SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 333-16867
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Outsourcing Solutions Inc.
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(Exact name of registrant as specified in its charter)
Delaware 58-2197161
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
390 South Woods Mill Road, Suite 350
Chesterfield, Missouri 63017
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (314)576-0022
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Indicate by checkmark whether the registrant: (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Outstanding at
Class September 30, 1998
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Voting common stock 3,477,126.01
Class A convertible nonvoting common stock 391,740.58
Class B convertible nonvoting common stock 400,000.00
Class C convertible nonvoting common stock 1,040,000.00
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5,308,866.59
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Transitional Small Disclosure (check one): Yes [ ] No [ X ]
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<PAGE>
PAGE 2
OUTSOURCING SOLUTIONS INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
Part I. Financial Information Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 30, 1998 (unaudited) and December 31, 1997 ............. 3
Condensed Consolidated Statements of Operations for the
three and nine months ended September 30, 1998
and 1997 (unaudited) ............................................. 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1998 and 1997 (unaudited) ........ 5
Notes to Condensed Consolidated Financial Statements (unaudited).. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 9
Part II. Other Information ................................................ 14
<PAGE>
PAGE 3
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands except share and per share
amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
Unaudited Audited
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,356 $ 3,217
Cash and cash equivalents held for clients 24,392 20,762
Current portion of purchased loans and accounts receivable portfolios 41,063 42,915
Accounts receivable - trade, less allowance for doubtful 40,026 27,192
receivables of $1,276 and $538
Other current assets 7,573 2,119
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Total current assets 122,410 96,205
PURCHASED LOANS AND ACCOUNTS RECEIVABLE PORTFOLIOS 24,769 19,537
PROPERTY AND EQUIPMENT, net 45,323 32,563
INTANGIBLE ASSETS, net 422,657 219,795
DEFERRED FINANCING COSTS, net 13,452 12,517
OTHER ASSETS 370 1,073
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TOTAL $628,981 $381,690
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable - trade $ 8,326 $ 6,977
Collections due to clients 24,392 20,762
Accrued compensation 15,610 8,332
Other current liabilities 46,957 26,131
Current portion of long-term debt 16,661 15,445
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Total current liabilities 111,946 77,647
LONG-TERM DEBT 512,068 309,521
OTHER LONG-TERM LIABILITIES 23,160 --
STOCKHOLDERS' EQUITY (DEFICIT):
8% nonvoting cumulative redeemable exchangeable preferred stock; 12,167 11,699
authorized 1,000,000 shares,973,322.32 and 935,886.85 shares,
respectively, issued and outstanding, at liquidation value of
$12.50 per share
Voting common stock; $.01 par value; authorized 7,500,000 shares, 35 35
3,477,126.01 shares issued and outstanding
Class A convertible nonvoting common stock; $.01 par value; 4 4
authorized 7,500,000 shares, 391,740.58 shares issued and outstanding
Class B convertible nonvoting common stock; $.01 par value; 4 4
authorized 500,000 shares, 400,000 shares issued and outstanding
Class C convertible nonvoting common stock; $.01 par value; 10 10
authorized 1,500,000 shares, 1,040,000 shares issued and outstanding
Paid-in capital 66,958 66,958
Retained deficit (97,371) (84,188)
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Total stockholders' equity (deficit) (18,193) (5,478)
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TOTAL $628,981 $381,690
======== ========
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
</TABLE>
<PAGE>
PAGE 4
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30
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1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES $119,903 $67,537 $358,634 $197,663
EXPENSES:
Salaries and benefits 58,050 32,218 171,203 97,018
Service fees and other operating and 35,130 16,314 105,100 49,882
administrative expenses
Amortization of loans and accounts 12,840 13,138 35,198 31,174
receivable purchased
Amortization of goodwill and other intangibles 4,045 5,293 11,588 21,269
Depreciation expense 3,486 2,558 9,963 7,615
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Total expenses 113,551 69,521 333,052 206,958
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OPERATING INCOME (LOSS) 6,352 (1,984) 25,582 (9,295)
INTEREST EXPENSE - Net 13,164 7,153 37,554 20,950
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LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (6,812) (9,137) (11,972) (30,245)
INCOME TAX BENEFIT -- (2,797) -- (9,626)
MINORITY INTEREST -- -- 572 --
------- ------- --------- ---------
NET LOSS (6,812) (6,340) (12,544) (20,619)
PREFERRED STOCK DIVIDEND REQUIREMENTS 162 266 639 686
------- ------- --------- ---------
NET LOSS TO COMMON STOCKHOLDERS $(6,974) $(6,606) $ (13,183) $ (21,305)
======= ======= ========= =========
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
</TABLE>
<PAGE>
PAGE 5
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands except share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(12,544) $(20,619)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 23,654 28,884
Amortization of loans and accounts receivable purchased 35,198 31,174
Deferred taxes -- (9,626)
Minority interest 572 --
Change in assets and liabilities:
Other current assets 5,256 (2,621)
Accounts payable and other current liabilities (10,122) (10,773)
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Net cash provided by operating activities 42,014 16,419
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INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired (167,305) (1,200)
Purchase of loans and accounts receivable portfolios (38,030) (34,955)
Acquisition of property and equipment (10,794) (5,729)
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Net cash used in investing activities (216,129) (41,884)
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FINANCING ACTIVITIES:
Proceeds from term loans 225,469 --
Borrowings under revolving credit agreement 168,050 44,300
Repayments under revolving credit agreement (177,900) (16,900)
Repayments of debt (32,327) (7,225)
Deferred financing fees (3,038) (324)
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Net cash provided by financing activities 180,254 19,851
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,139 (5,614)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,217 14,497
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,356 $ 8,883
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during period for interest $ 28,407 $ 12,146
======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES - During
the nine months ended September 30, 1998 and 1997, the Company paid preferred
stock dividends of $468 and $883, respectively, through the issuance of
37,435.47 shares and 70,606.84 shares of preferred stock, respectively.
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
</TABLE>
<PAGE>
OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 1998 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1998. For purposes of comparability, certain prior
year and prior quarter amounts have been reclassified to conform to current
quarter and year to date presentation. These Condensed Consolidated Financial
Statements should be read in conjunction with the Consolidated Financial
Statements and notes thereto contained in the Company's Form 10-K for the year
ended December 31, 1997.
NOTE 2. ACQUISITIONS
On January 23, 1998, the Company acquired through a tender offer approximately
77% of the outstanding shares of The Union Corporation's ("Union") common stock
for $31.50 per share. On March 31, 1998, the Company acquired the remaining
outstanding shares of Union when Union merged with a wholly-owned subsidiary of
the Company. The aggregate purchase price of the Union acquisition was
approximately $230,000 including transaction fees, assumed liabilities, and
certain adjustments to conform to the Company's accounting policies. The Company
financed the acquisition primarily with funds provided by the Second Amended and
Restated Credit Agreement (as defined herein). Union, through certain of its
subsidiaries, furnishes a broad range of credit and receivables management
outsourcing services as well as management and collection of accounts
receivable. The acquisition was accounted for under the purchase method of
accounting. Accordingly, the purchase price has been preliminarily allocated
based upon the estimated fair value of the net assets acquired. This treatment
resulted in approximately $214,025 of goodwill that will be amortized over 30
years using the straight-line method. Union's consolidated operating results
have been included in the Company's consolidated results since January 23, 1998,
recognizing the minority interest through the completion date of the
acquisition.
The unaudited proforma consolidated financial data presented below gives effect
to the Union acquisition as well as the North Shore Agency and Accelerated
Bureau of Collections acquisitions that occurred in the fourth quarter of 1997,
as if such acquisitions had occurred as of the beginning of each period
presented. The pro forma adjustments are based upon available information and
certain assumptions that management believes are reasonable. The unaudited pro
forma consolidated financial data does not purport to represent what the
Company's financial position or results of operations would have been if
consummation of the acquisitions of Union, North Shore Agency and Accelerated
Bureau of Collections had occurred on the date indicated or what may be achieved
in the future. Except for the elimination of costs associated with duplicative
administrative functions and facilities based upon actions actually taken as of
the close of the transactions, anticipated cost savings have not been reflected
in this presentation. The unaudited pro forma consolidated financial data should
be read in conjunction with the historical consolidated financial statements and
accompanying notes for the Company, Union, North Shore Agency and Accelerated
Bureau of Collections.
For the three months For the nine months
Ended September 30, Ended September 30,
--------------------- -------------------
1998 1997 1998 1997
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Revenues $119,903 $115,663 $365,988 $343,984
======== ======== ======== ========
Net loss $(6,812) $(7,570) $(13,665) $(23,490)
======= ======= ======== ========
NOTE 3. DEBT
On January 26, 1998, the Company entered into a Second Amended and Restated
Credit Agreement ("Agreement") with a group of banks in part to fund the Union
acquisition. This Agreement amended the Company's existing credit agreement. The
Agreement consists of a $412,422 term loan facility and a $58,000 revolving
credit facility.
The term loan facility consists of a term loan of $62,500 ("Term Loan A"), a
term loan of $124,922 ("Term Loan B") and a term loan of $225,000 ("Term Loan
C"), which mature on October 15, 2001, 2003 and 2004, respectively. The Company
is required to make quarterly principal repayments on each term loan. Term Loan
A bears interest, at the Company's option, (a) at a base rate equal to the
greater of the federal funds rate plus 0.5% or the lender's customary base rate
plus 1.5% or (b) at the reserve adjusted Eurodollar rate plus 2.5%. Term Loans B
and C bear interest, at the Company's option, (a) at a base rate equal to the
greater of the federal funds rate plus 0.5% or the lender's customary base rate
plus 2.0% or (b) at the reserve adjusted Eurodollar rate plus 3.0%.
The revolving credit facility has a term of five years and is fully revolving
until October 15, 2001. The revolving credit facility bears interest, at the
Company's option, (a) at a base rate equal to the greater of the federal funds
rate plus 0.5% or the lender's customary base rate plus 1.5% or (b) at the
reserve adjusted Eurodollar rate plus 2.5%.
The obligations of the Company under the Agreement are guaranteed by all of the
Company's present domestic subsidiaries and are secured by all of the stock of
the Company's present domestic subsidiaries and by substantially all of the
Company's domestic property assets. The Agreement contains certain covenants,
the more significant of which limit dividends, asset sales, acquisitions and
additional indebtedness, as well as requires the Company to satisfy certain
financial performance ratios.
NOTE 4. LITIGATION
The Company and certain of its subsidiaries are subject to various
investigations, claims and legal proceedings covering a wide range of matters
that arise in the normal course of business and are routine to the nature of the
Company's businesses. In addition, as a result of the Union acquisition,
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. Each of these matters is
subject to various uncertainties, and it is possible that some of these matters
will be decided unfavorably against the Company. The Company has established,
with input from environmental and legal experts, accruals for matters that are
in its view probable and reasonably estimable. Based on information presently
available, management believes that existing accruals are sufficient to satisfy
any known environmental liabilities.
NOTE 5. NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued the Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective for fiscal periods beginning after
June 15, 1999. The adoption of this statement is not expected to have a material
effect on the financial statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended September 30, 1998 Compared to Three Months
Ended September 30, 1997
Revenues for the three months ended September 30, 1998 were $119.9 million
compared with $67.5 million in the same period last year - an increase of 77.5%.
The revenue increase of $52.4 million was primarily due to the acquisitions of
Union, North Shore Agency and Accelerated Bureau of Collections. Revenues from
fee services were $84.7 million for the three months ended September 30, 1998
compared to $39.0 million in the comparable period in 1997. The increase in fee
revenues of 116.9% was primarily due to the three acquisitions. Revenues from
purchased portfolios increased 1.3% to $19.3 million for the quarter ended
September 30, 1998 compared to $18.9 million in 1997 due primarily from
strategic sales of portfolios. The outsourcing revenue of $15.9 million compared
favorably to prior year of $9.6 million due primarily to the Union acquisition.
Operating expenses for the three months ended September 30, 1998 were $113.6
million compared to $69.5 million for the comparable period in 1997 - an
increase of $44.1 million. Operating expenses, exclusive of amortization and
depreciation charges, were $93.2 million for the three months ended September
30, 1998 and $48.5 million for the comparable period in 1997. The increase in
operating expenses, exclusive of amortization and depreciation charges, resulted
from the three acquisitions. Of the $113.6 million in operating expenses for the
three months ended September 30, 1998, $20.4 million was attributable to
amortization and depreciation charges compared to $21.0 million for the same
period last year. The lower amortization and depreciation charges were due to no
account placement inventory amortization in 1998 ($3.5 million in 1997) since
account placement inventory was fully amortized as of December 31, 1997 offset
partially by depreciation and amortization of goodwill related to the three
acquisitions.
As a result of the above, the Company generated operating income of $6.4 million
for the three months ended September 30, 1998 compared to an operating loss of
$2.0 million for the comparable period in 1997.
Earnings before interest expense, taxes, depreciation and amortization (EBITDA)
for the quarter ended September 30, 1998 was $26.7 million compared to $19.1
million for the same period in 1997. The increase of $7.6 million was
attributable to the three acquisitions.
Net interest expense for the three months ended September 30, 1998 was $13.2
million compared to $7.2 million for the comparable period in 1997. The increase
was primarily due to additional indebtedness incurred to finance the Union,
North Shore Agency and Accelerated Bureau of Collections acquisitions.
Consistent with management's assessment made in the fourth quarter of 1997, the
potential tax benefits generated by additional net operating loss carryovers or
the future reversal of the net deductible temporary differences for the three
months ended September 30, 1998 were fully offset by valuation allowance of $2.7
million.
Due to the factors stated above and the fact that the Company recorded a $2.8
million tax benefit in the third quarter of 1997, the net loss for the quarter
ended September 30, 1998 was $6.8 million compared to $6.3 million for the
comparable period in 1997.
Nine Months Ended September 30, 1998 Compared to Nine Months
Ended September 30, 1997
Revenues for the nine months ended September 30, 1998 were $358.6 million
compared with $197.7 million in the same period last year - an increase of
81.4%. The revenue increase of $160.9 million was due primarily to increased fee
services and portfolio revenues of $11.6 million - an increase of 5.9% over last
year, and $152.3 million from the acquisitions of Union, North Shore Agency and
Accelerated Bureau of Collections offset by lower outsourcing revenue of $3.0
million. Revenues from fee services were $255.2 million for the nine months
ended September 30, 1998 compared to $116.2 million in the comparable period in
1997. The increase in fee revenues was due to a 4.0% increase in existing
business and $134.3 million from the three acquisitions. Revenues from purchased
portfolios increased to $59.1 million for the nine months ended September 30,
1998 compared to $52.1 million in 1997 - up 13.3%. The increased revenue
resulted primarily from strategic sales of portfolios. The outsourcing revenue
of $44.3 million compared favorably to prior year of $29.4 million due primarily
to the Union acquisition.
Operating expenses for the nine months ended September 30, 1998 were $333.1
million compared to $207.0 million for the comparable period in 1997. Operating
expenses, exclusive of amortization and depreciation charges, were $276.3
million for the nine months ended September 30, 1998 and $146.9 million for the
comparable period in 1997 - an increase of 88.1%. The increase in operating
expenses, exclusive of amortization and depreciation charges, resulted primarily
from the three acquisitions as well as higher collection-related expenses
associated with the increased revenues. Of the $333.1 million in operating
expenses for the nine months ended September 30, 1998, $56.8 million was
attributable to amortization and depreciation charges compared to $60.1 million
for the same period last year. The lower amortization and depreciation charges
resulted from no account placement inventory amortization in 1998 ($15.6 million
in 1997) since account placement inventory was fully amortized as of December
31, 1997, offset partially by additional depreciation and amortization of
goodwill related to the three acquisitions and increased portfolio amortization
resulting from increased portfolio revenue.
As a result of the above, the Company generated operating income of $25.6
million for the nine months ended September 30, 1998 compared to an operating
loss of $9.3 million for the comparable period in 1997.
Earnings before interest expense, taxes, depreciation and amortization (EBITDA)
for the nine months ended September 30, 1998 was $82.3 million compared to $50.8
million for the same period in 1997. The increase of $31.5 million consisted of
$25.9 million as a result of the three acquisitions and $5.6 million primarily
from the increased revenue from operations unrelated to the acquisitions of $8.6
million.
Net interest expense for the nine months ended September 30, 1998 was $37.6
million compared to $21.0 million for the comparable period in 1997. The
increase was primarily due to additional indebtedness incurred to finance the
Union, North Shore Agency and Accelerated Bureau of Collections acquisitions.
Consistent with management's assessment made in the fourth quarter of 1997, the
potential tax benefits generated by additional net operating loss carryovers or
the future reversal of the net deductible temporary differences for the nine
months ended September 30, 1998 were fully offset by valuation allowance of $4.8
million.
Minority interest in earnings in 1998 resulted from the Union acquisition. On
January 23, 1998, the Company acquired approximately 77% of the outstanding
common stock of Union through a tender offer. The acquisition of all remaining
outstanding common stock of Union was completed on March 31, 1998. The Company
recognized minority interest in earnings of Union during the period from January
23, 1998 to March 31, 1998.
Due to the factors stated above, the net loss for the nine months ended
September 30, 1998 was $12.5 million compared to $20.6 million for the
comparable period in 1997 - an improvement of $8.1 million.
Financial Condition, Liquidity and Capital Resources
At September 30, 1998, the Company had cash and cash equivalents of $9.4
million. In addition, the Company has a $58.0 million revolving credit facility,
which allows the Company to borrow for working capital, general corporate
purposes and acquisitions, subject to certain conditions. As of September 30,
1998, the Company had outstanding $22.0 million under the revolving credit
facility leaving $34.4 million, after outstanding letters of credit, available
under the revolving credit facility.
Since December 31, 1997, cash and cash equivalents increased $6.1 million
primarily due to cash provided by operations and financing activities of $42.0
million and $180.3 million, respectively, offset primarily by cash utilized for
the Union acquisition of $164.7 million, purchases of loans and accounts
receivable portfolios of $38.0 million and capital expenditures of $10.8
million. The Company also held $24.4 million of cash for clients in restricted
trust accounts at September 30, 1998.
For the first nine months in 1998, the Company made capital expenditures of
$10.8 million primarily for the replacement and upgrading of equipment and
expansion of the Company's information services systems. The Company anticipates
spending approximately $18.0 million for 1998.
On October 29, 1998, the Company executed a warehouse financing arrangement that
provides the Company with up to $100 million of off-balance sheet funding
capacity for the purchase of account receivable portfolios over its five year
term. Proceeds from this arrangement, funded by an insurance company sponsored
commercial paper conduit, will allow the Company to finance substantially all of
its portfolio purchasing activities without additional borrowings from its bank
credit facility. Pursuant to this financing arrangement, the Company's Second
Amended and Restated Credit Agreement was amended to limit borrowing available
for future account portfolio purchases and to permit an initial investment in a
new wholly-owned, non-consolidated bankruptcy-remote subsidiary.
Year 2000
As the Year 2000 approaches, many corporate systems worldwide could malfunction
or produce incorrect results because they cannot process date-related
information properly. Dates play a key role in dependable functioning of the
software applications, software systems, information technology infrastructure,
and embedded technology (i.e., non-technical assets such as time clocks and
building services) the Company relies upon in day-to-day operations for
innumerable tasks. This includes any tasks requiring date-dependent arithmetic
calculations, sorting and sequencing data, and many other functions.
The Company identified this problem as a key focus during 1997 and as part of
any subsequent due-diligence procedures related to acquisitions completed during
1998. The Company has assessed the impact of Year 2000 issues on the processing
of date-related information for all of its information systems infrastructure
(e.g., production systems) and significant non-technical assets. As the new
millennium approaches, the Company has developed and implemented a Year 2000
program to deal with this important issue in an effective and timely manner.
This problem has received significant senior management attention and resources.
Management reviews have been held on this topic. During 1998 and 1999, the
Company's Board of Directors has requested and will continue to receive
quarterly presentations at each regular Board meeting regarding the Company's
overall Year 2000 compliance status and readiness.
An independent consulting firm has been retained to provide independent
verification and testing of the production systems. Under the direction of the
Company's Senior Vice President and Chief Information Officer, the Company has
established a program management structure, a management process and methodology
and proactive client and vendor management strategies to manage the Year 2000
risk.
Because many of the Company's client relationships are supported through
computer-system interfaces, it is critical that the Company works proactively
with its clients to achieve Year 2000 compliance. The Company has established a
proactive client management strategy focused on enabling the Company to work
together with clients to assure Year 2000 compliance between respective computer
systems.
The implementation of the client management strategy has commenced in 1998.
Letters have been sent to significant clients, inquiring about their Year 2000
compliance plans and status. The Company is working to establish a follow-up
process with each key client, taking a proactive, customer-focused approach to
achieving Year 2000 compliance with its customers.
The Company has also communicated with its strategic suppliers and equipment
vendors, including suppliers of non-technical assets, seeking assurances that
they and their products will be Year 2000 ready. The Company's goal is to obtain
as much detailed information as possible about its strategic suppliers and
equipment vendors' Year 2000 plans to identify those companies which appear to
pose any significant risk of failure to perform their obligations to the Company
as a result of the Year 2000. The Company expects to have compiled detailed
information regarding all of its strategic suppliers and equipment vendors by
December 1998. This will be an ongoing process during the Year 2000 project. For
those strategic suppliers and equipment vendors that do not respond as to their
status or their response is not satisfactory, the Company intends to develop
contingency plans to ensure that sufficient alternative resources are available
to continue with business operations.
The target date for completion of all production systems and significant
non-production systems (e.g., predictive dialer systems, phone switches, wide
area network hardware), including non-technical assets, is March, 1999, with
testing to begin during the first quarter of 1999 with completion no later than
mid-1999.
Spending for modifications and updates are being expensed as incurred and is not
expected to have a material impact on the results of operations or cash flows.
The cost of the Company's Year 2000 project is being funded from cash flows
generated from operations. The Company estimates that its total Year 2000
expenses will be in the range of $1.2 to $1.5 million. To date, the Company has
expended approximately $0.8 million, primarily for contract programmers and
consulting costs associated with the evaluation, assessment and remediation of
computer systems.
The Company is dependent upon its own internal computer technology and relies
upon the timely performance of its suppliers and customers and their systems. A
substantial part of the Company's day-to-day operations is dependent on power
and telecommunications services, for which alternative sources of services may
be limited. A large-scale Year 2000 failure could impair the Company's ability
to provide timely performance results required by the Company's customers,
thereby causing potential liability, lost revenues and additional expenses, the
amounts which have not been estimated. The Company's Year 2000 project seeks to
identify and minimize this risk and includes testing of its in-house
applications, purchased software and hardware to ensure that all such systems
will function before and after the Year 2000. The Company is continually
refining its understanding of the risk the Year 2000 poses to its strategic
suppliers and customers based upon information obtained through its surveys.
This refinement will continue through the rest of 1998 and into 1999.
The Company's Year 2000 project includes the development of contingency plans
for business critical systems, as well as for strategic suppliers and customers
to attempt to minimize disruption to its operations in the event of a Year 2000
failure. The Company will be formulating plans to address a variety of failure
scenarios, including failures of its in-house applications, as well as failures
of strategic suppliers and customers. The Company anticipates that it will
complete Year 2000 contingency planning by mid-1999.
The following statements in this document are or may constitute forward-looking
statements made in reliance upon the safe harbor of the Private Securities
Litigation Reform Act of 1995: (1) statements concerning the cost and successful
implementation of the Company's Year 2000 initiatives, (2) statements concerning
the anticipated costs and outcome of legal proceedings and environmental
liabilities, (3) any statements preceded by, followed by or that include the
word "believes," "expects," "anticipates," "intends," "should," "may," or
similar expressions; and (4) other statements contained or incorporated by
reference in this document regarding matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual results
may differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to: (1) the demand for the Company's services, (2)
the demand for accounts receivable management generally, (3) general economic
conditions, (4) changes in interest rates, (5) competition, including but not
limited to pricing pressures, (6) changes in governmental regulations including,
but not limited to the federal Fair Debt Collection Practices Act and comparable
state statutes, (7) the status and effectiveness of the Company's Year 2000
efforts, (8) legal proceedings, (9) environmental investigations and clean up
efforts, (10) the Company's ability to rationalize operations of recent
acquisitions, and (11) the Company's ability to generate cash flow or obtain
financing to fund its operations, service its indebtedness and continue its
growth and expand successfully into new markets and services.
These forward-looking statements speak only as of the date they were made. These
cautionary statements should be considered in connection with any written or
oral forward-looking statements that the Company may issue in the future. The
Company does not undertake any obligation to release publicly any revisions to
such forward-looking statements to reflect later events or circumstances or to
reflect the occurrence of unanticipated events.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is 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 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, 1997, and the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a). Exhibits
Exhibit 10.1 First Amendment to the Second Amended and Restated
Credit Agreement, dated as of March 31, 1998
Exhibit 10.2 Second Amendment to the Second Amended and Restated
Credit Agreement, dated as of August 5, 1998
Exhibit 10.3 Third Amendment to the Second Amended and Restated
Credit Agreement, dated as of September 23, 1998
Exhibit 10.4 Employment Agreement dated as of March 1,
1997 between Outsourcing Solutions Inc. and Michael Meyer
Exhibit 27 Financial Date Schedule (Unaudited)
(b). Reports on Form 8-K
There were no reports on Form 8-K filed for the three-month period
ended September 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OUTSOURCING SOLUTIONS INC.
(Registrant)
/s/ TIMOTHY G. BEFFA
------------------------------------------------
Timothy G. Beffa
President and Chief Executive Officer
/s/ DANIEL J. DOLAN
------------------------------------------------
Daniel J. Dolan
Executive Vice President
and Chief Financial Officer
/s/ DANIEL T. PIJUT
------------------------------------------------
Daniel T. Pijut
Vice President, Corporate Controller
and Chief Accounting Officer
Date: November 13, 1998
OUTSOURCING SOLUTIONS INC.
FIRST AMENDMENT TO SECOND AMENDED AND
RESTATED CREDIT AGREEMENT
This FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is dated as of March 31, 1998 and entered into by and among
OUTSOURCING SOLUTIONS INC., a Delaware corporation ("Company"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to
herein as a "Lender" and collectively as the "Lenders"), GOLDMAN SACHS CREDIT
PARTNERS L.P. and THE CHASE MANHATTAN BANK, as Co-Administrative Agents (in such
capacities, "Co-Administrative Agents"), SUN TRUST BANK, ATLANTA, as Collateral
Agent (in such capacity, "Collateral Agent"), and is made with reference to that
certain Second Amended and Restated Credit Agreement dated as of January 26,
1998 (the "Credit Agreement"), by and among Company, the Lenders, Goldman Sachs
Credit Partners L.P. and Chase Securities Inc., as Arranging Agents and
Co-Administrative Agents and Collateral Agent (the Lenders party to the Credit
Agreement, Co-Administrative Agents and Collateral Agent are each individually
referred to herein as a "Lender Party" and collectively as the "Lender
Parties"). Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, the parties to the Credit Agreement desire to amend the Credit
Agreement to permit, subject to certain conditions, Company and its subsidiaries
to enter into certain collection agency arrangements.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT
1.1 Amendments to Section 1: Definitions
A. Subsection 1.1 of the Credit Agreement is hereby amended by deleting the
definition of "Consolidated Maintenance Capital Expenditures" set forth therein
and substituting the following therefor:
"Consolidated Maintenance Capital Expenditures" means, for any period, all
Consolidated Capital Expenditures for such period other than y)
Consolidated Capital Expenditures expended to make Permitted Acquisitions
or Permitted Portfolio Acquisitions and z)Consolidated Capital Expenditures
made with respect to Portfolio Advances."
B. Subsection 1.1 of the Credit Agreement is hereby further amended by
adding the following definitions of "Agency Acquisition Contract" and "Portfolio
Advances" which shall be inserted in appropriate alphabetical order:
"Agency Acquisition Contract" means an agreement whereby Company
and/or one or more of its Subsidiaries agrees to serve as agent for a third
party for purposes of collecting debt owed to such third party and pursuant
to which y) Company or any Subsidiary is obligated to make Portfolio
Advances; provided that, the aggregate of all such amounts required to be
advanced by Company and its Subsidiaries as Portfolio Advances, and not yet
paid, at any time shall not exceed $10 million per calendar quarter and z)
Company and/or any of its Subsidiaries is entitled to retain as
compensation for its services thereunder substantially all of the amounts
collected with respect to such debt."
"Portfolio Advances" means, with respect to any Agency Acquisition
Contract, all amounts required to be advanced or paid by Company or any of
its Subsidiaries pursuant to such Agency Acquisition Contract other than
amounts representing a portion of the recovery from third party debtors as
payments made on the debt of such third party debtors."
1.2 Amendments to Section 7: Negative Covenants
A. Subsection 7.4 of the Credit Agreement is hereby amended by adding a new
subdivision (x) thereto as follows:
"(x) Company and its Subsidiaries may become and remain liable with
respect to Agency Acquisition Contracts."
B. Subdivision (d) of subsection 7.7(v) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"(d) the aggregate amount expended for Permitted Portfolio
Acquisitions during any Fiscal Year, together with the aggregate amount of
all Investments made pursuant to subsection 7.3(v)(c) and the aggregate
amount advanced by Company and/or its subsidiaries as Portfolio Advances
during such Fiscal Year shall not exceed $60,000,000;"
SECTION 2. ACKNOWLEDGEMENT AND CONSENT
Each Subsidiary Guarantor hereby acknowledges that it has reviewed the
terms and provisions of this Amendment and consents to the amendment of the
Credit Agreement effected pursuant to this Amendment. Each Subsidiary Guarantor
hereby confirms that each Loan Document to which it is a party or otherwise
bound and all Collateral encumbered thereby will continue to guaranty or secure,
as the case may be, to the fullest extent possible, the payment and performance
of all Obligations.
Each Subsidiary Guarantor acknowledges and agrees that any of the Loan
Documents to which it is a party or otherwise bound shall continue in full force
and effect and that all of its Obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment.
SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend the
Credit Agreement in the manner provided herein, Company represents and warrants
to each Lender that the following statements are true, correct and complete:
A. Corporate Power and Authority. Each Loan Party has all requisite
corporate or partnership (as applicable) power and authority to enter into
this Amendment and to carry out the transactions contemplated by, and
perform its obligations under, the Credit Agreement as amended by this
Amendment (the "Amended Agreement") and the other Loan Documents.
B. Authorization of Agreements. The execution and delivery of this
Amendment and the performance of the Amended Agreement and the other Loan
Documents have been duly authorized by all necessary corporate or
partnership (as applicable) action on the part of each Loan Party.
C. No Conflict. The execution and delivery by each Loan Party of this
Amendment and the performance by each Loan Party of the Amended Agreement
and the other Loan Documents do not and will not (i) violate any provision
of any law or any governmental rule or regulation applicable to Company or
any of its Subsidiaries, the Certificate or Articles of Incorporation or
Bylaws (or other analogous organizational document) of Company or any of
its Subsidiaries or any order, judgment or decree of any court or other
agency of government binding on Company or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any Contractual Obligation of
Company or any of its Subsidiaries, (iii) result in or require the creation
or imposition of any Lien upon any of the properties or assets of Company
or any of its Subsidiaries (other than any Liens created under any of the
Loan Documents in favor of Collateral Agent on behalf of Lenders), or (iv)
require any approval of stockholders or partners or any approval or consent
of any Person under any Contractual Obligation of Company or any of its
Subsidiaries, except for such approvals or consents which will be obtained
on or before the Second Amendment Effective Date and disclosed in writing
to Lenders.
D. Governmental Consents. The execution and delivery by each Loan
Party of this Amendment and the performance by each Loan Party of the
Amended Agreement and the other Loan Documents do not and will not require
any registration with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other governmental authority
or regulatory body.
E. Binding Obligation. This Amendment and the Amended Agreement have
been duly executed and delivered by each Loan Party and are the legally
valid and binding obligations of each Loan Party, enforceable against each
of them in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
F. Incorporation of Representations and Warranties From Credit
Agreement. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the effective date of this Amendment to the same
extent as though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in
which case they were true, correct and complete in all material respects on
and as of such earlier date.
G. Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
SECTION 4. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the Other Loan
Documents.
(i) On and after the date of effectiveness of this Amendment, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the "Credit
Agreement", "thereunder", "thereof" or words of like import referring to
the Credit Agreement shall mean and be a reference to the Credit Agreement
as amended by this Amendment.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of any
Lender Party under, the Credit Agreement or any of the other Loan
Documents.
B. Headings. Section and subsection headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose or be given any substantive effect.
C. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment shall become effective as of March 31, 1998
upon the execution of a counterpart hereof by Company, each Subsidiary
Guarantor, and Requisite Lenders and receipt by Company and Co-Administrative
Agents of written or telephonic notification of such execution and authorization
of delivery thereof.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY: OUTSOURCING SOLUTIONS INC.
By: ---------------------------------------
Daniel J. Dolan
Executive Vice President and
Chief Financial Officer
AGENTS AND LENDERS: GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually and as a Co-Administrative Agent
By: ---------------------------------------
Authorized Signatory
THE CHASE MANHATTAN BANK,
individually and as a Co-Administrative Agent
By: ---------------------------------------
Name:
Title:
SUNTRUST BANK, ATLANTA,
individually and as Collateral Agent
By: ---------------------------------------
Name:
Title:
By: ---------------------------------------
Name:
Title:
AG CAPITAL FUNDING PARTNERS, LTD.
By: ---------------------------------------
Name:
Title:
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc.,
as Collateral Manager
By: --------------------------------
Name:
Title:
ARES LEVERAGED INVESTMENT FUND
By: ---------------------------------------
Name:
Title:
BANK OF SCOTLAND
By: ---------------------------------------
Name:
Title:
BANKERS TRUST COMPANY
By: ---------------------------------------
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By: ---------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By: ---------------------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: ---------------------------------------
Name:
Title:
CREDITANSTALT - BANKVEREIN
By: ---------------------------------------
Name:
Title:
BANKBOSTON, N.A.
By: ---------------------------------------
Name:
Title:
FIRST DOMINION CAPITAL, L.L.C.
By: ---------------------------------------
Name:
Title:
HELLER FINANCIAL, INC.
By: ---------------------------------------
Name:
Title:
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS, LDC
By: ING Capital Advisors, Inc.
as Investment Advisor
By: ---------------------------------------
Name:
Title:
LASALLE NATIONAL BANK
By: ---------------------------------------
Name:
Title:
ML CLO XII PILGRIM AMERICA
By: ---------------------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By: ---------------------------------------
Name:
Title:
PUTNAM HIGH YIELD TRUST
By: ---------------------------------------
Name:
Title:
PUTNAM HIGH YIELD ADVANTAGE FUND
By: ---------------------------------------
Name:
Title:
PUTNAM VT HIGH YIELD TRUST
By: ---------------------------------------
Name:
Title:
ROYALTON COMPANY
By: ---------------------------------------
Name:
Title:
SOUTHERN PACIFIC BANK
By: ---------------------------------------
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: ---------------------------------------
Name:
Title:
INDOSUEZ CAPITAL FUNDING II, LTD.
By: INDOSUEZ CAPITAL LUXEMBOURG, as
Collateral Manager
By: --------------------------------
Name:
Title:
INDOSUEZ CAPITAL FUNDING III, LTD.
By: INDOSUEZ CAPITAL LUXEMBOURG, as
Collateral Manager
By: --------------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By: BOSTON MANAGEMENT AND
RESEARCH, as Investment Advisor
By: --------------------------------
Name:
Title:
SPS SWAPS
By: ---------------------------------------
Name:
Title:
PILGRIM AMERICA PRIME RATE TRUST
By: ---------------------------------------
Name:
Title:
PACIFIC LIFE CBO 1998-1 LTD
By: ---------------------------------------
Name:
Title:
CYPRESS TREE BOSTON PARTNERS
By: ---------------------------------------
Name:
Title:
DELANO COMPANY
By: Pacific Investment Management Company,
as its Investment Advisor
By: ---------------------------------------
Name:
Title:
KZH HOLDING CORPORATION
By: ---------------------------------------
Name:
Title:
KZH-CRESCENT 2 CORPORATION
By: ---------------------------------------
Name:
Title:
KZH HOLDING CORPORATION III
By: ---------------------------------------
Name:
Title:
KZH IV CORPORATION
By: ---------------------------------------
Name:
Title:
<PAGE>
SUBSIDIARY GUARANTORS:
ALASKA FINANCIAL SERVICES, INC.
CFC SERVICES CORP.
THE CONTINENTAL ALLIANCE, INC.
SOUTHWEST CREDIT SERVICES, INC.
By: ---------------------------------------
Name:
Title:
A.M. MILLER & ASSOCIATES, INC.
ACCOUNT PORTFOLIOS G.P., INC.
ACCOUNT PORTFOLIOS, INC.
ASSET RECOVERY & MANAGEMENT CORP.
FM SERVICES CORPORATION
FURST AND FURST, INC.
INDIANA MUTUAL CREDIT ASSOCIATION, INC.
JENNIFER LOOMIS & ASSOCIATES, INC.
NATIONAL ACCOUNT SYSTEMS, INC.
PAYCO AMERICAN CORPORATION
PAYCO AMERICAN INTERNATIONAL CORP.
PAYCO-GENERAL AMERICAN CREDITS, INC.
PROFESSIONAL RECOVERIES INC.
QUALINK, INC.
UNIVERSITY ACCOUNTING SERVICE, INC.
ACCELERATED BUREAU OF COLLECTIONS, INC.
NORTH SHORE AGENCY, INC.
By: ---------------------------------------
Name:
Title:
KZH-CRESCENT CORPORATION
By: ---------------------------------------
Name:
Title:
OUTSOURCING SOLUTIONS INC.
SECOND AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is dated as of August 5, 1998 and entered into by and among
OUTSOURCING SOLUTIONS INC., a Delaware corporation ("Company"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to
herein as a "Lender" and collectively as the "Lenders"), and GOLDMAN SACHS
CREDIT PARTNERS L.P. and THE CHASE MANHATTAN BANK, as Co-Administrative Agents
(in such capacities, "Co-Administrative Agents"), and is made with reference to
that certain Second Amended and Restated Credit Agreement dated as of January
26, 1998, as heretofore amended, supplemented or otherwise modified (as so
amended, supplemented or modified, the "Credit Agreement"), by and among
Company, the Lenders, Goldman Sachs Credit Partners L.P. and Chase Securities
Inc., as Arranging Agents, and Co-Administrative Agents. Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement and in the amendments contained in Section 1 hereof.
RECITALS
WHEREAS, the parties to the Credit Agreement desire to amend the Credit
Agreement as herein provided to provide for certain adjustments to certain
covenants to permit Company to establish a special purpose subsidiary to finance
the acquisition of receivables and to make certain other amendments as provided
herein.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT
1.1 Amendments to Section 1: Definitions
A. Subsection 1.1 of the Credit Agreement is hereby amended by adding
thereto the following definitions, which shall be inserted in proper
alphabetical order:
"API" means Account Portfolios, Inc., a Delaware corporation.
"OSI Funding" means OSI Funding Corp., a Delaware corporation.
"Plan of Correction" has the meaning assigned to that term in
subsection 5.21.
"Receivables Sale and Servicing Agreement" means that certain Sale and
Servicing Agreement among Company, Gulf State Credit, L.L.C., OSI Funding,
API and Triple-A One, in the form delivered to Co-Administrative Agents on
or prior to the Second Amendment Effective Date and as such agreement may
be amended, restated, supplemented or otherwise modified from time to time
to the extent permitted under subsection 7.12A.
"Second Amendment" means that certain Second Amendment to Credit
Agreement dated as of August 5, 1998, by and among Company, Lenders and
Co-Administrative Agents.
"Second Amendment Effective Date" has the meaning assigned to that
term in the Second Amendment.
"Triple-A One" means Triple-A One Funding Corporation, a Delaware
corporation.
"Triple-A One Commercial Paper" means commercial paper issued by
Triple-A One to fund advances made by Triple-A One to OSI Funding evidenced
by the Variable Funding Notes.
"Triple-A One Credit Agreement", means that certain Triple-A One
Credit Agreement among OSI Funding, Triple-A One and MBIA Insurance
Corporation, in the form delivered to Co-Administrative Agents on or prior
to the Second Amendment Effective Date and as such agreement may be
amended, restated, supplemented or otherwise modified from time to time to
the extent permitted under subsection 7.12A.
"Variable Funding Notes" means, collectively, the variable funding
notes or certificates in an original aggregate principal amount of up to
$100,000,000 issued by OSI Funding to Triple-A One to finance the purchase
of receivables by OSI Funding pursuant to the Triple-A One Credit
Agreement, as such variable funding notes or certificates may be amended,
restated, supplemented or otherwise modified from time to time to the
extent permitted under subsection 7.12A.
"Year 2000 Problems" means limitations in the capacity or readiness to
handle date information for the Year 1999 or years beginning January 1,
2000 of any of the hardware, firmware or software systems ("Systems")
associated with information processing and delivery, operations or services
(e.g., security and alarms, elevators, communications, and HVAC) operated
by, provided to or otherwise reasonably necessary to the business or
operations of Holdings and its Subsidiaries.
B. Subsection 1.1 of the Credit Agreement is hereby further amended by
deleting the definitions of "Consolidated Maintenance Capital Expenditures" and
"Related Agreements" in their entirety and substituting therefor the following:
"Consolidated Maintenance Capital Expenditures" means, for any period,
all Consolidated Capital Expenditures for such period other than (x)
Consolidated Capital Expenditures expended to make Permitted Acquisitions
or Permitted Portfolio Acquisitions, (y) Consolidated Capital Expenditures
made with respect to Portfolio Advances and (z) Consolidated Capital
Expenditures expended to make acquisitions of receivables portfolios
permitted under subsection 7.7(vii) or 7.7(viii).
"Related Agreements" means the Subordinated Notes, the Subordinated
Note Indenture, the other Subordinated Note Documents, the Payco
Acquisition Agreement, the Articles of Merger, the Certificate of Merger,
the NSA Acquisition Agreement, the Accelerated Acquisition Agreement, the
Union Acquisition Documents, the Receivables Sale and Servicing Agreement,
the Triple-A One Credit Agreement, the Variable Funding Notes, the Articles
of Merger and the Certificate of Merger.
C. Subsection 1.1 of the Credit Agreement is hereby further amended by
adding at the end of the definition of "Asset Sale" contained therein the
following sentence:
"Notwithstanding anything to the contrary contained herein, any sale of a
receivables portfolio to OSI Funding permitted under subsection 7.7(vii)
shall not be deemed an Asset Sale hereunder."
D. Subsection 1.1 of the Credit Agreement is hereby further amended by (i)
deleting the "." at the end of the definition of "Subsidiary" contained therein
and substituting therefor ";"; and (ii) adding at the end thereof the following
proviso:
"provided, however, that for purposes of subsections 6.9 and 6.14 and
Sections 7 and 8 hereof, OSI Funding shall not be deemed a Subsidiary of
Holdings or any of its Subsidiaries; provided further, however, that
nothing contained herein shall limit the obligation of Company and its
Subsidiaries to pledge OSI Funding's capital stock pursuant to the
Collateral Documents."
1.2 Amendment to Section 5: Representations and Warranties
Section 5 of the Credit Agreement is hereby amended by adding a new
subsection 5.21 at the end thereof as follows:
"5.21 Year 2000 Problems.
Company and its Subsidiaries have (i) engaged in a process of assessment of
the existence of the Year 2000 Problems reasonably appropriate to the scope
and complexity of their respective Systems; (ii) adopted and are
successfully implementing a plan of correction ("Plan of Correction") which
Company reasonably believes will result in a substantial elimination of
Year 2000 Problems before any processing failure of a System or of Systems
due to Year 2000 Problems which might have a material effect on the
business, operations or financial performance of Company and, in the case
of all Systems critical to the business or operations of Company and its
Subsidiaries, elimination in all material respects of Year 2000 Problems
prior to any processing failure of a System or Systems due to Year 2000
Problems which migh have a material effect on the business, operations or
financial performance of Company; (iii) adopted and are successfully
implementing validation procedures calculated to test on an ongoing basis
the sufficiency of the Plan of Correction, its implementation, and the
correction of Year 2000 Problems in substantially all Systems and all
Systems critical to the business or operations of Company and its
Subsidiaries; (iv) adopted and are successfully implementing policies and
procedures requiring regular reports to, and monitoring by, senior
management of Company concerning the foregoing matters; and (v) provided
Co-Administrative Agents true and correct copies of the written Plan of
Correction, and related implementation budgets, reviewed and approved by
Company's Board of Directors."
1.3 Amendment to Section 6: Affirmative Covenants
Section 6 of the Credit Agreement is hereby amended by adding a new
subsection 6.15 at the end thereof as follows:
"6.15 Year 2000 Problems.
Company shall (i) promptly advise Co-Administrative Agents of any
material (A) disruption or delay in the implementation of the Plan of
Correction, as the same may be updated from time to time, including any
determination by Company, any senior manager of Company or any other
Subsidiary of Company, or any consultant known to Company or any other
Subsidiary of Company with respect to Year 2000 Problems ("Consultant")
that there is or will be a failure to achieve any of the objectives
specifically identified in subdivision (ii) of subsection 5.21, or (B)
change in the written Plan of Correction or related implementation budget
referred to in subdivision (v) of subsection 5.21, or any later version
thereof furnished to Co-Administrative Agents; (ii) afford to
Co-Administrative Agents and their representatives, upon three days' notice
to Company, reasonable access to Company's and its Subsidiaries'
properties, personnel, service providers, vendors and records for the
purpose of enabling Co-Administrative Agents to assess the adequacy of, and
the record of performance of Company and its Subsidiaries with respect to,
the Plan of Correction, related financial performance and conformity of
actual performance with related implementation budgets; and (iii)
periodically report to Co-Administrative Agents, in such form as
Co-Administrative Agents may reasonably request, on (a) the progress of
Company and its Subsidiaries in implementing the Plan of Correction, (b)
the budget for, and actual financial performance with respect to,
implementation of the Plan of Correction and (c) the assessment of Company,
any senior manager of Company or any other Subsidiary of Company, or any
Consultant of the adequacy of the Plan of Correction or the related
implementation budget."
1.4 Amendments to Section 7: Negative Covenants
A. Subsection 7.3 of the Credit Agreement is hereby amended by (i)deleting
the "and" at the end of clause (ix) thereof; (ii) deleting the "." at the end of
clause (x) thereof and substituting therefor ";"; and (iii) adding new clauses
(xi) and (xii) at the end thereof as follows:
"(xi) Company may, on or after the Second Amendment Effective Date,
(a) make a cash equity contribution of $2,500,000 to OSI Funding and (b) in
the event that the average aggregate outstanding principal amount of
Triple-A One Commercial Paper exceeds $25,000,000 for any 30-day period
after the Second Amendment Effective Date, make an additional cash equity
contribution of $2,500,000 to OSI Funding; and
(xii) Company may make the Investments permitted under subsections
7.7(vii) and 7.7(viii)."
B. Subsection 7.6D of the Credit Agreement is hereby amended by deleting
the reference to "$18,000,000" contained therein and substituting therefor the
following:
"(x) $20,000,000 in Fiscal Year 1998 and (y) $18,000,000 in each
Fiscal Year thereafter"
C. Subsection 7.7(v) of the Credit Agreement is hereby amended by deleting
clause (d) therefrom in its entirety and substituting therefor the following:
"(d) the aggregate amount expended for Permitted Portfolio
Acquisitions of receivables portfolios from Bally's Inc. shall not exceed
$10,000,000 during any Fiscal Year, and the aggregate amount expended for
all other Permitted Portfolio Acquisitions (1) during the period from the
beginning of Fiscal Year 1998 to but excluding the Second Amendment
Effective Date, together with the aggregate amount of all Investments made
pursuant to subsection 7.3(v)(c) and the aggregate amount advanced and
retained by Company and/or its Subsidiaries as Portfolio Advances during
such period, shall not exceed $35,000,000, (2) during the period from the
Second Amendment Effective Date through the end of Fiscal Year 1998,
together with the aggregate amount of all Investments made pursuant to
subsection 7.3(v)(c) and the aggregate amount advanced and retained by
Company and/or its Subsidiaries as Portfolio Advances during such period,
shall not exceed $10,000,000, and (3) during any Fiscal Year after 1998,
together with the aggregate amount of all Investments made pursuant to
subsection 7.3(v)(c) and the aggregate amount advanced and retained by
Company and/or its Subsidiaries as Portfolio Advances during such Fiscal
Year, shall not exceed $15,000,000;"
D. Subsection 7.7 of the Credit Agreement is hereby amended by (i)deleting
the "and" at the end of clause (v) thereof; (ii) deleting the "." at the end of
clause (vi) thereof and substituting therefor ";"; and (iii) adding new clauses
(vii), (viii) and (ix) at the end thereof as follows:
"(vii) API may (a) make acquisitions of receivables portfolios which
are, within 10 Business Days after the acquisition thereof (or, in the case
of receivables portfolios purchased after July 1, 1998 but prior to the
Second Amendment Effective Date, within 10 Business Days after the Second
Amendment Effective Date), sold to OSI Funding pursuant to and in
accordance with the terms of the Receivables Sale and Servicing Agreement,
and (b) sell receivables portfolios to OSI Funding pursuant to and in
accordance with the terms of the Receivables Sale and Servicing Agreement,
provided that the consideration received by API from OSI Funding for any
such receivables portfolio shall be no less than the consideration paid by
API to acquire such receivables portfolio;
(viii) API may (a) re-acquire (pursuant to the terms of the
Receivables Sale and Servicing Agreement) from OSI Funding any receivables
portfolios sold to OSI Funding pursuant to subsection 7.7(vii) and (b)
re-sell such receivables portfolios to the Persons from whom such
receivables portfolios originated, provided that the aggregate
consideration paid by API to re-acquire such receivables portfolios minus
the aggregate consideration received by API for any such receivables
portfolios subsequently re-sold to any such Persons shall not exceed
$2,500,000; and
(ix) Company may create OSI Funding on or after the Second Amendment
Effective Date; provided, however, that no change to the Certificate of
Incorporation or Bylaws of OSI Funding after the Second Amendment Effective
Date which would be adverse to Lenders may be made without the prior
written consent of Co-Administrative Agents."
E. Subsection 7.11 of the Credit Agreement is hereby amended by adding the
following sentence at the end thereof:
"Notwithstanding anything to the contrary contained herein, API shall not
acquire and hold any receivables portfolio for more than 10 Business Days
after the acquisition thereof (or, in the case of receivables portfolios
purchased after July 1, 1998 but prior to the Second Amendment Effective
Date, 10 Business Days after the Second Amendment Effective Date)."
1.5 Amendment to Section 8: Events of Default
Section 8 of the Credit Agreement is hereby amended by adding a new
subsection 8.16 at the end thereof as follows:
"8.16 Termination as Servicer.
API or any other subsidiary of Company shall be terminated as servicer
under the Receivables Sale and Servicing Agreement and Company or any other
Subsidiary of Company shall not concurrently succeed such terminated
servicer as successor servicer thereunder;"
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Second
Amendment Effective Date"):
A. On or before the Second Amendment Effective Date, Company shall
deliver to Lenders (or to Chase Co-Administrative Agent for Lenders with
sufficient originally executed copies, where appropriate, for each Lender
and its counsel) the following, each, unless otherwise noted, dated the
Second Amendment Effective Date:
(i) Certified copies of its Certificate of Incorporation,
together with a good standing certificate from the Secretary of State
of the State of Delaware, each dated a recent date prior to the Second
Amendment Effective Date;
(ii) Copies of its Bylaws, certified as of the Second Amendment
Effective Date by its corporate secretary or an assistant secretary;
(iii) Resolutions of its Board of Directors approving and
authorizing the execution, delivery, and performance of this Amendment,
certified as of the Second Amendment Effective Date by its corporate
secretary or an assistant secretary as being in full force and effect
without modification or amendment;
(iv) Signature and incumbency certificates of its officers
executing this Amendment; and
(v) Copies of this Amendment executed by Company and each
Subsidiary Guarantor.
B. On or before the Second Amendment Effective Date, Co-Administrative
Agents shall have received certified copies of the Certificate of
Incorporation and Bylaws of OSI Funding and copies of the Receivables Sale
and Servicing Agreement, the Variable Funding Notes, the Triple-A One
Credit Agreement and other documentation (collectively, the "Securitization
Documents") relating to the formation of OSI Funding, the issuance of the
Variable Funding Notes and the guarantees issued by MBIA Insurance
Corporation in connection therewith, which Securitization Documents shall
be in form and substance reasonably satisfactory to Co-Administrative
Agents.
SECTION 3. ACKNOWLEDGEMENT AND CONSENT
Each Subsidiary Guarantor hereby acknowledges that it has reviewed the
terms and provisions of this Amendment and consents to the amendment of the
Credit Agreement effected pursuant to this Amendment. Each Subsidiary Guarantor
hereby confirms that each Loan Document to which it is a party or otherwise
bound and all Collateral encumbered thereby will continue to guaranty or secure,
as the case may be, to the fullest extent possible, the payment and performance
of all Obligations.
Each Subsidiary Guarantor acknowledges and agrees that any of the Loan
Documents to which it is a party or otherwise bound shall continue in full force
and effect and that all of its obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment.
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend the
Credit Agreement in the manner provided herein, Company represents and warrants
to each Lender that the following statements are true, correct and complete:
A. Corporate Power and Authority. Each Loan Party has all requisite
corporate or partnership (as applicable) power and authority to enter into
this Amendment and to carry out the transactions contemplated by, and
perform its obligations under, the Credit Agreement as amended by this
Amendment (the "Amended Agreement") and the other Loan Documents.
B. Authorization of Agreements. The execution and delivery of this
Amendment and the performance of the Amended Agreement and the other Loan
Documents have been duly authorized by all necessary corporate or
partnership (as applicable) action on the part of each Loan Party.
C. No Conflict. The execution and delivery by each Loan Party of this
Amendment and the performance by each Loan Party of the Amended Agreement
and the other Loan Documents do not and will not (i) violate any provision
of any law or any governmental rule or regulation applicable to Company or
any of its Subsidiaries, the Certificate or Articles of Incorporation or
Bylaws (or other analogous organizational document) of Company or any of
its Subsidiaries or any order, judgment or decree of any court or other
agency of government binding on Company or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any Contractual Obligation of
Company or any of its Subsidiaries, (iii) result in or require the creation
or imposition of any Lien upon any of the properties or assets of Company
or any of its Subsidiaries (other than any Liens created under any of the
Loan Documents in favor of Collateral Agent on behalf of Lenders), or (iv)
require any approval of stockholders or partners or any approval or consent
of any Person under any Contractual Obligation of Company or any of its
Subsidiaries, except for such approvals or consents which will be obtained
on or before the Second Amendment Effective Date and disclosed in writing
to Lenders.
D. Governmental Consents. The execution and delivery by each Loan
Party of this Amendment and the performance by each Loan Party of the
Amended Agreement and the other Loan Documents do not and will not require
any registration with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other governmental authority
or regulatory body.
E. Binding Obligation. This Amendment and the Amended Agreement have
been duly executed and delivered by each Loan Party and are the legally
valid and binding obligations of each Loan Party, enforceable against each
of them in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability.
F. Incorporation of Representations and Warranties From Credit
Agreement. The representations and warranties contained in Section 5 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Second Amendment Effective Date to the same
extent as though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in
which case they were true, correct and complete in all material respects on
and as of such earlier date.
G. Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
SECTION 5. AUTHORIZATION OF COLLATERAL AGENT
Each undersigned Lender hereby (i) authorizes Collateral Agent to enter an
amendment to the Security Agreement in substantially the form attached hereto as
Annex A and (ii) authorizes Collateral Agent to execute and deliver partial
release statements and other documents which Collateral Agent deems necessary to
evidence the release of Collateral Agent's security interest in receivables
portfolios sold by API pursuant to subsection 7.7(vii) of the Amended Agreement.
SECTION 6. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the Other Loan
Documents.
(i) On and after the Second Amendment Effective Date, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import referring to the Credit Agreement, and
each reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Credit Agreement as amended
by this Amendment.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of any
Agent or Lender under, the Credit Agreement or any of the other Loan
Documents.
B. Headings. Section and subsection headings in this Amendment are included
herein for convenience of reference only and not constitute a part of this
Amendment for any other purpose or be given any substantive effect.
C. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment (other than the provisions of Section 1
hereof) shall become effective upon the execution of a counterpart hereof by
Company, each Subsidiary Guarantor and Requisite Lenders and receipt by Company
and Co-Administrative Agents of written or telephonic notification of such
execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY: OUTSOURCING SOLUTIONS INC.
By: /s/ Daniel Dolan
---------------------------------------
Name: Daniel Dolan
Title: Executive Vice President & Chief
Financial Officer
AGENTS AND LENDERS: GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually and as a Co-Administrative Agent
By: /s/ Stephen B. King
---------------------------------------
Name: Stephen B. King
Title: Authorized Signatory
THE CHASE MANHATTAN BANK,
individually and as a Co-Administrative Agent
By: /s/ Gail Weiss
---------------------------------------
Name: Gail Weiss
Title: Vice President
SUNTRUST BANK, ATLANTA,
individually and as Collateral Agent
By: /s/ Dennis H. James, Jr.
---------------------------------------
Name: Dennis H. James, Jr.
Title: Vice President
By: /s/ Susan M. Hall
---------------------------------------
Name: Susan M. Hall
Title: Vice President
AG CAPITAL FUNDING PARTNERS, L.P.
By: Angelo, Gordon & Co., L.P. as
Investment Advisor
By: /s/ Jeffrey H. Aronson
---------------------------------------
Name: Jeffrey H. Aronson
Title: Managing Director
AG CAPITAL FUNDING PARTNERS, L.P.
By: /s/ Jeff Moore
---------------------------------------
Name: Jeff Moore
Title: Principal
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc.,
as Collateral Manager
By: /s/ Michael D. Hatley
---------------------------------------
Name: Michael D. Hatley
Title: Senior Vice President
ARES LEVERAGED INVESTMENT FUND, L.P.
By: /s/ Jeff Moore
---------------------------------------
Name: Jeff Moore
Title: Principal
CANADIAN IMPERIAL BANK OF COMMERCE
By: ---------------------------------------
Name:
Title:
CAPTIVA FINANCE III, LTD.
By: ---------------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON
By: /s/ Barry A. Zamore
---------------------------------------
Name: Barry A. Zamore
Title: Vice President
By: /s/ Claire M. McCarthy
---------------------------------------
Name: Claire M. McCarthy
Title: Managing Director
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ William J. Oleferchik
---------------------------------------
Name: William J. Oleferchik
Title: Vice President
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By: ---------------------------------------
Name:
Title:
ML DEBT STRATEGIES FUND II, INC.
By: ---------------------------------------
Name:
Title:
ML INCOME STRATEGIES PORTFOLIO
By: ---------------------------------------
Name:
Title:
CREDITANSTALT CORPORATE FINANCE, INC.
By: /s/ Carl G. Drake
---------------------------------------
Name: Carl G. Drake
Title: Vice President
By: /s/ John Taylor
---------------------------------------
Name: John Taylor
Title: Senior Associate
BANKBOSTON, N.A.
By: /s/ Richard D. Hill, Jr.
---------------------------------------
Name: Richard D. Hill, Jr.
Title: Managing Director
FIRST DOMINION FUNDING I
By: ---------------------------------------
Name:
Title:
FRANKLIN FLOATING RATE TRUST
By: ---------------------------------------
Name:
Title:
HELLER FINANCIAL, INC.
By: /s/ Linda W. Wolf
---------------------------------------
Name: Linda W. Wolf
Title: Senior Vice President
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS, LDC
By: ING Capital Advisors, Inc.
as Investment Advisor
By: /s/ Michael D. Hatley
--------------------------------
Name: Michael D. Hatley
Title: Senior Vice President
LASALLE NATIONAL BANK
By: /s/ Young J. Park
---------------------------------------
Name: Young J. Park
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Robert A. Krasnow
---------------------------------------
Name: Robert A. Krasnow
Title: Senior Vice President
PUTNAM VT HIGH YIELD TRUST
By: ---------------------------------------
Name:
Title:
PUTNAM HIGH YIELD TRUST
By: ---------------------------------------
Name:
Title:
ROYALTON COMPANY
By: ---------------------------------------
Name:
Title:
SOUTHERN PACIFIC BANK
By: /s/ Cheryl A. Wasilewski
---------------------------------------
Name: Cheryl A. Wasilewski
Title: Vice President
TORONTO DOMINION BANK
By: ---------------------------------------
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
---------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President &
Director
VAN KAMPEN AMERICAN CAPITAL
SENIOR FLOATING RATE FUND
By: /s/ Jeffrey W. Maillet
---------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President &
Director
SENIOR DEBT PORTFOLIO
By: BOSTON MANAGEMENT AND
RESEARCH, as Investment Advisor
By: --------------------------------
Name:
Title:
SPS SWAPS
By: ---------------------------------------
Name:
Title:
PILGRIM AMERICA PRIME RATE TRUST
By: Pilgrim America Investments, Inc., as
its Investment Manager
By: /s/ Charles E. LeMieux
--------------------------------
Name: Charles E. LeMieux
Title: Assistant Vice
President
DELANO COMPANY
By: Pacific Investment Management Company,
as its Investment Advisor
By: --------------------------------
Name:
Title:
KZH-CRESCENT 2 CORPORATION
By: /s/ Virginia Conway
---------------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH HOLDING CORPORATION III
By: /s/ Virginia Conway
---------------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH-CYPRESS TREE-1 CORPORATION
By: /s/ Virginia Conway
---------------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH-CRESCENT CORPORATION
By: /s/ Virginia Conway
---------------------------------------
Name: Virginia Conway
Title: Authorized Agent
KZH-ING-2 CORPORATION
By: /s/ Virginia Conway
---------------------------------------
Name: Virginia Conway
Title: Authorized Agent
VAN KAMPEN CLO II, LIMITED
By: /s/ Jeffrey W. Maillet
---------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President &
Director
INDOSUEZ CAPITAL FUNDING IIA, LTD.
By: INDOSUEZ CAPITAL,
as Portfolio Advisor
By: /s/ Daniel H. Smith
---------------------------------------
Name: Daniel H. Smith
Title: First Vice President
INDOSUEZ CAPITAL FUNDING III, LTD.
By: INDOSUEZ CAPITAL,
as Portfolio Advisor
By: /s/ Daniel H. Smith
---------------------------------------
Name: Daniel H. Smith
Title: First Vice President
CREDIT LYONNAIS
By: ---------------------------------------
Name:
Title:
KZH-IV CORPORATION
By: /s/ Virginia Conway
---------------------------------------
Name: Virginia Conway
Title: Authorized Agent
<PAGE>
SUBSIDIARY GUARANTORS:
CFC SERVICES CORP.
THE CONTINENTAL ALLIANCE, INC.
By: /s/ Daniel Dolan
---------------------------------------
Name: Daniel Dolan
Title: Vice President
A.M. MILLER & ASSOCIATES, INC.
ACCOUNT PORTFOLIOS, INC.
ASSET RECOVERY & MANAGEMENT CORP.
GRABLE, GREINER & WOLFF, INC.
INDIANA MUTUAL CREDIT ASSOCIATION, INC.
JENNIFER LOOMIS & ASSOCIATES, INC.
NATIONAL ACCOUNT SYSTEMS, INC.
PAYCO AMERICAN CORPORATION
PAYCO AMERICAN INTERNATIONAL CORP.
PAYCO-GENERAL AMERICAN CREDITS, INC.
PROFESSIONAL RECOVERIES INC.
QUALINK, INC.
UNIVERSITY ACCOUNTING SERVICE, INC.
NORTH SHORE AGENCY, INC.
By: /s/ Richard Hoffman
---------------------------------------
Name: Richard Hoffman
Title: Assistant Secretary
ACCELERATED BUREAU OF COLLECTIONS, INC.
By: /s/ Daniel Dolan
---------------------------------------
Name: Daniel Dolan
Title: Assistant Secretary
PERIMETER CREDIT, L.L.C.
GULF STATE CREDIT, L.L.C.
ALLIED BOND & COLLECTION AGENCY, INC.
AMERICAN CHILD SUPPORT SERVICE BUREAU, INC.
CAPITAL CREDIT CORPORATION
TRANSWORLD SYSTEMS INC.
UCO PROPERTIES, INC.
UNION FINANCIAL SERVICES GROUP, INC.
HIGH PERFORMANCE SERVICES, INC.
HIGH PERFORMANCE SERVICES OF FLORIDA, INC.
INTERACTIVE PERFORMANCE, INC.
INTERACTIVE PERFORMANCE OF FLORIDA, INC.
AMERICAN RECOVERY COMPANY, INC. C.S.N. CORP.
GENERAL CONNECTOR CORPORATION
U.C.O.-M.B.A. CORPORATION
UNION-SPECIALTY STEEL CASTING CORPORATION
INTERACTIVE PERFORMANCE OF GEORGIA, INC.
By: /s/ Richard Hoffman
---------------------------------------
Name: Richard Hoffman
Title: Assistant Secretary
THE UNION CORPORATION
By: /s/ Richard Hoffman
---------------------------------------
Name: Richard Hoffman
Title: Secretary
<PAGE>
OUTSOURCING SOLUTIONS INC.
THIRD AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is dated as of September 23, 1998 and entered into by and
among OUTSOURCING SOLUTIONS INC., a Delaware corporation ("Com pany"), THE
FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually
referred to herein as a "Lender" and collectively as the "Lend ers"), and
GOLDMAN SACHS CREDIT PARTNERS L.P. and THE CHASE MANHAT TAN BANK, as
Co-Administrative Agents (in such capacities, "Co-Administrative Agents"), and
is made with reference to that certain Second Amended and Restated Credit
Agreement dated as of January 26, 1998, as heretofore amended, supplemented or
otherwise modified (as so amended, supplemented or modified, the "Credit
Agreement"), by and among Company, the Lenders, Goldman Sachs Credit Partners
L.P. and Chase Securities Inc., as Arranging Agents and Co-Administrative
Agents. Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Credit Agreement and in the amendments
contained in Section 1 hereof.
RECITALS
WHEREAS, the parties to the Credit Agreement desire to amend the Credit
Agreement to provide for certain adjustments to the covenants restricting
Permitted Portfolio Acquisitions and Portfolio Advances.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENT TO CREDIT AGREEMENT
1.1 Amendments to Section 7: Negative Covenants
A. Subsection 7.7(v) of the Credit Agreement is hereby amended by deleting
clause (d) therefrom in its entirety and substituting therefor the following:
"(d) the aggregate amount expended for Permitted Portfolio
Acquisitions of receivables portfolios from Bally's Inc. shall not exceed
$10,000,000 during any Fiscal Year, and the aggregate amount expended for
all other Permitted Portfolio Acquisitions(1) during Fiscal Year 1998,
together with the aggregate amount of all Investments made pursuant to
subsection 7.3(v)(c) and the aggregate amount advanced and retained by
Company and/or its Subsidiaries as Portfolio Advances during such period,
shall not exceed $55,000,000, and (2) during any Fiscal Year after 1998,
together with the aggregate amount of all Investments made pursuant to
subsection 7.3(v)(c) and the aggregate amount advanced and retained by
Company and/or its Subsidiaries as Portfolio Advances during such Fiscal
Year, shall not exceed $15,000,000;"
SECTION 2. ACKNOWLEDGMENT AND CONSENT
Each Subsidiary Guarantor hereby acknowledges that it has reviewed the
terms and provisions of this Amendment and consents to the amendment of the
Credit Agreement effected pursuant to this Amendment. Each Subsidiary Guarantor
hereby confirms that each Loan Document to which it is a party or otherwise
bound and all Collateral encumbered thereby will continue to guaranty or secure,
as the case may be, to the fullest extent possible, the payment and performance
of all Obligations.
Each Subsidiary Guarantor acknowledges and agrees that any of the Loan
Documents to which it is a party or otherwise bound shall continue in full force
and effect and that all of its obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment.
SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend the
Credit Agreement in the manner provided herein, Company represents and warrants
to each Lender that the following statements are true, correct and complete:
A. Corporate Power and Authority. Each Loan Party has all requisite
corporate or partnership (as applicable) power and authority to enter into this
Amendment and to carry out the transactions contemplated by, and perform its
obligations under, the Credit Agreement as amended by this Amendment (the
"Amended Agreement") and the other Loan Documents.
B. Authorization of Agreements. The execution and delivery of this
Amendment and the performance of the Amended Agreement and the other Loan
Documents have been duly authorized by all necessary corporate or partnership
(as applicable) action on the part of each Loan Party.
C. No Conflict. The execution and delivery by each Loan Party of this
Amendment and the performance by each Loan Party of the Amended Agreement and
the other Loan Documents do not and will not (i) violate any provision of any
law or any governmental rule or regulation applicable to Company or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws (or other
analogous organizational document) of Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than any Liens created under
any of the Loan Documents in favor of Collateral Agent on behalf of Lenders), or
(iv) require any approval of stockholders or partners or any approval or consent
of any Person under any Contractual Obligation of Company or any of its
Subsidiaries, except for such approvals or consents which will be obtained on or
before the Third Amendment Effective Date and disclosed in writing to Lenders.
D. Governmental Consents. The execution and delivery by each Loan Party of
this Amendment and the performance by each Loan Party of the Amended Agreement
and the other Loan Documents do not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by, any
federal, state or other governmental authority or regulatory body.
E. Binding Obligation. This Amendment and the Amended Agreement have been
duly executed and delivered by each Loan Party and are the legally valid and
binding obligations of each Loan Party, enforceable against each of them in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.
F. Incorporation of Representations and Warranties From Credit Agreement.
The representations and warranties contained in Section 5 of the Credit
Agreement are and will be true, correct and complete in all material respects on
and as of the Third Amendment Effective Date to the same extent as though made
on and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
G. Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default.
SECTION 4. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the Other Loan
Documents.
(i) On and after the Third Amendment Effective Date, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein"
or words of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Credit Agreement as amended
by this Amendment.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of any
Agent or Lender under, the Credit Agreement or any of the other Loan
Documents.
B. Headings. Section and subsection headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose or be given any substantive effect.
C. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGA TIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment shall become effective (the date of
effectiveness being referred to herein as the "Third Amendment Effective Date")
upon the execution of a counterpart hereof by Company, each Subsidiary Guarantor
and Requisite Lenders and receipt by Company and Co-Administrative Agents of
written or telephonic notification of such execution and authorization of
delivery thereof. Notwithstanding the date of effectiveness of the Second
Amendment to the Credit Agreement, the provisions of this Amendment with respect
to subsection 7.7 (v)(d) of the Credit Agreement shall be controlling on and
after the Third Amendment Effective Date.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY: OUTSOURCING SOLUTIONS INC.
By: /s/ Daniel J. Dolan
---------------------------------------
Name: Daniel J. Dolan
Title: EVP, Chief Financial Officer
AGENTS AND LENDERS: GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually and as a Co-Administrative Agent
By: ---------------------------------------
Authorized Signatory
THE CHASE MANHATTAN BANK,
individually and as a Co-Administrative Agent
By: ---------------------------------------
Name:
Title:
SUNTRUST BANK, ATLANTA,
individually and as Collateral Agent
By: ---------------------------------------
Name:
Title:
By: ---------------------------------------
Name:
Title:
AG CAPITAL FUNDING PARTNERS, L.P.
By: ---------------------------------------
Name:
Title:
ARCHIMEDES FUNDING, L.L.C.
By: ING Capital Advisors, Inc.,
as Collateral Manager
By: --------------------------------
Name:
Title:
ARES LEVERAGED INVESTMENT FUND, L.P.
By: ---------------------------------------
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By: ---------------------------------------
Name:
Title:
CAPTIVA FINANCE III, LTD.
By: ---------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By: ---------------------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: ---------------------------------------
Name:
Title:
ML DEBT STRATEGIES FUND II, INC.
By: ---------------------------------------
Name:
Title:
ML INCOME STRATEGIES PORTFOLIO
By: ---------------------------------------
Name:
Title:
CREDITANSTALT - BANKVEREIN
By: ---------------------------------------
Name:
Title:
BANKBOSTON, N.A.
By: ---------------------------------------
Name:
Title:
FIRST DOMINION FUNDING I
By: ---------------------------------------
Name:
Title:
FRANKLIN FLOATING RATE TRUST
By: ---------------------------------------
Name:
Title:
HELLER FINANCIAL, INC.
By: ---------------------------------------
Name:
Title:
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS, LDC
By: ING Capital Advisors, Inc.
as Investment Advisor
By: --------------------------------
Name:
Title:
LASALLE NATIONAL BANK
By: ---------------------------------------
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By: ---------------------------------------
Name:
Title:
PUTNAM VT HIGH YIELD TRUST
By: ---------------------------------------
Name:
Title:
PUTNAM HIGH YIELD TRUST
By: ---------------------------------------
Name:
Title:
ROYALTON COMPANY
By: ---------------------------------------
Name:
Title:
SOUTHERN PACIFIC BANK
By: ---------------------------------------
Name:
Title:
TORONTO DOMINION BANK
By: ---------------------------------------
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: ---------------------------------------
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL
SENIOR FLOATING RATE FUND
By: ---------------------------------------
Name:
Title:
INDOSUEZ CAPITAL FUNDING II, LTD.
By: INDOSUEZ CAPITAL LUXEMBOURG, as
Collateral Manager
By: --------------------------------
Name:
Title:
INDOSUEZ CAPITAL FUNDING III, LTD.
By: INDOSUEZ CAPITAL LUXEMBOURG,
as Collateral Manager
By: --------------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By: BOSTON MANAGEMENT AND
RESEARCH, as Investment Advisor
By: --------------------------------
Name:
Title:
SPS SWAPS
By: ---------------------------------------
Name:
Title:
PILGRIM AMERICA PRIME RATE TRUST
By: ---------------------------------------
Name:
Title:
PILGRIM HIGH INCOME INVESTMENTS Ltd.
By: ---------------------------------------
Name:
Title:
DELANO COMPANY
By: Pacific Investment Management Company,
as its Investment Advisor
By: --------------------------------
Name:
Title:
KZH CRESCENT-2 LLC
By: ---------------------------------------
Name:
Title:
KZH III LLC
By: ---------------------------------------
Name:
Title:
KZH CYPRESSTREE-1 LLC
By: ---------------------------------------
Name:
Title:
KZH CRESCENT LLC
By: ---------------------------------------
Name:
Title:
KZH ING-2 LLC
By: ---------------------------------------
Name:
Title:
VAN KAMPEN CLO II, LIMITED
By: ---------------------------------------
Name:
Title:
INDOSUEZ CAPITAL FUNDING IIA, LTD.
By: INDOSUEZ CAPITAL,
as Portfolio Advisor
By: --------------------------------
Name:
Title:
INDOSUEZ CAPITAL FUNDING III, LTD.
By: INDOSUEZ CAPITAL,
as Portfolio Advisor
By: --------------------------------
Name:
Title:
CREDIT LYONNAIS
By: ---------------------------------------
Name:
Title:
<PAGE>
SUBSIDIARY GUARANTORS:
ALASKA FINANCIAL SERVICES, INC.
CFC SERVICES CORP.
CONTINENTAL CREDIT SERVICES, INC.
By: /s/ DanielJ. Dolan
---------------------------------------
Name: Daniel J. Dolan
Title: Treasurer
A.M. MILLER & ASSOCIATES, INC.
ACCOUNT PORTFOLIOS, INC.
ASSET RECOVERY & MANAGEMENT CORP.
FURST AND FURST, INC.
INDIANA MUTUAL CREDIT ASSOCIATION, INC.
JENNIFER LOOMIS & ASSOCIATES, INC.
NATIONAL ACCOUNT SYSTEMS, INC.
PAYCO AMERICAN CORPORATION
PAYCO AMERICAN INTERNATIONAL CORP.
PAYCO-GENERAL AMERICAN CREDITS, INC.
PROFESSIONAL RECOVERIES INC.
QUALINK, INC.
UNIVERSITY ACCOUNTING SERVICE, INC.
ACCELERATED BUREAU OF COLLECTIONS, INC.
NORTH SHORE AGENCY, INC.
By: /s/ DanielJ. Dolan
---------------------------------------
Name: Daniel J. Dolan
Title: Treasurer
PERIMETER CREDIT, L.L.C.
GULF STATE CREDIT, L.L.C.
SHERMAN ACQUISITION CORPORATION
THE UNION CORPORATION
ALLIED BOND & COLLECTION AGENCY, INC.
AMERICAN CHILD SUPPORT SERVICE BUREAU, INC.
CAPITAL CREDIT CORPORATION
TRANSWORLD SYSTEMS INC.
UCO PROPERTIES, INC.
UNION FINANCIAL SERVICES GROUP, INC.
HIGH PERFORMANCE SERVICES, INC.
HIGH PERFORMANCE SERVICES OF FLORIDA, INC.
INTERACTIVE PERFORMANCE, INC.
INTERACTIVE PERFORMANCE OF FLORIDA, INC.
AMERICAN RECOVERY COMPANY, INC.
C.S.N. CORP.
GENERAL CONNECTOR CORPORATION
U.C.O.-M.B.A. CORPORATION
UNION-SPECIALTY STEEL CASTING CORPORATION
INTERACTIVE PERFORMANCE OF GEORGIA, INC.
By: /s/ DanielJ. Dolan
---------------------------------------
Name: Daniel J. Dolan
Title: Treasurer
EMPLOYMENT AGREEMENT
This Agreement is made as of the 1st day of March, 1997 between Outsourcing
Solutions Inc., a Delaware corporation, with offices at 390 South Woods Mill
Road, Suite 150, Chesterfield, Missouri 63017 (the "Company"), and Michael G.
Meyer, an individual residing in the State of Missouri (the "Employee").
RECITALS
WHEREAS, the Company desires to secure the services and employment of the
Employee on behalf of the Company, and the Employee desires to enter into
employment with the Company, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as Senior Vice
President, Chief Information Officer of the Company, and the Employee accepts
such employment for the term of the employment specified in Section 3 below.
During the Employment Term (as defined below), the Employee shall serve as the
Senior Vice President, Chief Information Officer of the Company, performing such
duties as shall be reasonably required of such an employee of the Company, and
shall have such other powers and perform such other additional executive duties
as may from time to time be assigned to him by the Board of Directors of the
Company. The Employee's primary place of employment shall be St. Louis,
Missouri.
2. Performance. The Employee will serve the Company faithfully and to the
best of his ability and will devote substantially all of his time, energy,
experience and talents during regular business hours and as otherwise reasonably
necessary to such employment, to the exclusion of all other business activities.
3. Employment Term. The employment term shall begin on the date of this
Agreement and continue until the first anniversary date of this Agreement,
unless earlier terminated pursuant to Section 7 below (the "Employment Term").
The Employment Term may be extended by mutual agreement of the Company and the
Employee in accordance with Section 7 below.
4. Compensation.
(a) Salary. During the Employment Term, the Company shall pay the Employee
a base salary, payable in equal semimonthly installments, subject to withholding
and other applicable taxes, at an annual rate of One Hundred Ninety Thousand
Dollars ($190,000.00).
(b) Bonus. The Company shall pay the Employee a signing bonus, subject to
withholding and other applicable taxes, of $75,000, payable on or before March
7, 1997. Commencing for the 1997 calendar year, the Employee shall be eligible
for an annual bonus of up to 50% of his base salary. Such annual bonus shall be
based on the satisfaction of performance targets established by the Board of
Directors on or before December 31 of each year for the next succeeding year.
(c) Stock Options. The Company shall grant to the Employee options to
purchase 25,000 shares of the Company's common stock at an exercise price of
$25.00 per share pursuant to the Company's 1995 Stock Option and Stock Award
Plan (the "Plan"). Such options shall vest upon the satisfaction of performance
and liquidity targets as set forth in the Plan and any award agreement pursuant
to which such options are granted.
(d) Medical and Dental Health Benefits. During the Employment Term, the
Employee shall be entitled to medical and dental health benefits in accordance
with the Company's established practices with respect to its key employees.
(e) Vacation; Sick Leave. During the Employment Term, the Employee shall be
entitled to vacation and sick leave in accordance with the Company's established
practices with respect to its key employees.
5. Expenses. The Employee shall be reimbursed by the Company for all
reasonable expenses incurred by him in connection with the performance of his
duties hereunder in accordance with policies established by the Board from time
to time and upon receipt of appropriate documentation.
6. Secret Processes and Confidential Information. For the Employment Term
and thereafter, (a) the Employee will not divulge, transmit or otherwise
disclose (except as legally compelled by court order, and then only to the
extent required, after prompt notice to the Company of any such order), directly
or indirectly, other than in the regular and proper course of business of the
Company, any confidential knowledge or information with respect to the
operations or finances of the Company or with respect to confidential or secret
processes, services, techniques, customers or plans with respect to the Company
and (b) the Employee will not use, directly or indirectly, any confidential
information for the benefit of anyone other than the Company; provided, however,
that the Employee has no obligation, express or implied, to refrain from using
or disclosing to others any such knowledge or information which is or hereafter
shall become available to the public other than through disclosure by the
Employee. All new processes, techniques, know-how, inventions, plans, products,
patents and devices developed, made or invented by the Employee, alone or with
others, while an employee of the Company, shall be and become the sole property
of the Company, unless released in writing by the Company, and the Employee
hereby assigns any and all rights therein or thereto to the Company.
During the term of this Agreement and thereafter, Employee shall not take
any action to disparage or criticize to any third parties any of the services of
the Company or to commit any other action that injures or hinders the business
relationships of the Company.
During the term of this Agreement and thereafter, Employee shall not
employ, solicit for employment or otherwise contract for the services of any
employee of the Company or any of its Affiliates (as defined below) at the time
of this Agreement or who shall subsequently become an employee of the Company or
any of its Affiliates.
All files, records, documents, memorandums, notes or other documents
relating to the business of Company, whether prepared by Employee or otherwise
coming into his possession in the course of the performance of his services
under this Agreement, shall be the exclusive property of Company and shall be
delivered to Company and not retained by Employee upon termination of this
Agreement for any reason whatsoever.
7. Termination. The employment of the Employee hereunder shall
automatically terminate at the end of the Employment Term, unless the parties
hereto mutually agree otherwise in writing, at least 30 days prior to expiration
of the Employment Term. The employment of the Employee hereunder may also be
terminated at any time by the Company with or without "cause". For purposes of
this Agreement, "cause" shall mean: (i) embezzlement, theft or other
misappropriation of any property of the Company or any subsidiary, (ii) gross or
willful misconduct resulting in substantial loss to the Company or any
subsidiary or substantial damage to the reputation of the Company or any
subsidiary, (iii) any act involving moral turpitude which results in a
conviction for a felony involving moral turpitude, fraud or misrepresentation,
(iv) gross neglect of his assigned duties to the Company or any subsidiary, (v)
gross breach of his fiduciary obligations to the Company or any subsidiary, or
(vi) any chemical dependence which materially affects the performance of his
duties and responsibilities to the Company or any subsidiary; provided that in
the case of the misconduct set forth in clauses (iv) and (vi) above, such
misconduct shall continue for a period of 30 days following written notice
thereof by the Company to the Employee.
8. Severance; Non-Competition Covenant. If the Employee's employment is
terminated by the Company without "cause", the Employee shall be entitled to
receive an amount equal to his base salary for the year preceding the Employee's
termination, payable, at the Company's option, in a lump sum on the date of
termination or ratably over the one year period following the date of
termination. If the Employee's employment is terminated by the Company "for
cause", the Employee shall not be entitled to severance compensation. The
Employee covenants and agrees that he will not, during the one year period
following the termination of the Employee's employment by the Company, within
any jurisdiction or marketing area in which the Company or any of its Affiliates
(as defined below) is doing business or is qualified to do business, directly or
indirectly own, manage, operate, control, be employed by or participate in the
ownership, management, operation or control of, or be connected in any manner
with, any business of the type and character engaged in and competitive with
that conducted by the Company or any of its Affiliates at the time of such
termination; provided, however, that ownership of securities of 2% or less of
any class of securities of a public company shall not be considered to be
competition with the Company or any of its Affiliates. For the purposes of this
Section 8, the term "Affiliate" shall mean, with respect to the Company, any
person or entity which, directly or indirectly, owns or is owned by, or is under
common ownership with, the Company. The term "own" (including, with correlative
meanings, "owned by" and "under common ownership with") shall mean the ownership
of 50% or more of the voting securities (or their equivalent) of a particular
entity.
9. Notice. Any notices required or permitted hereunder shall be in writing
and shall be deemed to have been given when personally delivered or when mailed,
certified or registered mail, postage prepaid, to the following addresses:
If to the Employee:
Michael G. Meyer
1981 Rule
St. Louis, Missouri 63043
If to the Company:
Outsourcing Solutions Inc.
390 South Woods Mill Road, Suite 150
Chesterfield, Missouri 63017
Attention: President and Chief Executive Officer
10. General.
(a) Governing Law; Jurisdiction. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Missouri applicable to contracts executed and to be performed entirely within
said State. Any judicial proceeding brought against any of the parties to this
Agreement or any dispute arising out of this Agreement or any matter related
hereto may be brought in the courts of the State of Missouri or in the United
States District Court for the Eastern District of Missouri, and, by execution
and delivery of this Agreement, each of the parties to this Agreement accepts
the jurisdiction of said courts, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. The foregoing
consent to jurisdiction shall not be deemed to confer rights on any person other
than the respective parties to this Agreement.
(b) Assignability. The Employee may not assign his interest in or delegate
his duties under this Agreement. Notwithstanding anything else in this Agreement
to the contrary, the Company may assign this Agreement to and all rights
hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Enforcement Costs. In the event that either the Company or the Employee
initiates an action or claim to enforce any provision or term of this Agreement,
the costs and expenses (including attorney's fees) of the prevailing party shall
be paid by the other party, such party to be deemed to have prevailed if such
action or claim is concluded pursuant to a court order or final judgment which
is not subject to appeal, a settlement agreement or dismissal of the principle
claims.
(d) Binding Effect. This Agreement is for the employment of Employee,
personally, and for the services to be rendered by him must be rendered by him
and no other person. This Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
may not be modified or amended in any way except in writing by the parties
hereto.
(f) Duration. Notwithstanding the term of employment hereunder, this
Agreement shall continue for so long as any obligations remain under this
Agreement.
(g) Survival. The covenants set forth in Sections 6 and 7 of this Agreement
shall survive and shall continue to be binding upon Employee notwithstanding the
termination of this Agreement for any reason whatsoever. The covenants set forth
in Sections 6 and 8 of this Agreement shall be deemed and construed as separate
agreements independent of any other provision of this Agreement. The existence
of any claim or cause of action by Employee against Company, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Company of any or all covenants. It is expressly agreed that the
remedy at law for the breach or any such covenant is inadequate and that
injunctive relief shall be available to prevent the breach or any threatened
breach thereof.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have
hereunto executed this Agreement the day and year first written above.
OUTSOURCING SOLUTIONS INC.
By /s/ Timothy G. Beffa
---------------------------------------
Timothy G. Beffa, President and
Chief Executive Officer
EMPLOYEE
/s/ Michael G. Meyer
---------------------------------------
Michael G. Meyer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10-Q for the Quarter Ended September 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001027574
<NAME> Outsourcing Solutions, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 33,748
<SECURITIES> 0
<RECEIVABLES> 41,302
<ALLOWANCES> 1,276
<INVENTORY> 41,063
<CURRENT-ASSETS> 122,410
<PP&E> 87,847
<DEPRECIATION> 42,524
<TOTAL-ASSETS> 628,981
<CURRENT-LIABILITIES> 111,946
<BONDS> 0
0
12,167
<COMMON> 53
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 628,981
<SALES> 0
<TOTAL-REVENUES> 358,634
<CGS> 0
<TOTAL-COSTS> 333,052
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37,554
<INCOME-PRETAX> (11,972)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,972)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (572)
<NET-INCOME> (12,544)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
