (v) Insurance. (i) All of the Company's insurance policies which are intended to cover miscellaneous professional liability claims against the Company and its Subsidiaries, including claims related to the Fair Debt Collection Practices Act and any state or local counterpart or equivalent, are listed in Section 3.01(v) of the Company's disclosure letter, including the limits and deductibles related thereto. (ii) All such policies are in full force and effect. (x) Disclosure. Except as set forth in Section 3.01(x) of the Company's disclosure letter, this Agreement, the certificates and other instruments attached hereto or delivered pursuant to this Agreement, the Financial Statements, the Commission Filings, the Company's disclosure letter and to the extent listed or described on the Company's disclosure letter, the documents and statements in writing which have been supplied by or on behalf of the Company in connection with the transactions contemplated by this Agreement, when considered in their entirety, do not contain any untrue statement of a material fact, or omit a material fact necessary to make the statements contained herein or therein not misleading. 3.02 Representations and Warranties of Purchaser. Each Purchaser, severally and not jointly, represents and warrants to the Company as of the date hereof and as of the Initial Closing Date as follows: (a) Due Organization and Power. Each of GPII-A and GPII is a limited partnership duly organized and validly existing and (to the extent such concept is applicable) in good standing under the laws of the State of Delaware. Each other Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation. (b) Authorization and Validity of Agreement. Purchaser has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Purchaser, and the consummation by Purchaser of the transactions contemplated hereby, has been duly authorized by Purchaser. No other action on the part of Purchaser (or its partners, stockholders or members, as applicable) is necessary to authorize the execution, delivery and performance of this Agreement by Purchaser and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Purchaser and, assuming the due execution and delivery of this Agreement by the Company, is a valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms. (c) Consents and Approvals; No Violations. Assuming that, with respect to each applicable Closing, the filings, if any, required under the HSR Act are made and the waiting period thereunder has been terminated or has expired, the execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated hereby will not: (1) violate any provision of the governing or charter instruments of Purchaser; (2) violate any statute, ordinance, rule, regulation, order or decree of any court or of any governmental or regulatory body, agency or authority applicable to Purchaser or by which its properties or assets may be bound; (3) require any filing with, or permit, consent or approval of, or the giving of any notice to any governmental or regulatory body, agency or authority; or (4) result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of security interest, charge or Encumbrance upon any of the properties or assets of Purchaser under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, permit, agreement, lease or other instrument or obligation to which Purchaser is a party, or by which its properties or assets may be bound except for in the case of clauses (3) and (4) above for such as would not prevent or materially delay consummation of the transactions contemplated by this Agreement. (d) Litigation. There is no action, suit, proceeding at law or in equity, or any arbitration or any administrative or other proceeding by or before (or, to the Knowledge of Purchaser, any investigation by) any governmental or other instrumentality or agency, pending or, to the Knowledge of Purchaser, threatened, against or affecting Purchaser, or any of its properties or rights, which would prevent or materially delay consummation of the transactions contemplated by this Agreement. (e) Broker's or Finder's Fee. No agent, broker, Person or firm acting on behalf of Purchaser is, or will be, entitled to any fee, commission or broker's or finder's fees from the Company in connection with this Agreement or any of the transactions contemplated hereby. (f) No Registration of Shares. Purchaser is aware that the Sale Shares have not been registered under the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder (the "Securities Act"), that the offer and sale are intended to be exempt from registration under the Securities Act and the rules promulgated thereunder by the Commission, and that the Sale Shares cannot be sold, assigned, transferred, or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from such registration is available; provided, however, that that subject to the contractual obligations of such Purchaser, the disposition of such Purchaser's property shall at all times remain within the sole control of Purchaser. Purchaser is also aware that sales or transfers of the Sale Shares are further restricted by state securities laws and the provisions of the Stockholders Agreement and that the certificates for the Sale Shares will bear appropriate legends restricting their transfer pursuant to applicable laws and the Stockholders Agreement. (g) Suitability of Investment. (i) Purchaser is acquiring the Sale Shares for its own account, for investment purposes only and not with a view to the resale or distribution thereof in violation of the Securities Act; (ii) Purchaser has not and will not, directly or indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all or any part of the Sale Shares, except in accordance with applicable federal and state securities laws and the Stockholders Agreement; provided, however, that subject to the contractual obligations of such Purchaser, the disposition of such Purchaser's property shall at all times remain within the sole control of Purchaser; (iii) Purchaser has such knowledge and experience in financial, business and tax matters that it is capable of evaluating the merits and risks relating to its investment in the Sale Shares and making an investment decision with respect to the Company, and Purchaser has determined the Sale Shares are a suitable investment for Purchaser and that Purchaser is able at this time, and in the foreseeable future, to bear the economic risk of a total loss of its investment in the Company; (iv) Without limiting or modifying the Company's representations and warranties set forth in Section 3.01 or otherwise delivered to the Purchasers hereunder or the right of the Purchasers to rely thereon, to the full satisfaction of Purchaser, Purchaser has been given the opportunity to obtain information and documents relating to the Company and to ask questions of and receive answers from representatives of the Company concerning the Company and the investment in the Sale Shares and Purchaser has no Knowledge of any information that would make the representations and warranties of the Company set forth in this Agreement untrue; (v) Neither Purchaser nor any of its affiliates has engaged in any activity that would be deemed a "general solicitation" under the provisions of Regulation D as promulgated under the Securities Act; and (vi) Purchaser is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act as presently in effect. If Purchaser is subject to ERISA, and is acquiring the Sale Shares as a fiduciary or agent for another investor's account, Purchaser will have sole investment and voting discretion with respect to such account and will have full power to make the acknowledgements, representations and agreements contained herein on behalf of such account. ARTICLE IV TRANSACTIONS PRIOR TO INITIAL CLOSING 4.01 Access to Information Concerning Properties and Records. During the period commencing on the date hereof and ending on the Initial Closing Date, the Company shall, and shall cause each of its Subsidiaries to, upon reasonable notice, (i) afford the Purchasers, and their counsel, accountants, funding sources, consultants and other authorized representative (collectively, "Purchasers' Representatives"), full access during normal business hours to the employees, properties, books and records of the Company and its Subsidiaries in order that they may have the opportunity to make such investigations as they shall desire of the affairs of the Company and its Subsidiaries; (ii) furnish to the Purchasers and the Purchasers' Representatives such financial, legal, technical, personnel and operating data and other information as such Persons may reasonably request; and (iii) instruct the Company's employees, counsel, auditors and financial and industry advisors to cooperate with the Purchasers and the Purchasers' Representatives in their activities reasonably related to consummating the transactions contemplated hereby; provided, that such investigation and assistance shall not unreasonably disrupt the personnel and operations of the Company and its Subsidiaries. In addition, for each month prior to the Initial Closing beginning with January, 2001, the Company shall provide the Purchasers with an unaudited consolidated balance sheet and the related unaudited consolidated statement of operations, changes in stockholders' equity and cash flows for the month then ended when and as such statements are made available to Madison Dearborn Capital Partners III, L.P. (the "Monthly Financial Statements"). The Monthly Financial Statements, except as indicated therein, shall be prepared in accordance with GAAP applied on a basis consistent with the Financial Statements except that they need not contain footnotes and will be subject to year end adjustments. 4.02 Confidentiality. Information obtained by the Principal Purchaser pursuant to Section 4.01 hereof shall be subject to the provisions of the Confidentiality Agreement dated March 2, 2001 between the Company and Principal Purchaser (the "Confidentiality Agreement"). 4.03 Conduct of the Business of the Company Pending the Initial Closing. The Company agrees that, except as set forth in Section 4.03 of the Company's disclosure letter and except as permitted, required or contemplated by, or otherwise described in, this Agreement or otherwise consented to or approved by the Principal Purchaser in writing, during the period commencing on the date hereof and ending on the Initial Closing Date: (a) The Company and each of its Subsidiaries will conduct their respective operations in the ordinary and usual course of business and will use their reasonably best efforts to preserve intact their respective business organization, keep available the services of their officers and employees and maintain satisfactory relationships with licensors, suppliers, distributors, clients, joint venture partners, and others having business relationships with them; and (b) Neither the Company nor any of its Subsidiaries shall (i) make any change in or amendment to its Certificate of Incorporation or By-Laws (or comparable governing documents); (ii) issue or sell any shares of its capital stock (other than in connection with the exercise of convertible or exercisable securities outstanding on the date hereof) or any of its other securities, or issue or grant any securities convertible into, or options, warrants or rights to purchase or subscribe to, or enter into any arrangement or contract with respect to the issuance or sale of, any shares of its capital stock or any of its other securities, or make any other changes in its capital structure; (iii) sell or pledge or agree to sell or pledge any stock owned by it in any of its Subsidiaries; (iv) declare, pay, set aside or make any dividend or other distribution or payment with respect to, or split, combine, redeem or reclassify, or purchase or otherwise acquire any shares of its capital stock or its other securities; (v) cancel or materially amend, modify or supplement or cancel any Material Contract or release or relinquish any material rights under any Material Contract without written notice thereof to the Principal Purchaser prior to or concurrently with such action; (vi) transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of, encumber or subject to any lien, any material assets or incur or modify any indebtedness or other liability; (vii) make any change in its method of accounting other than such changes as may be necessary or advisable to comply with applicable law or regulation or with generally accepted accounting principals after prior notice to the Purchasers; (viii) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries not constituting an inactive Subsidiary (other than the transactions contemplated in this Agreement); or (ix) agree, in writing or otherwise, to take any of the foregoing actions; provided, however, the Company may take any action reasonably necessary to effectuate the payment of payment-in-kind dividends to the holders of the Preferred Stock, in accordance with the terms of the Preferred Stock. 4.04 Reasonable Best Efforts. (a) Subject to the terms and conditions provided herein, the Company and each Purchaser shall, and the Company shall cause each of its Subsidiaries to, cooperate and use their respective reasonable best efforts to take, or cause to be taken, all appropriate action, and to make, or cause to be made, all filings necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, the Company shall use its reasonable best efforts to (x) obtain, prior to the Initial Closing Date, all licenses, permits, consents, waivers, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and its Subsidiaries as are necessary for consummation of the transactions contemplated by this Agreement and Purchaser shall cooperate with, and use its reasonable best efforts to assist, the Company with respect thereto and (z) obtain the waiver, extension and modification as contemplated in Section 5.03(f) in the form reasonably requested or approved by Purchaser and reasonably acceptable to the Company. The Company shall submit to the stockholders of the Company for approval the Certificate Amendment and, assuming that such requisite approval is obtained, on or prior to the Initial Closing the Company shall cause such Certificate Amendment to be duly filed and recorded with and certified by the Secretary of State of the State of Delaware and to be in full force and effect as of the Initial Closing Date. (b) Prior to the Initial Closing, the Company and each of its Subsidiaries shall take all actions that are required to be taken prior to the Initial Closing to ensure that each License shall remain in effect in all material respects upon consummation of the transactions contemplated hereby and will use their reasonable best efforts to respond to requests and inquiries from regulatory agencies regarding Licenses. Without limiting the foregoing, the Company and each of its Subsidiaries shall use their reasonable best efforts to comply with all notice, application, and change in control provisions associated with any License that requires any action to be taken prior to the Initial Closing and to notify the Purchasers of any and all conditions of which the Company is aware with which Purchasers and/or the Company must comply to maintain in all material respects each License with no gap in the coverage of any License, and each of the Company and the Purchasers shall cooperate fully with each other to ensure such compliance. Such notice to the Purchasers shall, to the extent practicable, be given sufficiently in advance of the Initial Closing to permit compliance with all applicable notice, application and change in control provisions associated with each License. 4.05 Exclusive Dealing. During the period from the date of this Agreement to the earlier of the termination of this Agreement and the Initial Closing, neither the Company nor any Stockholder shall take, and they shall not permit any of their respective affiliates, officers, directors, agents, advisors, attorneys, or accountants or financing sources to take, any action to, directly or indirectly, encourage, initiate, solicit or engage in discussions or negotiations with, or provide any information to, any Person, other than the Principal Purchaser and its representatives, concerning (i) any issuance of any capital stock of the Company or its Subsidiaries (other than in connection with the exercise of options, warrants or other convertible securities outstanding on the date hereof) at a price per share that would trigger any preemptive or similar rights pursuant to Section 7 of the Stockholders Agreement assuming that the Stockholders Agreement was then effective, or (ii) any merger, asset sale, recapitalization or similar transaction involving the Company or its Subsidiaries. The Company will not solicit the consent of its stockholders to vote their stock in the Company, and the Company will not vote the capital stock of any of its Subsidiaries, in favor of any such purchase of any capital stock of the Company, or any merger, asset sale or similar transaction. The Company will notify the Principal Purchaser as soon as practicable if any Person makes any proposal, offer, inquiry, or contact to the Company with respect to the foregoing and shall describe in reasonable detail the identity of such Person and, the substance and material terms of any such contact and the material terms of any such proposal. 4.06 Notification of Certain Matters. The Company shall give prompt notice to the Purchasers of the existence of any fact or circumstance of which the Company becomes aware which would cause any representation or warranty made by it contained in this Agreement to be untrue in any material respect or would result in the failure of any condition precedent set forth in Article V at any time from the date of this Agreement to the Initial Closing Date. The Company and each Purchaser shall give prompt notice to the other parties of any notice or other communication from, any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement. 4.07 HSR. Each party shall file or cause to be filed, as promptly as practicable, with the Federal Trade Commission and the United States Department of Justice, all reports and other documents required to be filed by such party under the HSR Act concerning the transactions contemplated hereby and shall promptly comply with or cause to be complied with any requests made to such party by the Federal Trade Commission or the United States Department of Justice for additional information concerning such transactions, in each case so that any waiting period applicable to this Agreement and the transactions contemplated hereby under the HSR Act shall expire as soon as practicable. Each party agrees to request, and to cooperate with the other parties in requesting, early termination of any applicable waiting period under the HSR Act. The Principal Purchaser shall be responsible for any filing fees incurred by the Principal Purchaser in connection with the filings required under the HSR Act. ARTICLE V CONDITIONS PRECEDENT TO SALE OF STOCK 5.01 Conditions to Each Party's Obligations. The respective obligations of each party to effect the transactions contemplated hereby shall be subject to the fulfillment or waiver at or prior to each Closing of the following conditions: (a) No Injunction. No preliminary injunction, or decree, or other order shall have been issued by any court or by any governmental or regulatory agency, body or authority which prohibits the consummation of the transactions contemplated by this Agreement which is in effect at the Closing; provided, however, that, in the case of any such injunction, decree or other order, each of the parties hereto shall have used reasonable best efforts to prevent the entry of any such decree, injunction or other order and to appeal as promptly as possible any such decree, injunction or other order that may be entered. (b) Statutes. No statute, rule, regulation, executive order, decree or order of any kind shall have been enacted, entered, promulgated or enforced by any court or governmental authority which prohibits the consummation of the transactions contemplated hereby. (c) HSR Act. Any waiting period applicable to the sale of the Sale Shares at the Closing under the HSR Act shall have expired, or earlier termination thereof shall have been granted, and no action shall have been instituted by either the United States Department of Justice or the Federal Trade Commission to prevent the consummation of the transactions contemplated by this Agreement at the Closing or to modify or amend such transactions in any material manner or, if any such action shall have been instituted, it shall have been withdrawn or a final judgment shall have been entered against such Department or Commission, as the case may be. 5.02 Conditions to Obligations of the Company. The obligation of the Company to effect the sale of the Sale Shares and to effect the other transactions contemplated hereby shall be subject to the fulfillment at or prior to the Initial Closing of the following additional conditions, any one or more of which may be waived by the Company: (a) Purchaser Representations and Warranties. The representations and warranties of the Purchasers contained in this Agreement which are qualified as to "materiality" or "material adverse effect" shall be true and correct in all respects and the representations and warranties of the Purchasers which are not so qualified shall be true and correct in all material respects, in each case as of the date hereof and as of the Initial Closing with the same effect as though such representations and warranties had been made on and as of such date. (b) Performance by Purchaser. The Purchasers shall have performed and complied in all material respects with all of the covenants and agreements and satisfied in all material respects all of the conditions required by this Agreement to be performed or complied with or satisfied by the Purchasers at or prior to the Initial Closing. (c) Transaction Documents. The Purchasers shall each have executed and delivered the Transactions Documents to which they are parties. 5.03 Conditions to Obligations of the Purchasers. The obligations of each Purchaser to effect the purchase of the Sale Shares and to effect the other transactions contemplated hereby shall be subject to the fulfillment at or prior to the Initial Closing of the following additional conditions, any one or more of which may be waived by such Purchaser as to such Purchaser's obligations hereunder: (a) Representations and Warranties. The representations and warranties of the Company contained in this Agreement which are qualified as to "materiality" or "material adverse effect" shall be true and correct in all respects and the representations and warranties of the Company which are not so qualified shall be true and correct in all material respects as of the date hereof and as of the Initial Closing with the same effect as though such representations and warranties had been made on and as of such date. (b) Performance. The Company shall have performed and complied in all material respects with all the covenants and agreements and satisfied in all material respects all the conditions required by this Agreement to be performed or complied with or satisfied by such parties at or prior to the Initial Closing. (c) No Material Adverse Change. There shall have not occurred after the date hereof any material adverse change in the Condition of the Company and its Subsidiaries taken as a whole. (d) Certificate. The Company shall have delivered, or caused to be delivered, at the Initial Closing to the Purchasers a certificate executed on its behalf by its duly authorized officer in their corporate capacity to the effect that the conditions set forth in Subsections 5.03(a), 5.03(b) and 5.03(c), above, have been satisfied. (e) Transaction Documents. (i) The Company and each other Purchaser shall each have executed and delivered the Transactions Documents to which they are parties, and (ii) the Stockholders Agreement and the Registration Rights Agreement shall have been duly executed and delivered by the requisite parties thereto such that the Stockholders Agreement dated December 10, 1999 by and among the Company, Madison Dearborn Capital Partners III, L.P. and certain other stockholders of the Company and the Registration Rights Agreement dated December 10, 1999 by and among the Company, Madison Dearborn Capital Partners III, L.P. and certain other stockholders of the Company shall each have been amended, restated and superseded in its entirety by the Stockholders Agreement and the Registration Rights Agreement, respectively. (f) Material Consents. The Company and its Subsidiaries shall have procured: (1) a duly obtained waiver in a form reasonably acceptable to the Principal Purchaser under the DLJ Credit Agreement providing that the consummation of the transactions contemplated hereby shall not violate the DLJ Credit Agreement and waiving the Company's obligation thereunder to deliver to the lenders thereunder any portion of any of the payments made hereunder by the Purchasers to the Company in respect of their purchase of Sale Shares at any Closing, (2) a waiver by the parties to the Stockholders Agreement of any preemptive rights or rights of first refusal that may arise under the Stockholders Agreement with respect to any issuance hereunder at any Closing of any Sale Shares, and (3) all other third party consents necessary to consummate the transactions contemplated hereby that, if not obtained, would have a material adverse effect on the Condition of the Company and its Subsidiaries, taken as a whole. (g) Participation by Other Purchasers. With respect only to the Principal Purchaser, Purchasers (other than the Principal Purchaser) shall purchase a total of 81,632.65 Sale Shares at the Initial Closing. (h) Opinion of Counsel. The Purchasers shall have received an opinion of Kirkland & Ellis, counsel to the Company, in substantially the form of Exhibit F. (i) Board of Directors. A representative of the Principal Purchaser shall have been duly elected to the Board of Directors of the Company effective immediately following the Initial Closing and such representative shall have been given an opportunity to execute and deliver, and the Company shall have offered to execute and deliver to such representative, an indemnification agreement with respect to such person's services as a director in the Company's standard form. (j) Certificate Amendment. The Certificate Amendment shall have been filed with and certified by the Secretary of State of the State of Delaware. ARTICLE VI CERTAIN ADDITIONAL MATTERS 6.01 Survival, Etc. All representations and warranties in Sections 3.01 and 3.02 of this Agreement (as modified by the Company's disclosure letter) shall survive the Initial Closing until the date that is 12 months after the Initial Closing Date; provided, however, that with respect to the representations and warranties set forth in Sections 3.01(c)(ii), (f)(ii), (g), (h), (i), (j)(ii), (k), (l), (m), (n), (p), (q), (r), (s), (t), (u), (v)(ii) and (x) and Section 3.02(d) and (e), such representations and warranties shall survive only with respect to any breach of any such representation or warranty of which the breaching party had Knowledge. Except as otherwise set forth in Section 3.02(g)(iv), any rights or remedies based on such representations and warranties will not be affected by any investigation conducted with respect to, or any knowledge capable of being acquired at any time, whether before or after the execution and delivery of this Agreement or the Initial Closing, with respect to, any such representation or warranty. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect any rights or remedies based on such representations, warranties, covenants and obligations, unless the related written waiver expressly so provides. The termination of the representations and warranties provided herein shall not affect the rights of a party in respect of any claim made by such party in a writing received by the other party prior to the expiration of the applicable survival period provided herein. 6.02. Finders Fees. (a) Subject to the terms and conditions of this Section 6.02(a), if the Company completes an Acquisition which Gryphon Advisors II, LLC (or an affiliate) ("Gryphon") introduced to the Company and/or any of its affiliates or representatives, the Company shall pay Gryphon a fee equal to 2% of the Transaction Value and reimburse Gryphon for any and all out-of-pocket expenses incurred by Gryphon and/or its affiliates in connection with such Acquisition. The Company's obligations to pay such fee and expense reimbursement are subject to the conditions that (i) the applicable Acquisition is completed on or prior to the first anniversary date of such introduction, and (ii) such introduction is not made at a time that the business that is the subject of such Acquisition is conducting or has announced to potential purchasers an auction with respect to the sale of such business and such auction is being conducted by an investment banking firm that has been retained by the seller of such business and such investment bank is actively soliciting offers and participation in such auction. Such fee and expense reimbursement shall be due and payable, in immediately available funds by wire transfer, concurrently with the closing of the Acquisition, provided that if, by virtue of an "earn out" or other similar contingent consideration, the Transaction Value is subject to future upward adjustment, the fee with respect to such additional Transaction Value shall be paid promptly after any future payments of contingent consideration. (b) An "Acquisition" shall mean the purchase by the Company and/or any of its affiliates, by stock purchase, merger, consolidation, recapitalization or acquisition of assets, of any business. "Transaction Value" shall mean the total fair market value (at the time of closing) of all consideration (including cash, securities, property and the principal amount of all indebtedness (including bank debt) and capital leases that are assumed or paid by the Company or any of its Subsidiaries) paid or payable, or otherwise to be distributed, directly or indirectly, to the acquired company or its shareholders in connection with the Acquisition. If the Acquisition takes the form of a recapitalization or similar transaction, "Transaction Value" will also include the value of all shares retained by the shareholders of the acquired company. Any acts taken by Gryphon with respect to the foregoing shall be on a non-exclusive basis. Gryphon's sole responsibility will be to introduce the Company and/or its affiliates or representatives to a prospective Acquisition candidate, and Gryphon will not negotiate with any such prospective Acquisition candidate on behalf of the Company and/or its affiliates or representatives. 6.03 Board Observer Rights; Certain Information Rights. (a) Without limiting any of the Principal Purchaser's rights under any of the Transaction Documents, the Principal Purchaser shall have the right to designate a representative to attend all meetings of the Company's Board of Directors and all meetings of any committees of the Company's Board of Directors in each case in a non-voting observer capacity (the "Gryphon Observer"), and, in this respect, the Company shall give the Principal Purchaser and the Gryphon Observer copies of all notices, minutes, consents and other materials that it provides to its directors; provided, however, that (i) the Principal Purchaser agrees, and any Gryphon Observer will agree, to hold in confidence all information so provided and not to use or disclose any confidential information provided to or learned by it in connection with its rights under this Agreement, and (ii) that the board observation rights pursuant to this Section 6.03(a) shall be temporarily suspended with respect to any portion of a meeting if, in the opinion of counsel of the Company, the Gryphon Observer's attendance at such portion of the meeting could violate any member of the Board of Directors' fiduciary duty, any confidentiality obligation or any attorney-client privilege that may exist in connection with such meeting. The board observation rights pursuant to this Section 6.03(a) shall terminate on the first date on which the Principal Purchaser (together with its affiliated funds) owns collectively less than 25% of the Sale Shares owned by the Principal Purchaser as of the Initial Closing Date. (b) The Company agrees that GPII shall have at all times during which it owns any interest in the stock of the Company, the right to consult with and advise management of the Company on significant business issues, including management's proposed annual operating plans and to meet with the Company's management at the Company's facilities at mutually agreeable times for such consultation and advice and to review progress in achieving such plans, and in connection therewith, (i) to inspect and copy the books and records of the Company; (ii) to inspect the Company's properties; (iii) to receive and review the Company's financial statements; (iv) to receive materials sent by the Company to the Company's board of directors, and (v) otherwise to routinely to consult with and advise the management of the Company on matters relating to the Company's business and affairs. ARTICLE VII TERMINATION AND ABANDONMENT 7.01 Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned, at any time prior to the Initial Closing: (a) by mutual consent of the Company and the Principal Purchaser; (b) by the Company or the Principal Purchaser if the transactions contemplated hereby to be consummated at the Initial Closing shall not have been consummated on or before April 30, 2001 (or such later date as may be agreed to in writing by the Company and the Principal Purchaser), by reason of the failure of any condition to the consummation of the transactions contemplated hereby at such Initial Closing which must be fulfilled to its satisfaction; provided that no party may terminate this Agreement under this Section 7.01(b) if such failure has been caused primarily by such party's material breach of this Agreement; (c) by the Company prior to the Initial Closing if (a) there are any inaccuracies, misrepresentations or breaches of the Principal Purchaser's representations or warranties in this Agreement, such that the condition set forth in Section 5.02(a) to the Company's obligation to effect the transactions contemplated hereby cannot be met in connection with the Initial Closing, or (b) the Principal Purchaser has breached or failed to perform in all material respects any of its material covenants or agreements contained herein as to which notice has been given to the Principal Purchaser and the Principal Purchaser has failed to cure or otherwise resolve the same to the reasonable satisfaction of the Company within fifteen (15) days after receipt of such notice; (d) by the Principal Purchaser prior to the Initial Closing if (a) there are any inaccuracies, misrepresentations or breaches of any of the Company's representations or warranties in this Agreement, such that the condition set forth in Section 5.03(a) to the Principal Purchaser's obligation to effect the transactions contemplated hereby cannot be met in connection with the Initial Closing, or (b) the Company has breached or failed to perform in all material respects any of their material covenants or agreements contained herein as to which notice has been given to the Company and the Company has failed to cure or otherwise resolve the same to the reasonable satisfaction of the Principal Purchaser within fifteen (15) days after receipt of such notice; or (e) by the Company or the Principal Purchaser if a court of competent jurisdiction or other governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, decree, ruling or other action shall have become final and nonappealable. 7.02 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 7.01 hereof by the Principal Purchaser or the Company, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination is made, this Agreement shall be void and have no effect, and there shall be no liability hereunder on the part of any party hereto, except that Sections 4.02, 8.01, 8.13 and this Section 7.02 hereof shall survive any termination of this Agreement. Nothing in this Section 7.02 shall relieve any party to this Agreement of liability for breach of this Agreement. Nothing in this Article VII is intended to limit any party's right to terminate this Agreement pursuant to Section 1.02. ARTICLE VIII MISCELLANEOUS 8.01 Fees and Expenses. All costs and expenses incurred in connection with this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such costs and expenses; provided, that: (a) the Company shall reimburse Principal Purchaser for (i) 100% of the previously unreimbursed Principal Purchaser's Transaction Expenses (as defined below) up to an aggregate maximum reimbursement of $200,000, and (ii) 50% of all of the Principal Purchaser's Transaction Expenses in excess of such initial $200,000 reimbursed amount; (b) the Company shall pay to Gryphon at the Initial Closing a transaction fee equal to 4.0% of the aggregate payment made by the Principal Purchaser in respect of the Principal Purchaser's purchase of Sale Shares at the Initial Closing. (c) the Company shall pay to Gryphon at each Subsequent Closing a transaction fee equal to 3.0% of the aggregate payment made by the Principal Purchaser in respect of the Principal Purchaser's purchase of Sale Shares at each such Subsequent Closing. Such amounts shall be paid at the applicable Closing (and in the case of clause (a), at the Initial Closing) to the extent not previously reimbursed or paid. For purposes of this Section 8.01, the "Principal Purchaser's Transaction Expenses" shall mean the reasonable out of pocket expenses, including the reasonable fees and expenses of third parties, incurred by the Principal Purchaser in connection with and related to the transactions contemplated hereunder during the period up to and including the Initial Closing Date. 8.02 Transfer Taxes. Except as provided herein, all transfer, sales and use, registration, stamp and similar Taxes imposed in connection with any transaction that occurs pursuant to this Agreement shall be borne solely by the Company. 8.03 Extension; Waiver. At any time prior to a Closing, the Principal Purchaser (on the one hand) and, the Company (on the other hand) may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party or (iii) waive compliance with any of the agreements or conditions contained herein; provided, that no such extension or waiver which adversely affects the rights and obligations of any Purchaser in a manner that does not equally affect all similarly situated Purchasers may be made without the approval of each Purchaser so affected. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any of such rights. 8.04 Public Announcements. The Company, on the one hand, and Principal Purchaser, on the other hand, agree to consult promptly with each other prior to issuing any press release or otherwise making any public statement with respect to the transactions contemplated hereby, and shall not issue any such press release or make any such public statement prior to such consultation and review by the other party of a copy of such release or statement, unless required by applicable law, including without limitation the rules and regulations of the Commission. No Purchaser other than the Principal Purchaser shall make or issue any such statement or release without the prior approval of the Principal Purchaser and the Company. 8.05 Indemnification. From and after the Initial Closing, the Company shall, and each Purchaser shall vote its shares in the Company to, maintain in effect in the Certificate of Incorporation of the Company the provisions with respect to indemnification set forth in Article Eighth of the Certificate of Incorporation of the Company and the corresponding provisions in the Bylaws of the Company, each as in effect at the Initial Closing, which provisions shall not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of individuals (or their estates) who at the date of this Agreement and/or as of the Initial Closing or immediately following the Initial Closing are or were directors, officers, employees or agents of the Company or its Subsidiaries, unless such amendment or modification is required by law or is consented to in writing by holders of a majority of the Sale Shares. This Section 8.05 shall terminate on the earlier of (i) the sixth anniversary of the Initial Closing Date, and (ii) the first date following the Initial Closing Date (or, if later, the date on which a designee of GPII or GPII-A is first elected or appointed to the Board of Directors of the Company) on which no individual designated by either GPII or GPII-A is an elected member of the Board of Directors of the Company. 8.06 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing addressed as follows: (a) if to the Company, to it at: 390 South Woods Mill Road, Suite 350 Chesterfield, Missouri 63017 Attention: Eric R. Fencl General Counsel Phone: (314) 576-0022 Fax: (314) 576-1867 with a copy to: Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60601 Attention: Richard W. Porter Phone: (312) 861-2000 Fax: (312) 861-2200 (b) if to Principal Purchaser, to it at: Gryphon Partners II, L.P. One Embarcadero Center, Suite 2750 San Francisco, CA 94111 Attention: Patrick Haiz Phone: (415) 217-7400 Fax: (415) 217-7447 with a copy to: Latham & Watkins 505 Montgomery Street, Suite 1900 San Francisco, CA 94111 Attention: Scott R. Haber Phone: (415) 395-8137 Fax: (415) 395-8095 (c) if to any other Purchaser, to the address set forth opposite each of their names on the signature pages hereto, or to such other Person or address as any party shall specify by notice in writing to each of the other parties. (d) Any such notice shall be deemed to have been received by the addressee (i) when received if personally delivered to the addressee's address as specified above, (ii) upon electronic confirmation of receipt, if transmitted by telecopy and confirmed by a copy sent for next day delivery to a domestic address by a nationally recognized overnight delivery service (e.g., Federal Express); provided that if transmitted by telecopy after 5:00 p.m. local time for the recipient, then deemed receipt shall be on the next business day, (iii) the day after it is sent, if sent for next day delivery to a domestic address by a nationally recognized overnight delivery service, and (iv) three days from the date of deposit in the U.S. mails, if sent by certified or registered U.S. mail, return receipt requested; provided, however, that a notice of a change of address shall be effective only upon receipt thereof. 8.07 Entire Agreement. This Agreement and the Exhibits, the Company's disclosure letter and other documents referred to herein or delivered pursuant hereto and the Confidentiality Agreement collectively contain the entire understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior agreements and understandings, oral and written, with respect thereto. 8.08 Binding Effect; Benefit; Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties. Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto or their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement except for Section 8.06 which shall inure to, and be enforceable by, the intended beneficiaries thereof. 8.09 Amendment and Modification. This Agreement may not be amended, modified and supplemented except in writing executed by the (i) Company, (ii) the Principal Purchaser and (iii) the Purchasers (other than the Principal Purchaser) representing at least 50% of the Sale Shares purchased or to be purchased by such Purchasers (other than the Principal Purchaser) hereunder. 8.10 Headings. The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. 8.11 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument. 8.12 Applicable Law. This Agreement and the legal relations between the parties hereto shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws rules thereof. Each of the parties hereto hereby irrevocably acknowledges and consents that any legal action or proceeding brought with respect to any of the obligations arising under or relating to this Agreement shall be brought in the United States District Court for the Northern District of Illinois, or, if such courts do not have jurisdiction over such claims, in the courts of the State of Illinois as the party bringing such action or proceeding may elect, and each of the parties hereto hereby irrevocably submits to and accepts with regard to any such action or proceeding, for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The foregoing shall not limit the rights of any party to serve process in any other manner permitted by law. The foregoing consents to jurisdiction shall not constitute general consents to service of process in the State of Illinois for any purpose except as provided above and shall not be deemed to confer rights on any Person other than the respective parties to this Agreement. To the fullest extent permitted by applicable law, each of the parties hereto hereby irrevocably waives the objection which it may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement in any of the courts referred to above and hereby further irrevocably waives any claim that any such court is not a convenient forum for any such suit, action or proceeding. 8.13 Severability. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions contained in this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 8.14 Certain Definitions. (a) "Person" shall mean and include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, a group and a government or other department or agency thereof. (b) "Subsidiary," with respect to the Company, shall mean and include (x) any partnership of which the Company or any Subsidiary is a general partner or (y) any other entity in which the Company or any of its Subsidiaries owns or has the power to vote 50% or more of the equity interests in such entity having general voting power to participate in the election of the governing body of such entity, in each case, including without limitation, the Subsidiaries set forth on Schedule 3.01(c)(ii) of the Company's disclosure letter. (c) "Knowledge" shall mean, with regard to any natural person, the actual knowledge of such person; and with regard to any party hereto, the actual knowledge of the executive officers of such party; provided, however, that with respect to (i) the Company, "Knowledge" shall mean the actual knowledge of Timothy G. Beffa, Gary L. Weller, Bryan K. Faliero, and Eric R. Fencl; and (ii) GPII and GPII-A, "Knowledge"shall mean the actual knowledge of R. David Andrews and Patrick Haiz. (d) A "business day" shall mean, any day, other than a Saturday, Sunday or a day on which banks located in Chicago, Illinois shall be authorized or required by law to close. (e) "Tax" or "Taxes" means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. (f) "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. [SIGNATURE PAGE FOLLOWS] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on their respective behalf, by their respective officers thereunto duly authorized, all as of the date first above written. THE COMPANY: OUTSOURCING SOLUTIONS INC. By:/s/ Timothy G. Beffa ----------------------- Name: Timothy G. Beffa Title: President PURCHASERS: GRYPHON PARTNERS II, L.P., a Delaware limited partnership By: Gryphon GenPar II, LLC Its: General Partner By:/s/ R. David Andrews -------------------- Name: R. David Andrews Title: President GRYPHON PARTNERS II-A, L.P., a Delaware limited partnership By: Gryphon GenPar II, LLC Its: General Partner By:/s/ R. David Andrews -------------------- Name: R. David Andrews Title: President MADISON DEARBORN CAPITAL PARTNERS III, L.P. By: Madison Dearborn Partners III, L.P. Its: General Partner By: Madison Dearborn Partners, Inc. Its: General Partner By:/s/ Paul R. Wood --------------------------- Name: Paul R. Wood Title: Managing Director Address for Notice: Madison Dearborn Capital Partners III, L.P. ------------------------------------------- Three First National Plaza, Suire 3800 ------------------------------------------- Chicago, IL 60602 ------------------------------------------- Attention: Timothy Hurd ------------------ Phone: (312) 895-1170 ------------------ Fax: (312) 895-1156 ------------------ With a Copy to: Kirkland & Ellis --------------------- 200 E. Randolph Drive --------------------- Chicago, IL 60601 --------------------- Attention: Richard W. Porter ------------------ Phone: (312) 861-2000 ------------------ Fax: (312) 861-2200 ------------------ ABBOTT CAPITAL PRIVATE EQUITY FUND III, L.P. By: Abbott Capital Management, LLC Its: Investment Manager By: /s/ Kathryn J. Stokel -------------------------- Kathryn J. Stokel Its: Managing Director Address for Notice: c/o Abbott Capital Management, LLC ---------------------------------- 1330 Avenue of the Americas ---------------------------------- New York, NY 10019 ---------------------------------- Attention: Kathryn J. Stokel ------------------ Phone: (212) 757-2700 ------------------ Fax: (212) 757-0835 ------------------ With a Copy to: Testa, Hurwitz & Thibeault -------------------------- 125 High Street -------------------------- Boston, MA 02110 -------------------------- Attention: Alan Applebaum ------------------ Phone: (617) 248-7573 ------------------ Fax: (617) 248-7100 ------------------ BNY PARTNERS FUND L.L.C. By: BNY Private Investment Management, Inc. Its: Member Manager By: /s/ Burton M. Siegel -------------------- Burton M. Siegel Its: Senior Vice President Address for Notice: c/o Abbott Capital Management, LLC ---------------------------------- 1330 Avenue of the Americas ---------------------------------- New York, NY 10019 ---------------------------------- Attention: Kathryn J. Stokel ------------------ Phone: (212) 757-2700 ------------------ Fax: (212) 757-0835 ------------------ With a Copy to: Testa, Hurwitz & Thibeault -------------------------- 125 High Street -------------------------- Boston, MA 02110 -------------------------- Attention: Alan Applebaum ------------------ Phone: (617) 248-7573 ------------------ Fax: (617) 248-7100 ------------------ DB CAPITAL INVESTORS, L.P. By: DB Capital Partners, L.P. Its: General Partner By: DB Capital Partners, Inc. By: /s/ Jon E. Mattson -------------------- Name: Jon E. Mattson Its: Vice President Address for Notice: 130 Liberty St. -------------------- New York, NY 10006 -------------------- Attention: Jon Mattson -------------------- Phone: (212) 250-8199 -------------------- Fax: (212) 250-7651 -------------------- With a Copy to: Tyler Zachem -------------------- 130 Liberty Street -------------------- New York, NY 10006 -------------------- Attention: ------------------ Phone: (212) 250-8199 ------------------ Fax: (212) 250-7651 -------------------- FIRST UNION CAPITAL PARTNERS 2001, LLC By:/s/ Fredrick W. Eubank, II -------------------------- Name: Fredrick W. Eubank, II Its: Partner Address for Notice: 301 South College Street One First Union Center, 12th Floor Charlotte, NC 25288-4845 Attention: Frederick W. Eubank, II Tel: (704) 374-7100 Fax: (704) 374-6711 With a copy (which shall not constitute notice) to: Kennedy Covington Cobdell & Hickman, L.L.P. Bank of America Corporate Center 100 N. Tryon Street, Suite 4200 Attention: Benjamin A. Yarbrough Tel: (704) 331-7400 Fax: (704) 331-7598 EXHIBIT A SCHEDULE OF PURCHASERS - ------------------------------------ ------------------------------------------ Sale Shares To Be Purchased at Name of Purchaser Initial Closing - ------------------------------------ ------------------------------------------ - ------------------------------------ ------------------- ---------------------- Number of Aggregate Sales Shares Purchase Price - ------------------------------------ ------------------- ---------------------- - ------------------------------------ ------------------- ---------------------- Gryphon Partners II, L.P. 381,340.41 $18,685,680 - ------------------------------------ ------------------- ---------------------- - ------------------------------------ ------------------- ---------------------- Gryphon Partners II-A, L.P. 26,822.86 1,314,320 - ------------------------------------ ------------------- ---------------------- - ------------------------------------ ------------------- ---------------------- Madison Dearborn Capital Partners III, L.P. 16,970.13 $831,536.30 - ------------------------------------ ------------------- ---------------------- - ------------------------------------ ------------------- ---------------------- Madison Dearborn Special Equity III, L.P. 376.81 $18,463.70 - ------------------------------------ ------------------- ---------------------- - ------------------------------------ ------------------- ---------------------- First Union Capital Partners 2001, L.L.C. 17,346.94 $850,000 - ------------------------------------ ------------------- ---------------------- - ------------------------------------ ------------------- ---------------------- DB Capital Investors, L.P. 6,122.45 $300,000 - ------------------------------------ ------------------- ---------------------- - ------------------------------------ ------------------- ---------------------- Abbott Capital Private Equity Fund III, L.P. 29,154.51 $1,428,571 - ------------------------------------ ------------------- ---------------------- - ------------------------------------ ------------------- ---------------------- BNY Partners Fund L.L.C. 11,661.82 $571,429 - ------------------------------------ ------------------- ---------------------- - ------------------------------------ ------------------- ---------------------- TOTAL: - ------------------------------------ ------------------- ---------------------- STOCK SUBSCRIPTION AGREEMENT BY AND AMONG GRYPHON PARTNERS II, L.P., GRYPHON PARTNERS II-A, L.P., OUTSOURCING SOLUTIONS INC. AND CERTAIN STOCKHOLDERS OF OUTSOURCING SOLUTIONS INC. WHO ARE SIGNATORIES HERETO Dated as of April 3, 2001 EX-3 5 atc_10q-063001.txt FOURTH AMENDED AND RESTATED CERTIFICATE FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF OUTSOURCING SOLUTIONS INC. Outsourcing Solutions Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation is Outsourcing Solutions Inc. (the "Corporation"). The Corporation was originally incorporated as OSI Holdings Corp. in the State of Delaware on the 21st day of September, 1995 pursuant to a Certificate of Incorporation filed with the Secretary of State of the State of Delaware on that date. 2. This Fourth Amended and Restated Certificate of Incorporation amends and restates the Third Amended and Restated Certificate of Incorporation of the Corporation filed with the Secretary of State of the State of Delaware on January 13, 1999, as amended on November 29, 1999. This Fourth Amended and Restated Certificate of Incorporation has been adopted by the Corporation and by its stockholders pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware. 3. On December 3, 1999, Directors of the Corporation duly adopted resolutions authorizing the following amendment and restatement of the Certificate of Incorporation of the Corporation, declaring such amendment and restatement to be advisable and in the best interests of the Corporation and its stockholders and authorizing the appropriate officers to solicit written consents of the stockholders of the Corporation in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. Thereafter, pursuant to resolutions of the Board of Directors, in lieu of a meeting and vote of holders of the Corporation's common stock and preferred stock, stockholders holding a majority of the issued and outstanding shares of common stock of the Corporation and holders of a majority of the issued and outstanding shares of each of the (i) preferred stock, (ii) Class A Non-Voting Common Stock, (iii) Class B Non-Voting Common Stock and (iv) Class C Non-Voting Common Stock of the Corporation adopted the following amendment and restatement of the Certificate of Incorporation of the Corporation. 4. The text of Certificate of Incorporation, is hereby restated and amended to read in its entirety as follows: FIRST: The name of the Corporation is Outsourcing Solutions Inc. SECOND: The registered office of the Corporation in the State of Delaware is 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle. The name of its registered agent in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc. THIRD: The purpose of the Corporation is to engage, directly or indirectly, in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware as from time to time in effect. FOURTH: The total number of shares which the Corporation shall have the authority to issue is 17,300,000 shares of capital stock as follows: 300,000 shares of Preferred Stock, no par value (the "Preferred Stock"), 15,000,000 shares of Voting Common Stock, par value $.01 per share (the "Voting Common Stock") and 2,000,000 shares of Non-Voting Stock, par value $.01 per share (the "Non-Voting Common Stock", and together with the Voting Common Stock, the "Common Stock"). Each share of Preferred Stock is hereafter referred to as a "Preferred Share" and collectively as "Preferred Shares." Each share of Voting Common Stock is hereafter referred to as a "Voting Common Share" and collectively as "Voting Common Shares". Each share of Non-Voting Common Stock is hereafter referred to as a "Non-Voting Common Share" and collectively as "Non-Voting Common Shares". The Voting Common Shares and Non-Voting Common Shares are hereafter collectively referred to as "Common Shares". A. Preferred Stock. Authorized but unissued shares of Preferred Stock may be issued from time to time in one or more series or classes. The Board of Directors is hereby authorized to determine and fix by resolution all rights, preferences, and privileges and qualifications, limitations and restrictions (including, without limitation, voting rights, dividend rights, redemption features, conversion rights or protective features, and the limitation and exclusion thereof) applicable to any such series or class of Preferred Stock and the number of shares constituting any such series or class and the designation thereof, and, subject to the terms of any such series or class, to increase or decrease (but not below the number of shares of such series or class then outstanding) the number of shares of any series or class subsequent to the issue of shares of that series or class then outstanding. In the event that the number of shares of any series or class is so decreased, the shares constituting such reduction shall resume the status which such shares had prior to the adoption of the resolution originally fixing the number of such series or class. B. Common Stock. The voting powers, designations, preferences and relative participating, optional or other special rights, and qualifications, or restrictions thereof, of the Common Stock are as follows: 1. Dividend Rights. Subject to the preferential rights of the Preferred Shares, the Board of Directors of the Corporation may, in its discretion, out of funds legally available for the payment of dividends and at such times and in such manner as determined by the Board of Directors, declare and pay dividends on the Common Shares of the Corporation. No dividend (other than a dividend in capital stock ranking on a parity with the Common Shares or cash in lieu of fractional shares with respect to such stock dividend) shall be declared or paid on any share or shares of any class of stock or series thereof ranking on a parity with the Common Shares in respect of payment of dividends for any dividend period unless there shall have been declared, for the same dividend period, like proportionate dividends on all shares of Common Shares then outstanding. As and when dividends are declared or paid thereon, whether in cash, property or securities of the Corporation, the holders of the Voting Common Shares and of the Non-Voting Common Shares will be entitled to share ratably, on a share for share basis, in such dividends, provided, that (i) if dividends are declared which are payable in Voting Common Shares or Non-Voting Common Shares, dividends will be declared which are payable at the same rate on both classes of stock and the dividends payable in Voting Common Shares will be payable to holders of such shares and the dividends payable in Non-Voting Common Shares will be payable to holders of such shares and (ii) if the dividends consist of other voting securities of the Corporation, (a) the Corporation will make available to each holder of Non-Voting Common Shares, at such holder's request, dividends consisting of non-voting securities of the Corporation which are otherwise identical to the voting securities and which are convertible into or exchangeable for such voting securities on the same terms as the Non-Voting Common Shares are convertible into Voting Common Shares. 2. Rights on Liquidation. In the event of any liquidation, dissolution, distribution of assets or winding up of the Corporation, whether voluntary or involuntary (collectively, a "Liquidation"), after payment or provision for payment of the debts and other liabilities of the Corporation and the setting aside for payment of any preferential amount due to the holders of any other class or series of stock (including, without limitation, the holders of Preferred Shares), the holders of Common Shares (including, without limitation, the Voting Common Shares and the Non-Voting Common Shares) and any other class of stock or series thereof ranking on a parity with the Common Shares in respect of distributions on Liquidation shall be entitled to receive ratably on a share for share basis, any or all assets remaining to be paid or distributed. 3. Voting Rights. Except as may be otherwise required by law, all voting rights shall be vested in the Voting Common Shares and each holder of Voting Common Shares shall have one vote in respect of each Voting Common Share held by such holder on all matters to be voted upon by the stockholders of the Corporation. The holders of the Non-Voting Shares will have no right to vote on any matters to be voted on by the stockholders of the Corporation; provided, that the holders of the Non-Voting Common Shares shall have the right to vote as a separate class on any matter on which the Non-Voting Common Shares are required to vote as a class pursuant to the General Corporation Law of the State of Delaware. 4. Conversion. A. Conversion of Non-Voting Common Shares. Any holder of Non-Voting Common Shares shall have the right, at its option, at any time and from time to time, to convert, subject to the terms and provisions of this Section 4A, any or all of such holder's Non-Voting Common Shares into an equal number of shares of fully paid and non-assessable shares of Voting Common Shares as provided below; provided, however, if the holder in any such conversion is subject to the Bank Holding Company Act of 1956, as amended (12 U.S.C. ss.1841, et. seq.) and the regulations promulgated thereunder (collectively and including any successor provisions, the "BHCA Act"), such conversion may be made only if: (i) the BHCA Act would not prohibit such holder from holding such shares of Voting Common Shares; and (ii) such shares of Voting Common Shares to be received upon such conversion will be (A) distributed or sold in connection with any public equity offering registered under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "1933 Act"), (B) distributed or sold in a "broker's transaction" (as defined in Rule 144(g) under the 1933 Act) pursuant to Rule 144 under the 1933 Act or any similar rule then in force, (C) distributed or sold to a person or group (within the meaning of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of persons if, after such distribution or sale, such person or group of persons would not, in the aggregate, own, control or have the right to acquire more than 2% of the outstanding securities of the Corporation entitled to vote on the election of directors of the Corporation, (D) distributed or sold to a person or group (within the meaning of the 1934 Act) of persons if, prior to such sale, such person or group of persons had control of the Corporation, (E) distributed, sold, or held in any other manner permitted under the BHCA, including after giving effect to the amendment of the BHCA by the Gramm-Leach-Bliley Financial Services Act; provided, further, that if the holder converts any Non-Voting Common Shares as provided in clauses (i) and (ii) above and any distribution or sale of the Non-Voting Common Shares fails to occur for any reason or such holder is not otherwise permitted to hold the Voting Common Shares into which such shares were converted, such holder may convert the Voting Common Shares into the Non-Voting Common Shares converted in anticipation of such distribution or sale or other permitted holding. B. Conversion Procedure. (i) Unless otherwise provided herein, each conversion of shares of Non-Voting Common Stock into shares of Voting Common Stock will be effected by the surrender of the certificate or certificates representing the Non-Voting Common Shares to be converted at the principal office of the Corporation at any time during normal business hours, together with a written notice by the holder of such Non-Voting Common Shares stating that such holder desires to convert such Non-Voting Common Shares, or a stated number of such Non-Voting Common Shares, represented by such certificate(s) into shares of Voting Common Shares. Unless otherwise provided herein, each conversion will be deemed to have been effected as of the close of business on the date on which such certificate(s) have been surrendered and such notice has been received, and at such time the rights of the holder of the converted Non-Voting Common Shares, as such holder, will cease and the person or persons in whose name or names the certificate(s) for Voting Common Shares are to be issued upon such conversion will be deemed to have become the holder or holders of record of the Voting Common Shares represented thereby. (ii) Promptly after the surrender of certificates and the receipt of written notice, the Corporation will issue and deliver in accordance with the surrendering holder's instructions (a) the certificate(s) for the Voting Common Shares issuable upon such conversion and (b) a certificate representing any Non-Voting Common Shares that was represented by the certificate(s) delivered to the Corporation in connection with such conversion but that was not converted. (iii) The issuance of certificates for Voting Common Shares upon conversion of Non-Voting Common Shares will be made without charge to the holders of such shares for any issuance tax in respect thereof (other than any tax in connection with the issuance of shares in a different name) or other cost incurred by the Corporation in connection with such conversion and the related issuance of Voting Common Shares. (iv) The Corporation will at all times reserve and keep available out of its authorized but unissued Voting Common Shares, solely for the purpose of issuance upon the conversion of the Non-Voting Common Shares such number of Voting Common Shares as are issuable upon the conversion of all outstanding Non-Voting Common Shares. All Common Shares which are so issuable will, when issued, be duly and validly issued, fully paid and nonassessable. The Corporation will take all such actions as may be necessary to assure that all such Common Shares may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which Common Shares may be listed (except for official notices of issuance which will be immediately transmitted by the Corporation upon issuance). (v) The Corporation will not close its books against the transfer of Common Shares in any manner which would interfere with the timely conversion of any Non-Voting Common Shares. 5. Stock Splits. If the Corporation in any manner subdivides or combines the outstanding shares of one class of Common Shares, the outstanding shares of the other class of Common Shares will be proportionately subdivided or combined in a similar manner. 6. Notices. All notices referred to in this Article FOURTH shall be in writing, shall be delivered personally, by facsimile or by first class mail, postage prepaid, and shall be deemed to have been given when so delivered or mailed to the Corporation at its principal office and to any stockholder at such holder's address as it appears in the stock records of the Corporation. 7. Amendment and Waiver. No amendment or waiver of any provision of paragraph 4 of this Article FOURTH or of this paragraph 7 shall be effective without the prior approval of both the holders of a majority of the Voting Common Shares then outstanding, voting as a separate class, and the holders of a majority of the Non-Voting Common Shares then outstanding, voting as a separate class. FIFTH: The business of the Corporation shall be managed under the direction of the Board of Directors except as otherwise provided by law. The number of Directors of the Corporation shall be fixed from time to time by, or in the manner provided in, the By-Laws. Election of Directors need not be by written ballot unless the By-Laws of the Corporation shall so provide. SIXTH: The Board of Directors may make, alter or repeal the By-Laws of the Corporation except as otherwise provided in the By-Laws adopted by the Corporation's stockholders. SEVENTH: The Directors of the Corporation shall be protected from personal liability, through indemnification or otherwise, to the fullest extent permitted under the General Corporation Law of the State of Delaware as from time to time in effect. 1. A Director of the Corporation shall under no circumstances have any personal liability to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director except for those breaches and acts or omissions with respect to which the General Corporation Law of the State of Delaware, as from time to time amended, expressly provides that this provision shall not eliminate or limit such personal liability of Directors. Neither the modification or repeal of this paragraph 1 of Article SEVENTH nor any amendment to said General Corporation Law that does not have retroactive application shall limit the right of Directors hereunder to exculpation from personal liability for any act or omission occurring prior to such amendment, modification or repeal. 2. The Corporation shall indemnify each Director and Officer of the Corporation to the fullest extent permitted by applicable law, except as may be otherwise provided in the Corporation's By-Laws, and in furtherance hereof the Board of Directors is expressly authorized to amend the Corporation's By-Laws from time to time to give full effect hereto, notwithstanding possible self interest of the Directors in the action being taken. Neither the modification or repeal of this paragraph 2 of Article SEVENTH nor any amendment to the General Corporation Law of the State of Delaware that does not have retroactive application shall limit the right of Directors and Officers to indemnification hereunder with respect to any act or omission occurring prior to such modification, amendment or repeal. EIGHTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. IN WITNESS WHEREOF, said Outsourcing Solutions Inc. has caused this Amended and Restated Certificate of Incorporation of Outsourcing Solutions Inc. to be executed by its officer thereunto duly authorized this 7th day of December, 1999. OUTSOURCING SOLUTIONS INC. By: /s/ Eric R. Fencl ---------------------- Name: Eric R. Fencl Title: Vice President & General Counsel CERTIFICATE OF AMENDMENT TO THE FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF OUTSOURCING SOLUTIONS INC. OUTSOURCING SOLUTIONS INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (hereinafter the "Corporation"), DOES HEREBY CERTIFY THAT: 1. The Corporation's Fourth Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on December 10, 1999. 2. On March 30, 2001, the Board of Directors of the Corporation, duly adopted resolutions setting forth proposed amendments to the Fourth Amended and Restated Certificate of Incorporation, declaring said amendments to be advisable and in the best interests of the Corporation and its stockholders and authorizing the appropriate officers to solicit written consents of the stockholders of the Corporation in accordance with Section 228 of the General Corporation Law of the State of Delaware. The resolutions setting forth the proposed amendments are attached hereto as Exhibit A and incorporated herein by reference. 3. Thereafter, pursuant to the resolutions of the Board of Directors, in lieu of a meeting and vote of holders of the Corporation's common and preferred stock, stockholders holding a majority of the issued and outstanding shares of common stock of the Corporation adopted the amendments set forth in Exhibit A. 4. Said amendments were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, Outsourcing Solutions Inc. has caused this Certificate of Amendment to be signed and attested by its duly authorized officer, this 16th day of April, 2001. OUTSOURCING SOLUTIONS INC. By: /s/ Eric R. Fencl ---------------------- Name: Eric R. Fencl Title: Secretary EXHIBIT A RESOLUTIONS OF THE BOARD OF DIRECTORS OF OUTSOURCING SOLUTIONS INC. 1. RESOLVED, that the Preamble of ARTICLE FOURTH to the Corporation's Fourth Amended and Restated Certificate of Incorporation be amended and restated to read as follows: "FOURTH: The total number of shares which the Corporation shall have the authority to issue is 23,200,000 shares of capital stock as follows: 300,000 shares of Preferred Stock, no par value (the "Preferred Stock"), 900,000 shares of Senior Common Stock, par value $.01 per share (the "Senior Common Stock"), 20,000,000 shares of Voting Common Stock, par value $.01 per share (the "Voting Common Stock") and 2,000,000 shares of Non-Voting Stock, par value $.01 per share (the "Non-Voting Common Stock", and together with the Voting Common Stock, the "Common Stock"). Each share of Preferred Stock is hereafter referred to as a "Preferred Share" and collectively as "Preferred Shares." Each share of Senior Common Stock is hereafter referred to as a "Senior Common Share" and collectively as "Senior Common Shares." Each Senior Common Share and each share of Voting Common Stock is hereafter referred to as a "Voting Common Share" and collectively as "Voting Common Shares." Each share of Non-Voting Common Stock is hereafter referred to as a "Non-Voting Common Share" and collectively as "Non-Voting Common Shares." The Voting Common Shares and Non-Voting Common Shares are hereafter collectively referred to as "Common Shares "." 2. RESOLVED, that ARTICLE FOURTH, Paragraph B to the Corporation's Fourth Amended and Restated Certificate of Incorporation be amended and restated to read as follows: "B. Senior Common Stock and Common Stock. Except as otherwise provided in this paragraph B or as otherwise required by applicable law, all shares of Senior Common Stock, Voting Common Stock and Non-Voting Common Stock shall be identical in all respects and shall entitle the holders thereof to the same voting powers, designations, preferences and relative participating, optional or other special rights, and qualifications, or restrictions thereof, as set forth herein: 3. Dividend Rights. Subject to the preferential rights of the Preferred Shares, the Board of Directors of the Corporation may, in its discretion, out of funds legally available for the payment of dividends and at such times and in such manner as determined by the Board of Directors, declare and pay dividends on the Common Shares of the Corporation. No dividend (other than a dividend in capital stock ranking on a parity with the Common Shares and or cash in lieu of fractional shares with respect to such stock dividend) shall be declared or paid on any share or shares of any class of stock or series thereof ranking on a parity with the Common Shares in respect of payment of dividends for any dividend period unless there shall have been declared, for the same dividend period, like proportionate dividends on all shares of Senior Common Stock, Voting Common Stock and Non-Voting Common Stock then outstanding. As and when dividends are declared or paid thereon, whether in cash, property or securities of the Corporation, the holders of the Common Shares will be entitled to share ratably, on a share for share basis, in such dividends, provided, that (i) if dividends are declared which are payable in shares of Senior Common Stock, Voting Common Stock or Non-Voting Common Stock, dividends will be declared which are payable at the same rate on all three classes of stock and the dividends payable in shares of Senior Common Stock will be payable to holders of such shares, the dividends payable in shares of Voting Common Stock will be payable to holders of such shares and the dividends payable in shares of Non-Voting Common Stock will be payable to holders of such shares and (ii) if the dividends consist of other voting securities of the Corporation, the Corporation will make available to each holder of shares of Non-Voting Common Stock, at such holder's request, dividends consisting of non-voting securities of the Corporation which are otherwise identical to the voting securities and which are convertible into or exchangeable for such voting securities on the same terms as the shares of Non-Voting Common Stock are convertible into shares of Voting Common Stock. 4. Rights on Liquidation. 1. Senior Common Stock. In the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (each a "Liquidation"), each holder of a Senior Common Share shall be entitled to receive with respect to such Senior Common Share, before any distribution is made to or set aside for the holders of Common Stock (or any other shares of capital stock of the Corporation, other than the Preferred Shares), payable in cash or, if the amount of cash available to the Corporation is insufficient, out of the other assets of the Corporation, whether such assets are stated capital or surplus of any nature, an amount equal to the Original Purchase Price (as defined below) per Senior Common Share (the "Liquidation Preference"). If the assets of the Corporation available for distribution to holders of Senior Common Stock shall be insufficient to permit the payment in full of the amount due such holders pursuant to this paragraph B(2)(A), all assets of the Corporation available for distribution to such holders shall be distributed pro rata among such holders. The fair market value of any assets of the Corporation and the proportion of cash and other assets distributed by the Corporation to the holders of Senior Common Stock shall be reasonably determined in good faith by a vote of the Board of Directors of the Corporation. Except as provided in this paragraph, the holders of Senior Common Shares shall not be entitled to any distribution in the event of a Liquidation. For the purposes of this paragraph, the consolidation or merger of the Corporation into or with another corporation, or the sale of all or substantially all of the assets of the Corporation (determined on a consolidated basis) to another corporation or any other entity shall be deemed a liquidation, dissolution or winding-up of the affairs of the Corporation; provided, however, that the foregoing provision shall not apply to any merger in which (i) the Corporation is the surviving entity, (ii) the holders of the Corporation's outstanding capital stock possessing the voting power to elect a majority of the Corporation's board of directors immediately prior to the merger continue to own the Corporation's outstanding capital stock possessing the voting power to elect a majority of the Corporation's board of directors immediately after the merger and (iii) the surviving entity expressly acknowledges and agrees that it shall assume the obligations of the Corporation under this Certificate of Amendment. Notwithstanding anything herein to the contrary, the Senior Common Stock ranks junior in all respects to the Preferred Shares, and no dividend distributions or distributions upon Liquidation shall be made with respect to the Senior Common Stock unless and until all dividend distributions and distributions upon Liquidation with respect to the Preferred Shares, have been made in full. The Senior Common Stock will, however, rank senior to all other capital stock of the Corporation other than the Preferred Shares. For purposes of this paragraph B(2)(A) and paragraph B(4) below, "Original Purchase Price" means $49.00 per share or $51.00 per share, as the case may be, of Senior Common Stock paid by the purchasers pursuant to that certain Stock Subscription Agreement, dated April 3, 2001, by and among the Corporation, Gryphon Partners II, L.P., Gryphon Partners II-A, L.P. and the additional purchasers named therein (as adjusted for any stock dividends, combinations, stock splits, recapitalizations, or the like with respect to such shares). 2. Common Stock. In the event of any Liquidation, after payment or provision for payment of the debts and other liabilities of the Corporation and the setting aside for payment of any preferential amount due to the holders of any other class or series of stock (including, without limitation, the holders of Preferred Shares and Senior Common Shares), the holders of Common Stock (including, without limitation, the Voting Common Stock and the Non-Voting Common Stock) and any other class of stock or series thereof ranking on a parity with the Common Stock in respect of distributions on Liquidation shall be entitled to receive ratably on a share for share basis, any or all assets remaining to be paid or distributed. 5. Voting Rights. Except as may be otherwise required by law, all voting rights shall be vested in the Voting Common Shares and each holder of Voting Common Shares shall have one vote in respect of each Voting Common Share held by such holder on all matters to be voted upon by the stockholders of the Corporation. The holders of the Non-Voting Shares will have no right to vote on any matters to be voted on by the stockholders of the Corporation; provided, that the holders of the Non-Voting Common Shares shall have the right to vote as a separate class on any matter on which the Non-Voting Common Shares are required to vote as a class pursuant to the General Corporation Law of the State of Delaware. 6. Conversion of Senior Common Stock. 1. Conversion Rights. (1) Optional Conversion. Each holder of Senior Common Shares shall have the right, at any time and at the option of the such holder, to convert any of such holder's Senior Common Shares into a number of shares of Voting Common Stock (the "Conversion Stock") equal to (a) the number of Senior Common Shares to be converted multiplied by the Original Purchase Price applicable for such Senior Common Shares, divided by (b) the Conversion Price (as defined below). (2) Mandatory Conversion. Upon consummation of the initial underwritten public offering, registered under the Securities Act of 1933, of Common Stock of the Corporation having an aggregate offering value of at least $50 million (the "Initial Public Offering"), each Senior Common Share shall automatically convert into a number of shares of Conversion Stock equal to (a) the number of Senior Common Shares to be converted multiplied by the Original Purchase Price applicable for such Senior Common Shares, divided by (b) the Conversion Price. Except as otherwise provided herein, the conversion of Senior Common Stock shall be deemed to have been effected at the time of consummation of the Initial Public Offering. 2. Conversion Price. (1) The initial conversion price shall be the Original Purchase Price applicable for such Senior Common Shares (the "Conversion Price"). In order to prevent dilution of the conversion rights granted under paragraph B(4)(A), the Conversion Price shall be subject to adjustment from time to time until on or before April 3, 2004 pursuant to this paragraph B(4)(B) and shall be subject to adjustment for any stock dividends, combinations, stock splits, recapitalizations, or the like with respect to the Senior Common Shares. (2) If and whenever on April 3,2001 or during the period between such date and April 3, 2004, the Corporation issues or sells, or in accordance with paragraph B(4)(C) is deemed to have issued or sold, Common Stock, in a transaction involving the issuance of Common Stock or a Convertible Security (as defined below) (a "Common Stock Financing Transaction"), for no consideration or for a consideration per share less than the Conversion Price in effect immediately prior to such time, then forthwith upon such issue or sale the Conversion Price shall be reduced to the lowest net price per share at which any such share of Common Stock has been issued or sold or is deemed to have been issued or sold; provided, however, that notwithstanding anything herein to the contrary, under no event or circumstance shall the Conversion Price be reduced hereunder to a per share price less than $37.47 (as adjusted for any stock dividends, combinations, stock splits, recapitalizations, or the like). 3. Effect on Conversion Price of Certain Events. For purposes of determining the adjusted Conversion Price under paragraph B(4)(B), the following shall be applicable: (1) Issuance of Convertible Securities. If the Corporation in any manner issues or sells any stock or other securities convertible into or exchangeable for Common Stock (such convertible or exchangeable stock or securities being herein called "Convertible Securities") in a Common Stock Financing Transaction and the price per share for which any one share of Common Stock is issuable upon conversion or exchange thereof is less than the Conversion Price in effect immediately prior to the time of such issue or sale, then such share of Common Stock shall be deemed to have been issued and sold by the Corporation at the time of the issuance or sale of such Convertible Securities for such price per share. No further adjustment of the Conversion Price shall be made upon the actual issue of such Common Stock upon conversion or exchange of any Convertible Security. (2) Change in Conversion Rate. If the additional consideration (if any) payable upon the issue, conversion or exchange of any Convertible Security, or the rate at which any Convertible Security is convertible into or exchangeable for Common Stock changes at any time, the Conversion Price in effect at the time of such change shall be readjusted to the Conversion Price which would have been in effect at such time had such Convertible Security originally provided for such changed purchase price, additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold; provided that if such adjustment would result in an increase of the Conversion Price then in effect, such adjustment shall not increase the Conversion Price higher than the Conversion Price in effect immediately prior to the issuance of such Convertible Security. (3) Treatment of Unexercised Convertible Securities. Upon the termination of any right to convert or exchange any Convertible Security without the exercise of any such right, the Conversion Price then in effect hereunder shall be adjusted to the Conversion Price which would have been in effect at the time of such termination had such Convertible Security, to the extent outstanding immediately prior to such expiration or termination, never been issued. (4) Calculation of Consideration Received. If any Common Stock or Convertible Security is issued or sold or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the net amount received by the Corporation therefor plus, in the case of Convertible Securities, the minimum amount to be paid to the Corporation upon the conversion or exercise thereof. In case any Common Stock or Convertible Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Corporation shall be the fair value of the securities as determined by the Corporation's board of directors in its reasonable good faith judgment as of the date of receipt. If any Common Stock or Convertible Security is issued to the owners of the non-surviving entity in connection with any merger in which the Corporation is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock or Convertible Securities, as the case may be. The fair value of any consideration other than cash and securities shall be determined jointly by the Corporation and the holders of a majority of the outstanding Senior Common Stock. If such parties are unable to reach agreement within a reasonable period of time, the fair value of such consideration shall be determined by the Corporation's board of directors in its reasonable good faith judgment. (5) Treasury Shares. The number of shares of Common Stock outstanding at any given time does not include shares owned or held by or for the account of the Corporation or any of its subsidiaries, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock. (6) Record Date.If the Corporation takes a record of the holders of Common Stock for the purpose of entitling them (a) to receive a dividend or other distribution payable in Common Stock or in Convertible Securities or (b) to subscribe for or purchase Common Stock or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or upon the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (7) Certain Issuances. Notwithstanding the foregoing, there shall be no adjustment to the Conversion Price under paragraph B(4) with respect to (a) the issuance of Common Stock (or options to purchase Common Stock) to the Corporation's or its affiliates' current or former employees, officers, directors or consultants pursuant to compensatory options or purchase rights which have been granted or are granted in the future, (b) warrants issued to underwriters in connection with a public offering registered under the Securities Act of 1933, (c) the issuance of Common Stock (or warrants exercisable into Common Stock) to financial institutions or lessors in connection with the bona fide incurrence of indebtedness, equipment financings or similar transactions, (d) the issuance of Common Stock to strategic investors or in connection with acquisitions or corporate partnering transactions, (e) the issuance of Common Stock as a dividend or distribution on Preferred Shares or Senior Common Shares, (f) the issuance of shares of Common Stock upon conversion of the Preferred Shares, Senior Common Shares and Non-Voting Common Shares in accordance with their respective terms, (g) the issuance of shares of Common Stock or other shares of the Corporation's capital stock upon conversion or exercise of any outstanding warrants, options or other convertible instruments or (h) the issuance of shares of Senior Common Stock, Voting Common Stock or Non-Voting Common Stock issued in connection with a stock split or stock dividend effected in accordance with this Article Fourth, paragraphs B(1) and B(6). 4. Conversion Terms. (1) At the time any such conversion has been effected pursuant to paragraph B(4)(A), the rights of the holder of the Senior Common Shares converted shall cease and the person or persons in whose name or names any certificate or certificates for shares of Conversion Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Conversion Stock represented thereby. (2) As soon as possible after a conversion has been effected pursuant to paragraph B(4)(A), the Corporation shall deliver to the converting holder, or in accordance with such holder's written instructions, a certificate or certificates representing the number of shares of Conversion Stock issuable by reason of such conversion in such name or names and such denomination or denominations as the converting holder has specified. The Corporation may, at its option, pay cash in lieu of issuing fractional shares of Voting Common Stock in connection with a conversion effected hereunder provided that no other fractional shares of Common Stock are outstanding at the time of such conversion. (3) The issuance of certificates for shares of Conversion Stock upon conversion of Senior Common Stock shall be made without charge to the holders of such Senior Common Stock for any issuance tax (other than in connection with a transfer into a different name) in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of shares of Conversion Stock. Upon conversion of each Senior Common Share, the Corporation shall take all such actions as are necessary in order to insure that the Conversion Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable. (4) The Corporation shall not close its books against the transfer of Senior Common Stock or of Conversion Stock issued or issuable upon conversion of Senior Common Stock in any manner which interferes with the timely conversion of Senior Common Stock. (5) The Corporation will at all times reserve and keep available out of its authorized but unissued Conversion Stock, solely for the purpose of issuance upon the conversion of the Senior Common Shares such number of shares of Conversion Stock as are issuable upon the conversion of all outstanding Senior Common Shares. All shares of Conversion Stock which are so issuable will, when issued, be duly and validly issued, fully paid and nonassessable. The Corporation will take all such actions as may be necessary to assure that all such shares of Conversion Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Conversion Stock may be listed (except for official notices of issuance which will be immediately transmitted by the Corporation upon issuance). 7. Conversion of Non-Voting Common Shares. 1. Conversion of Rights. Any holder of Non-Voting Common Shares shall have the right, at its option, at any time and from time to time, to convert, subject to the terms and provisions of this paragraph 5(A), any or all of such holder's Non-Voting Common Shares into an equal number of shares of fully paid and non-assessable shares of Voting Common Stock as provided below; provided, however, if the holder in any such conversion is subject to the Bank Holding Company Act of 1956, as amended (12 U.S.C. ss.1841, et. seq.) and the regulations promulgated thereunder (collectively and including any successor provisions, the "BHCA Act"), such conversion may be made only if: (1) the BHCA Act would not prohibit such holder from holding such shares of Voting Common Stock; and (2) such shares of Voting Common Stock to be received upon such conversion will be (A) distributed or sold in connection with any public equity offering registered under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "1933 Act"), (B) distributed or sold in a "broker's transaction" (as defined in Rule 144(g) under the 1933 Act) pursuant to Rule 144 under the 1933 Act or any similar rule then in force, (C) distributed or sold to a person or group (within the meaning of the Securities Exchange Act of 1934, as amended (the "1934 Act")) of persons if, after such distribution or sale, such person or group of persons would not, in the aggregate, own, control or have the right to acquire more than 2% of the outstanding securities of the Corporation entitled to vote on the election of directors of the Corporation, (D) distributed or sold to a person or group (within the meaning of the 1934 Act) of persons if, prior to such sale, such person or group of persons had control of the Corporation, (E) distributed, sold, or held in any other manner permitted under the BHCA, ___ including after giving effect to the amendment of the BHCA by the Gramm-Leach-Bliley Financial Services Act; provided, further, that if the holder converts any Non-Voting Common Shares as provided in clauses (i) and (ii) above and any distribution or sale of the Non-Voting Common Shares fails to occur for any reason or such holder is not otherwise permitted to hold the Voting Common Stock into which such shares were converted, such holder may convert the Voting Common Stock into the Non-Voting Common Shares converted in anticipation of such distribution or sale or other permitted holding. 2. Conversion Procedure. (1) Unless otherwise provided herein, each conversion of shares of Non-Voting Common Stock into shares of Voting Common Stock will be effected by the surrender of the certificate or certificates representing the Non-Voting Common Shares to be converted at the principal office of the Corporation at any time during normal business hours, together with a written notice by the holder of such Non-Voting Common Shares stating that such holder desires to convert such Non-Voting Common Shares, or a stated number of such Non-Voting Common Shares, represented by such certificate(s) into shares of Voting Common Stock. Unless otherwise provided herein, each conversion will be deemed to have been effected as of the close of business on the date on which such certificate(s) have been surrendered and such notice has been received, and at such time the rights of the holder of the converted Non-Voting Common Shares, as such holder, will cease and the person or persons in whose name or names the certificate(s) for Voting Common Stock are to be issued upon such conversion will be deemed to have become the holder or holders of record of the Voting Common Stock represented thereby. (2) Promptly after the surrender of certificates and the receipt of written notice, the Corporation will issue and deliver in accordance with the surrendering holder's instructions (a) the certificate(s) for the Voting Common Stock issuable upon such conversion and (b) a certificate representing any Non-Voting Common Shares that was represented by the certificate(s) delivered to the Corporation in connection with such conversion but that was not converted. (3) The issuance of certificates for Voting Common Stock upon conversion of Non-Voting Common Shares will be made without charge to the holders of such shares for any issuance tax in respect thereof (other than any tax in connection with the issuance of shares in a different name) or other cost incurred by the Corporation in connection with such conversion and the related issuance of Voting Common Stock. (4) The Corporation will at all times reserve and keep available out of its authorized but unissued Voting Common Stock, solely for the purpose of issuance upon the conversion of the Non-Voting Common Shares such number of Voting Common Stock as are issuable upon the conversion of all outstanding Non-Voting Common Shares. All Common Shares which are so issuable will, when issued, be duly and validly issued, fully paid and nonassessable. The Corporation will take all such actions as may be necessary to assure that all such Common Shares may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which Common Shares may be listed (except for official notices of issuance which will be immediately transmitted by the Corporation upon issuance). (5) The Corporation will not close its books against the transfer of Common Shares in any manner which would interfere with the timely conversion of any Non-Voting Common Shares. 8. Stock Splits, Etc. If the Corporation in any manner subdivides or combines the outstanding shares of one class of Common Shares, the outstanding shares of the other class of Common Shares will be proportionately subdivided or combined in a similar manner. 9. Notices. All notices referred to in this Article FOURTH shall be in writing, shall be delivered personally, by facsimile or by first class mail, postage prepaid, and shall be deemed to have been given when so delivered or mailed to the Corporation at its principal office and to any stockholder at such holder's address as it appears in the stock records of the Corporation. 10. Amendment and Waiver. No amendment, waiver or change to or with respect to any of the rights, privileges, preferences or powers of the Senior Common Stock shall be effective without the prior approval of the holders of a majority of the Senior Common Shares then outstanding, voting as a separate class. No amendment or waiver of any provision of paragraph B(5) of this Article FOURTH or of this paragraph B(8)(ii) shall be effective without the prior approval of the holders of a majority of the shares of Voting Common Stock then outstanding, voting as a separate class, and the holders of a majority of the shares of Non-Voting Common Stock then outstanding, voting as a separate class." EX-4 6 fsi_10q-063001.txt FIFTH SUPPLEMENTAL INDENTURE FIFTH SUPPLEMENTAL INDENTURE, dated as of April 30, 2001 (the "Supplemental Indenture") between Outsourcing Solutions Inc., a corporation organized under the laws of the State of Delaware (the "Company"), and Pacific Software Consulting, LLC, a Delaware 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, the Additional Guarantor 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 9.01 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: PACIFIC SOFTWARE CONSULTING, LLC. By: /s/ Timothy G. Beffa -------------------------- Timothy G. Beffa Title: Chairman TRUSTEE: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as trustee By: /s/ -------------------------- 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 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 COAST TO COAST CONSULTING, LLC By: /s/ Timothy G. Beffa -------------------------- Timothy G. Beffa Title: Chairman PAE LEASING, LLC By: /s/ Timothy G. Beffa -------------------------- Timothy G. Beffa Title: Chairman GUARANTEE Pacific Software Consulting, 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 Fifth 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 "Fifth Supplemental Indenture" means the Fifth Supplemental Indenture, dated as of April 30, 2001, among the Company, the Original Guarantors (as defined therein), the Additional Guarantor (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 Fifth Supplemental Indenture by the manual signature of one of its authorized officers. Guarantor: Pacific Software Consulting, LLC By: /s/ Timothy G. Beffa ---------------------------------- Name: Timothy G. Beffa Title: Chairman EX-10 7 mip_10q-063001.txt MANAGEMENT INCENTIVE PLAN OUTSOURCING SOLUTIONS INC. - -------------------------- Management Incentive Compensation Plan Description and Payout Guidelines I. Purpose Outsourcing Solutions Inc. (the Company) has created this Management Incentive Compensation Plan (Plan) to provide significant cash incentives for executives, managers, and other key personnel to attain the Revenue and Company's EBITDA or EBITDA, after Portfolio Amortization, if applicable and certain other business objectives as may be established by the Chief Executive Officer (CEO) and/or the Compensation Committee of the Board of Directors of the Company. The Plan is intended to provide financial recognition for the results these individuals achieve in exercising their judgement, initiative and effort. II. Effective Date This Plan is effective January 1, 2001, is intended to run annually thereafter concurrent with the Company's fiscal year (January 1 - December 31) and is subject to annual review / modification by the Chief Executive Officer. III. Participation Participation in the Plan is limited to executives, managers and equivalent and key professional personnel. Each year, senior management of the Company will recommend to the CEO the participants for that year. Once eligible, persons not employed in a designated position for a full calendar year will be eligible for incentive payments on a prorata basis for their period of participation. During the plan year, a person moving into a designated incentive position must be in that capacity by September 30 in order to receive a prorata incentive payment for the calendar year. An individual must be on the payroll at December 31 in order to be eligible to receive an incentive payment for that year. Participants who terminate employment after December 31 but prior to the date when payouts are made will not receive an incentive payment except at the discretion of the CEO. Participants whose employment is terminated during the year as a result of retirement, disability, or death may be eligible for a prorata incentive payment and will be at the discretion of the CEO. An employee is eligible to participate in only one Company incentive compensation plan at a time. Individuals participating in commission, override, or branch productivity plans are not eligible to participate in this Plan. Participants in this Plan are not eligible to participate in any other incentive plan nor given discretionary bonuses throughout the plan year. IV. Target Bonus Incentive Compensation Awards Target awards represent the percent of base salary at December 31 (end of plan year) that would be paid when Consolidated Corporate, Business Unit and Individual objectives are completely fulfilled. Payout will be done based upon the attainment of the financial and other incentives which will be set annually as part of the annual budget cycle. These incentives will be reflected in the format on the attached matrices. Bonuses payable pursuant to this Plan will be calculated (in whole numbers) by determining the appropriate payout from the applicable matrices. The appropriate percentage will be an absolute percentage from the matrices and will not be an interpolation from the matrices. While these awards will be determined based on the actual performance of the company utilizing the attached matrices, in no case will the bonuses exceed 160% of the target. In general, subject to the discretion of the CEO, no corporate, leverage, business unit, or individual bonuses will be paid if actual Consolidated Corporate Revenue and EBITDA after Portfolio Amortization is less than as indicated on the matrix chart. Unbudgeted acquisition impact on target performance will be measured at a rate of 50% of incremental Revenue and EBITDA or EBITDA, after Portfolio Amortization. Acquisition impact on targets will generally affect only the Consolidated Corporate Portion of the award. Acquisition impact will affect the Business Unit targets if the acquired entity becomes a part of the Business Unit. V. Performance Criteria A. Corporate Criteria: Represent W percent of total target award and will be determined on the percentage attainment of approved Consolidated Corporate Revenue and EBITDA less Portfolio Amortization objectives as determined annually. B. Leverage Criteria: Represent X percent of total target award and will be determined on the level of year-end leverage ratio attained. C. Business Unit Criteria (SBU & Ind. Group): Represent Y percent of total target award and will be determined on the percentage attainment of approved business unit Revenue and EBITDA or EBITDA less Portfolio Amortization objectives as determined annually. D. Individual Criteria: Represent Z percent of total target award and will be determined based on the attainment of individual objectives as judged by each participant's supervisor subject to approval and/or adjustment by the CEO. Individual objectives will be weighted, with the total weight equal to 100% of the individual portion (Z) of the total target award. E. Objective Mix: Target awards will be determined based upon an appropriate mix of Corporate, Leverage, Business Unit(s) and Individual objectives as approved by the CEO. The mix of objectives should consider the nature and direct financial impact of an individual's responsibilities as they relate to the overall financial results of the Company. Performance criteria mix will be represented in whole number percentages and must total 100%. No more than 50% can be placed in the Individual criteria unless approved by the CEO. In the majority of cases, criteria mix should be consistent among like jobs. F. Computation Examples: Assume: SBU Mgmt eligible for 20% target based on 10% Corporate, 10%, Leverage, 60%, Business unit and 20% Individual: Base Salary: $80,000 Target Award: 20% of base or $16,000 Corporate portion: 10% of $16,000 or $1,600 Leverage portion: 10% of $16,000 or $1,600 Business unit portion: 60% of $16,000 or $9,600 Individual portion: 20% of $16,000 or $3,200 Minimum award: 0% Maximum award: $25,600 1. Performance Situation #1: -------------------------- Corporate performance 85% of plan,payout (85% x1,600): $ 1,360 Leverage performance 80% of plan,payout (80% x 1,600): $ 1,280 Business unit performance 100% of plan, payout (100% x 9,600): $ 9,600 Individual performance judged 110% of plan, payout (110% x 3,200): $ 3,520 -------- $ 15,760 2. Performance Situation #2: ------------------------- Corporate performance 115% of plan, payout (115% x1,600): $ 1,840 Leverage performance 100% of plan, payout (100% x 1,600): $ 1,600 Business unit performance 100% of plan, payout (100% x 9,600): $ 9,600 Individual performance judged 85% of plan, payout (85% x 3,200): $ 2,720 -------- $ 15,760 3. Performance Situation #3: ------------------------- Corporate performance 100% of plan, payout (100% x 1,600): $ 1,600 Leverage performance 120% of plan, payout (120% x 1,600): $ 1,920 Business unit performance 85% of plan, payout (85% x 9,600): $ 8,160 Individual performance judged 70% of plan, payout (70% x 3,200): $ 2,240 -------- $ 13,920 VI. Bonus Incentive Compensation Pool A Bonus Incentive Compensation Pool will be accrued annually and will be allocated among participants based on a combination of corporate, leverage, business unit, and individual performance. The size of the pool will be determined annually based on Company and Business Unit performance against targets and the base salaries of the participants of the Plan. VII. Plan Administration Participation: In December of each year Management will compile a list of all employees eligible for the following year and a recommended performance criteria mix for each and submit it for review and approval by the CEO. Changes to Performance Criteria Mix: Changes to an individual's Target % of Base or Performance Criteria Mix must have prior approval from the appropriate Senior Executive and CEO. Payouts: Payouts will be made in a single lump sum by March 31 of the year following the year in which bonuses were earned. Tax regulations (e.g. federal, state, county, local) for lump sum distribution will apply. VIII. Management Rights This Plan replaces the 2000 Management Incentive Plan. Outsourcing Solutions Inc. reserves the right to alter, amend, suspend, or terminate this Plan prospectively (and any other variable compensation plan) at any time without notice and without any future liability. Designation of job classification, salary grade, or an individual neither guarantees the individual a right to a bonus nor a right to continued employment. The payout guidelines and formulas described in Section V herein, as well as actual payouts recommended, may be adjusted, modified, revised or eliminated at any time at the discretion of the CEO subject to approval of the Compensation Committee of the Board of Directors. An employee who is included in this Plan may be given certain individual performance objectives to achieve in order to qualify for any bonus payment. Such objectives, and the standards by which achievement is measured, may vary from job-to-job, and will be determined early each calendar year through discussions between the employee's supervisor and the employee, and must be approved by the supervisor's supervisor. Approved individual performance objectives must be submitted in writing to the CEO for approval no later than the later of (i) March 31 or (ii) 30 days following the date the participant is selected to participate in the Plan of the calendar year for which they apply. Such individual performance objectives may be reviewed and modified by meeting and co-signed agreement of the employee and the employee's supervisor at any time during the calendar year. -----END PRIVACY-ENHANCED MESSAGE-----