FORM 10-K

CONVERGYS CORP

(Annual Report)

Filed 3/5/2004 For Period Ending 12/31/2003

Address 201 EAST FOURTH STREET

CINCINNATI, Ohio 45202

Telephone 513-723-7000

CIK 0001062047

Industry Computer Networks

Sector Technology

Fiscal Year 12/31

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

Commission file number 1-14379

CONVERGYS CORPORATION

201 East Fourth Street, Cincinnati, Ohio 45202

Telephone Number (513) 723-7000

An Ohio Corporation I.R.S. Employer No. 31-1598292

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Title of each class

Name of each exchange on which registered

Common Shares (no par value) Series A Preferred Share Purchase Rights

New York Stock Exchange New York Stock Exchange

At January 31, 2004, there were 174,659,684 common shares outstanding, of which 31,386,257 were held in Treasury.

The aggregate market value of the voting shares owned by non-affiliates of the registrant as of June 30, 2003 was $2,786,048,224.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 No �

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. �

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule12b-2 of the Securities Act of 1934). Yes No �

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the 2004 Annual Meeting of Shareholders are incorporated by reference into Part III of this report to the extent described herein.

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TABLE OF CONTENTS

PART I

Item

Page

1. Business 2

2. Properties 12

3. Legal Proceedings 13

4. Submission of Matters to a Vote of the Security Holders 13

PART II

5. Market for the Registrant’s Common Equity and Related Security Holder Matters 16

6. Selected Financial and Operating Data 17

7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18

7A. Quantitative and Qualitative Disclosures about Market Risk 32

8. Financial Statements and Supplementary Data 32

9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 60

9A. Controls and Procedures 60

PART III

10. Directors and Officers of the Registrant 61

11. Executive Compensation 61

12. Security Ownership of Certain Beneficial Owners and Management 61

13. Certain Relationships and Related Transactions 61

14. Principal Accounting Fees and Services 61

PART IV

15. Exhibits, Financial Statement Schedule and Reports on Form 8-K 62

See page 14 for Executive Officers of the Registrant.

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PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR CAUTIONARY STATEMENT

This report and the documents incorporated by reference contain “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995, that are based on current expectations, estimates and projections. Statements that are not historical facts, including statements about the beliefs and expectations of Convergys Corporation, are forward-looking statements. Sometimes these statements will contain words such as “believes,” “expects,” “intends,” “could,” “should,” “will,” “plans,” “anticipates” and other similar words. These statements discuss potential risks and uncertainties; and, therefore, actual results may differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they were made. The Company expressly states that it has no current intention of updating any forward-looking statements, whether as a result of new information, future events or otherwise. Important factors that may affect these projections or expectations include, but are not limited to: the consequence of potential terrorist activities and the responses of the United States and other nations to such activities; the loss of a significant client or significant business from a client; difficulties in completing a contract or implementing its provisions, or completing or integrating an acquisition; changes in the overall economy; changes in competition in markets in which the Company operates; changes in the regulatory environment in which the Company and its clients operate; changes in the demand for the Company’s services; changes in technology that impact both the markets served and the types of services offered; consolidation within the industries in which the Company’s clients operate; and difficulties in conducting business internationally.

Part I

Item I. Business

General Convergys Corporation (the Company or Convergys) is a global leader in the provision of outsourced customer management, employee care and integrated billing software services. The Company was spun off from its former parent company, Cincinnati Bell Inc. (CBI), in 1998. Convergys focuses on developing long-term strategic relationships with clients in employee and customer intensive industries including communications, technology and financial services as well as governmental agencies. The Company has two reporting segments: (i) the Customer Management Group (CMG), which provides outsourced marketing, customer support services and employee care services; and (ii) the Information Management Group (IMG), which provides outsourced billing and information services and software. The Company has developed a base of recurring revenues by providing value-added billing and customer management and employee care solutions for its clients, generally under multiple year contracts. The Company’s principal executive offices are located at 201 East Fourth Street, Cincinnati, Ohio 45202, and the telephone number at that address is (513) 723-7000. The Company files annual, quarterly, special reports and proxy statements with the SEC. These filings are available to the public over the Internet on the SEC’s Web site at http://www.sec.gov and at the Company’s Web site at http://www.convergys.com. You may also read and copy any document the Company files with the SEC at its public reference facilities in Washington, D.C. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. You can also inspect reports, proxy statements and other information about Convergys at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Pursuant to Rule 12b-23 under the Securities Exchange Act of 1934, as amended, the industry segment and geographic information included in Item 8, Note 15 of Notes to Financial Statements, are incorporated by reference in partial response to this Item 1. Overview of Industry and Strategy Customer Management Group The emergence of the Internet and other technologies has created additional channels for customer support and employee care. Where companies once provided customer support and employee care through paper or telephone-based care centers, these emerging technologies and shifts in consumer preferences now require support to be offered through multi-channel contact centers. These rapid changes in technology, as well as growing competition and financial pressures, are making it increasingly difficult for companies, particularly in the communications, technology and financial services industries, as well as governmental agencies, to maintain in-house support functions to handle all of their customer management and employee care needs cost-effectively. Companies in these industries as well as many others are increasingly turning to outsourcing providers for cost-effective, high quality customer support and employee care services. In CMG’s multi-channel contact centers, CMG service agents are able to provide customer support and employee care through a full range of services ranging from self-care to chat to click-to-live-agent in addition to telephone-based agent services.

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The Company expects that growth of outsourced customer management and employee care services will be driven by the trend of large companies and governmental agencies turning to outsourcers to provide cost-effective, high quality customer support and employee care solutions. Outsourcing of customer management and employee care functions allows companies to focus their internal resources on core competencies. Additionally, outsourcing can provide companies with the following advantages: (i) technologically advanced, scalable systems and software, which enable rapid competitive response; (ii) cost savings resulting from economies of scale achieved by leveraging investments in technology and customer service centers; (iii) improved time-to-market for new products/services, whether for existing companies or new entrants; and (iv) expertise to target, acquire and retain customers more effectively. The Company also believes that the expansion of offshore capacity, which provides customer management clients with significantly lower costs and a highly educated labor force, will drive growth in the industry. The Convergys strategy is to leverage its leadership position in the industry to capture the growing demand for outsourced customer support services. Additionally, Convergys will continue to offer its clients the option of offshore services. As evidenced by the recent expansion of its customer contact centers in India and the Philippines, the Company will continue to be at the forefront in identifying new labor markets and operating contact centers in locations around the globe based on client demand. Convergys seeks to leverage its core strengths in operating complex software and in integrating employee contact technologies and services to provide clients with a more cost-effective single point of contact for outsourced human resource services. These services include health and welfare administration, defined benefit and defined contribution plan administration, payroll administration and payroll processing, recruiting and staffing administration, personnel and learning administration. The Company anticipates the demand for global employee care services will increase as companies attempt to manage multinational workforces with consistent policies and procedures and to maintain accurate and comprehensive information on those workforces. CMG has expanded its presence in the global employee care industry in anticipation of this demand. CMG offers employee care services in all regions of the world and in 20 different languages. Information Management Group The communications industry continues to drastically change as a result of deregulation and advancements in technology. Product and service offerings provided by the communications industry have been broadened through recent advances in communication technologies, including Internet telephony, digital subscriber line connections (DSL), wireless application protocol (WAP), wireless fidelity (WiFi) and universal mobile telecommunications systems (UMTS). Deregulation in the United States led to increased competition between communications providers, who now offer multiple or convergent services, including local, long distance, wireless, cable, cable telephony, broadband and Internet. Outside of the United States, especially in Europe, Asia Pacific and Latin America, new communications providers have emerged as markets have opened to competition. Established carriers, who once dominated national markets, now face increased competition from these new entrants. After an extended period of rapid growth, the communications industry has experienced over the last couple of years one of the most difficult periods in its history. Communications companies have focused their attention on cost reduction and margin improvement, with lower investment in billing information systems. This has had an adverse impact on IMG’s revenues and operating margin. If these market conditions continue, Convergys and other vendors to the communications industry will continue to be adversely affected. However, as communications companies continue to expand their service offerings, the requirements of billing information systems are becoming increasingly complex. In order to remain competitive and differentiate themselves from their competitors, communications companies require fully convergent billing systems that are cost effective, flexible and can be scaled to support millions of customers. Instead of committing their time and internal resources to develop and maintain billing systems internally, the Company believes that many communications companies will turn to third-party vendors, such as Convergys, for their billing information system needs. The Company’s strategy is to use this position to be the global billing services provider of choice for wireless, wireline, cable, cable telephony, broadband, direct broadcast satellite and Internet companies. By continuing to invest in research and development, the Company believes it will be positioned to provide its component-based, next-generation framework to its current clients, as they seek to introduce new services; to other service providers, who currently are not clients, as they outgrow their current billing systems; and to new entrants as they emerge. During 2003, international revenues accounted for approximately 22% of IMG’s revenues, with the remainder being derived from North American clients. However, North America accounts for less than 20% of the global wireless and cable subscriber market. The Company realizes that a key element to IMG’s growth is increasing its share of the international billing market. As international markets continue to expand, the Company believes demand for its highly scalable, flexible billing systems will increase. Additionally, despite a slower than anticipated deployment, the global communications industry is beginning to offer the next-generation (third) of cellular technology (known as 3G). 3G provides enhanced capabilities, primarily high-speed data transfer in addition to existing wireless voice services. Service providers will require more advanced billing systems to be able to bill for the broad range of wireless data and Internet services that can be provided via 3G. Convergys is investing in its systems’ capabilities and in its international sales and marketing efforts, particularly in the Asian Pacific and Latin American regions, to realize this market potential.

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Products and Services CMG CMG provides outsourced customer management and employee care services for its clients utilizing its advanced information systems capabilities, human resource management skills and industry expertise. Customer Service —CMG handles customer contacts that range from initial product information requests to customer retention initiatives. This involves a variety of activities including gathering and analyzing customer information; describing product features, capabilities and options; activating customer accounts or renewing service; processing a product or service sale; and resolving complaints and billing inquiries. Technical Support —CMG answers technical support inquiries for consumers and business customers. Technical support ranges from simple product installation or operating assistance for a variety of software and hardware products to highly complex issues such as systems networking configuration or software consultation. Sales Account Management —CMG is responsible for managing the entire customer relationship including obtaining current orders, increasing purchase levels, introducing new products, implementing product initiatives and handling all inquiries related to products, shipments and billing. Employee Care —The Company provides its clients with outsourced employee care services that enable its clients to provide their employees with world class service. The Company’s services support human resource activities that span the lifecycle of an employee, including: recruiting, hiring and staffing; annual benefits enrollment and ongoing benefits administration; defined benefit and defined contribution plan administration; payroll administration and payroll processing; learning and training; mergers and acquisition support; and general human resource and administration services. Convergys’ fully integrated customer management and employee care contact centers provide its clients’ customers and employees with a single point of contact. Phone and Web-based agent-assisted service channels provide for live agent interaction while allowing for the immediacy of interaction and the ability of agents, with the required level of expertise, to react to individual customer and employee needs. CMG delivers these services using a variety of tools including computer telephony integration (CTI), interactive voice response (IVR), advanced speech recognition (ASR), knowledge-based management (KBM) and the Internet through agent-assisted and self-service channels. Self-service channels, including automated telephone-based solutions such as ASR, allow customers to transact business or find their own assistance without the help of a live agent. Additionally, these channels enable employees and managers to access their human resource information and perform various transactions 24 hours a day and 7 days a week. CMG generally receives a fee based on staffing hours, number of contacts or participants handled or a flat monthly fee. Supplemental revenues can sometimes be earned depending on service levels or achievement of certain performance measurement targets. The Company recognizes these supplemental revenues only after it has achieved the required measurement target. Additional fees are charged for service enhancements or system upgrades requested by clients. IMG IMG serves clients principally by providing and managing complex billing and information software that addresses all segments of the communications industry, including wireless, wireline, cable, cable telephony, broadband, direct broadcast satellite and the Internet. IMG’s component-based, next-generation framework supports the creation of billing and customer care solutions ranging from a single module to the combination of modules to a complete, end-to-end billing system. Its global billing product portfolio gives its clients a flexible migration path to expand their billing and customer care systems without loss of their initial investment. IMG’s family of products includes:

Infinys ™

Infinys software is Convergys’ modular and convergent business support system (BSS) software. Infinys software enables communications companies or operators to accelerate the delivery of new services for a wide range of services including voice, video and data services. Clients have the capability to integrate Infinys software applications and solutions with their in-house or third-party software to implement BSS solutions that support market innovation in their packaging of voice, data, video and content for residential and business customers. Infinys software provides business process functions that can replace a specific part of an operator’s BSS with a convergent software solution or a set of solutions that pre-integrate business critical applications. Once a single application or solution is implemented, additional extensions or applications can be easily configured and work seamlessly with existing Infinys software functionality since Infinys software is configured on a component-based architecture. Infinys software applications and solutions include:

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Infinys Solution for Wireline Operators

Convergys’ Infinys solution for wireline operators features comprehensive customer lifecycle management capabilities for optimizing financial performance and customer loyalty. This Infinys software solution responds to the convergent needs of wireline operators by enabling them to automate and integrate their product, customer, fulfillment and revenue management functions across multiple products. With this solution, wireline operators can accelerate the adoption of new services, reduce operating costs and drive operator profitability.

At the core of this Infinys solution is the integration of the Infinys application for customer order management and the Infinys application for rating and billing. Additional functionality is available through optional, pre-integrated applications for customer care and Web self-care, mediation, settlement, provisioning, inventory management and service activation functions.

Infinys Solution for Partner Relationship Management (PRM)

This Infinys solution is a pre-integrated solution that combines the partner management, rating and billing and the optional mediation management capabilities. The result is a unique solution for supporting automated settlement of partner-enabled electronic and mobile commerce and content delivery. This Infinys solution can also deliver automated settlement support for global roaming and selected interconnection partnerships.

Infinys Application for Rating and Billing (Geneva ™ )

This Infinys application delivers a customer-focused approach that repositions billing at the very heart of businesses’ operations and strategies. Convergent by design and highly flexible, the Infinys application for rating and billing reduces time to market and achieves cost efficiencies through highly configurable applications rather than time-consuming or costly customizations. It is being used in a wide variety of industry sectors including wireline, wireless and cable.

Infinys Application for Customer Order Management (Cygent ® )

By managing the complex relationships among orders, customer accounts and products, this Infinys application enables operators to streamline these operations and align business processes around the customer. Operators have better capabilities to enable the timely and accurate ordering of communications services, standardize product definition, integrate order management and provisioning and accelerate the deployment of convergent services.

Infinys Cygent Customer Order Management has enabled Convergys clients to implement enterprise-wide customer care, order and service management and/or product solutions via software components that integrate customer-facing operations with back-office operational support systems (OSS).

Infinys Application for Mediation Management

This Infinys application manages the collection, normalization, filtering and distribution of event records generated by network elements, service applications and business partners. This flexible application for mediation management supports multiple market segments and technologies simultaneously, which enables operators to have one convergent mediation platform to support multiple business needs. It also provides enhanced revenue assurance capabilities that enable tracking, reporting and auditing of Convergys clients’ revenue stream in real time.

Infinys Application for Activation Management

This Infinys application helps to simplify and accelerate the activation process for convergent wireless, wireline, cable and broadband operators by providing an isolation layer between the operator’s billing system and the complex network infrastructure. This buffer separates an operator’s billing functions from network complexities, thereby accelerating activation. It should also provide the operator with reduced costs, increased revenue and greater customer satisfaction.

Infinys Application for Partner Management

This Infinys application module includes a powerful, integrated client interface that leverages the advanced Infinys platform components and permits the operator to proactively manage each phase of the partner lifecycle. As operators enter into an increasing number of complex partnerships to enable new content/commerce revenue, this Infinys application for partner management provides an easy-to-use tool for the set-up and management of the business relationship. Partner agreements and settlement compensation parameters can be quickly activated and modified as needed through an application interface. This Infinys application represents an important evolution supporting the automation of partner business processes within an enterprise.

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Atlys ®

Atlys is a comprehensive, end-to-end billing and customer care solution that supports the needs of wireless network operators competing in a global wireless voice and data market. Atlys possesses many key advantages that enable operators to realize fast time to market for new services and a greater return on their overall investment. Some of Atlys’ key advantages are the following:

• Atlys supports both voice and data services, while still supporting the specific business rules unique to wireless.

• The architecture supports open interface capabilities through Application Programming Interfaces (APIs), giving operators added

flexibility.

• Atlys supports real-time processing through the entire customer care business process—from mediation to activation and to rating

and billing.

ICOMS

• Atlys provides operators the flexibility of supporting pre- and post-paid subscribers on a single database.

The Integrated Communications Operations Management System (ICOMS) solution is designed specifically for the broadband convergent video, high-speed data and telephony markets. It incorporates the power and flexibility of Convergys’ cable television subscriber management system with the integrated support of high-speed data and wireline telephony. The net result is a convergent solution uniquely designed to meet cable and broadband operators’ subscriber, billing and operations management requirements. The ICOMS solution provides broadband operators with control and flexibility to sharpen their competitive edge, expand market penetration, increase revenues, decrease costs and differentiate themselves from their competition. Because ICOMS is designed specifically for the cable television, high-speed data and cable telephony markets, broadband operators can serve all three of these markets with a single billing solution. The operator gains efficiencies and decreases costs by eliminating redundant processing and the required maintenance of multiple systems. With a single billing system, the operator can maintain all of its customer data in a single database. This provides the operator with a unified view of its customer, thus enhancing marketing opportunities, reducing errors and streamlining customer service processes.

WIZARD

The WIZARD solution is designed to serve multimedia operators including direct broadcast satellite, direct-to-home, cable and cable telephony providers, by allowing them to extend their offerings to support the new convergent era that includes voice, video and data services. To address this rapidly evolving industry, WIZARD combines a comprehensive customer service system component and advanced billing and rating capabilities.

IMG provides its software products in one of three delivery modes: outsourced, licensed or build-operate-transfer (BOT). In the outsourced delivery mode, IMG provides the billing services by running its software in one of its data centers. In the licensed delivery mode, the software is licensed to clients who perform billing internally. Finally, the BOT delivery mode entails IMG implementing and initially running its software in the client’s data center with the option of transferring the operation of the center to the client at a future date. In addition to the products described above, the Company also provides outsourced billing services using legacy applications (i.e., Macrocell, Cellware, Cablemaster ® ) that have been customized to meet specific client needs. In 2003, 57.9% of IMG’s revenues were for data processing services generated from recurring monthly payments from its clients based upon the number of client subscribers, events or bills processed by IMG. During December 2003, the Company processed approximately 55 million of its clients’ subscribers. Most of IMG’s wireless data processing agreements, which are typically for multiple years, are priced on a per subscriber, per event or per invoice basis. As the number of subscribers processed by IMG’s system increases, the average per unit price for the Company’s services typically decreases (i.e. volume discounts). Additionally, some of IMG’s wireless data processing agreements contain per subscriber rate reductions triggered by the passage of time, typically a contract anniversary date. Professional and consulting services for installation, implementation, customization and enhancement services accounted for 12.1% of IMG’s 2003 revenues. The Company invoices its clients for these services based on time and material costs at contractually agreed upon rates, or in some instances, for a fixed fee. IMG’s remaining revenues were primarily from software license arrangements and international sales. International revenues consist of a mix of professional and consulting, license and support and maintenance revenues. Clients CMG CMG principally focuses on developing long-term strategic outsourcing relationships with large clients in the communications, technology and financial services industries for customer management services and large employers in any industry or government agency for employee care services. CMG focuses on these types of clients because of the complexity of services required, the anticipated growth of their market segments and their increasing need for more cost-effective customer management and employee care services. In terms of Convergys’ revenues, CMG’s largest customer management clients during 2003 were AT&T, AT&T Wireless, Comcast, DirecTV, Microsoft and Sprint PCS. CMG’s largest employee care clients were AT&T, General Electric, Lucent, Pfizer and the State of Florida.

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IMG IMG generally has multiple year contracts with its clients. In many cases, IMG is the client’s exclusive provider of billing services, or the contract requires the client to fulfill minimum annual commitments. IMG’s billing software platforms process billing information for monthly customer statements for approximately 33% of U.S. wireless subscribers. In terms of Convergys’ revenues, IMG’s largest wireless clients during 2003 were ALLTEL, AT&T Wireless and Sprint PCS. IMG provides cable and direct broadcast satellite billing services both domestically and internationally. IMG’s cable billing systems also support bundled telephone and entertainment services provided by cable television system operators in the U.S. and Europe. In terms of Convergys’ revenues, IMG’s largest cable clients during 2003 were Comcast, Cox Communications, Insight Communications, Telewest and Time Warner. Both of the Company’s segments derive significant revenues from AT&T Wireless. Revenues from AT&T Wireless were 21.2%, 19.7% and 18.2% of the Company’s consolidated revenues for 2003, 2002 and 2001, respectively. Operations At December 31, 2003, CMG operated 51 contact centers with 24 hour per day, 7 day a week availability, with over 28,000 production workstations and averaging approximately 74,000 square feet per center. New contacts centers are established to accommodate anticipated growth in business or in response to a specific customer need. The Company believes that its existing capacity in the U.S. and Canada is sufficient to meet near-term demand. However, with the growing demand for offshore services, the Company plans to continue to expand its offshore contact center capacity, particularly in India and the Philippines. CMG’s contact centers employ advanced technology that integrates digital switching, intelligent call routing and tracking, proprietary workforce management systems, case management tools, proprietary software systems, ASR, IVR, CTI, Web-based tools and relational database management systems. This technology enables the Company to improve its call, Web and e-mail handling and personnel scheduling, thereby increasing its efficiency and enhancing the quality of the services it delivers to its clients and their customers and employees. With this technology, the Company is able to respond to changes in client call volumes and move call volume traffic based on agent availability. Additionally, the Company uses this technology to collect information concerning the contacts including number, response time, duration and results of the contact. This information is reported to the client on a periodic basis for purposes of monitoring quality of service and accuracy of the related billing. The Company operates two billing data centers, one in Orlando, Florida, and the other in Cincinnati, Ohio, comprising, in total, approximately 170,000 square feet of space. The Company’s technologically advanced data centers provide 24 hour per day, 7 day a week availability (with redundant power and communication feeds and emergency power back-up supplied by diesel and turbine generators) and are designed to withstand most natural disasters. The facility infrastructure includes approximately 4,600 MIPS (millions of instructions per second) mainframe capacity, over 440 production servers and over 383 terabytes (trillion bytes) of information and provides back-up capacity in the unlikely event that either data center becomes inoperative. The capacity of the Company’s data center and contact center operations, coupled with the scalability of its billing and customer management and employee care systems, enables the Company to meet initial and ongoing needs of large-scale and rapidly growing companies and government entities. By employing the scale and efficiencies of common application platforms, the Company is able to provide client-specific enhancements and modifications without incurring many of the costs of a full custom application. This allows the Company to position itself as a value-added provider of billing, customer and employee support products and services. Technology, Research and Development The Company intends to continue to emphasize the design, development and deployment of scalable billing, customer management and employee care systems to increase its market share, both domestically and internationally. During 2003, the Company spent $94.3 million for research and development to advance the functionality, flexibility and scalability of its products and services. The result of this investment led to the following recent IMG product enhancements:

Infinys ™

This software solution was first introduced during 2003. As described more fully in Item 1 under the heading titled “Products and Services,” Infinys provides clients with a customer-focused, service management approach to their operational processes, enabling them to automate and integrate their order fulfillment, customer service management and billing functions across multiple product and service offerings while reducing the cost of delivering services to their customers.

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Infinys Mediation Manager Release 3.1

The latest release of Mediation Manager, which is now an application embedded within the Infinys solution, features multi-byte support, enabling service providers to use Mediation Manager with various Asian languages. Other enhancements enable service providers to enhance revenue assurance and improve the performance of transaction processing. Error threshold alarm enhancements improve revenue assurance by providing error notification and correction services in order to prevent revenue losses. It also introduces multi-threading to increase Mediation Manager’s processing power by 20%, enabling service providers to boost their return on investment by processing billions of events per day on a single server. ASL Designer, a new feature to Mediation Manager, makes the product far more business-user-friendly, so that a client’s analysts do not need to learn a scripting language in order to achieve their mediation objectives.

Geneva 5.2 ®

The latest release of Geneva, which is now an application embedded within the Infinys solution, features new revenue risk management functionality including support for conditional settlement that will enable operators to exploit the potential of the broadband-driven electronic and mobile commerce markets fully. Geneva’s conditional settlement support capability enables operators to bill subscribers for products and services supplied by third-party merchants. It also introduces a range of enhancements designed to bolster operators’ operational efficiency and reduce the total cost of ownership by improving load balancing and reducing hardware costs.

Atlys ® Release 10.0

Release 10.0 enables complex enterprise market support with advanced financial management and partner settlement capabilities in a single billing solution. It provides greater capability and flexibility to assure, settle and report client revenue while delivering next-generation services with multiple partner support to consumer and large commercial customers. Based on the Company’s next-generation framework, Atlys enables Convergys clients to reduce their capital investments in their billing operations while increasing revenue, improving customer interactions and differentiating their services. Enhancements to Atlys’ accrual, general ledger and deposit management accounting functionality assure timely and accurate production of financial statements as well as compliance with stringent regulatory accounting standards.

Integration of ICOMS and Activation Manager

During the year, the Company announced the integration of ICOMS with its Infinys Activation Manager. By combining ICOMS and Activation Manager, cable and broadband operators can streamline the provisioning of IP and circuit-based telephony services and more quickly and cost-effectively configure their workflow processes to support these offerings. Together they can reduce time-to-market for new offerings and ensure timely service delivery with minimal errors and lower configuration costs.

CMG’s success depends in part on its advanced technology, which helps maximize the utilization of CMG’s contact centers and increase the efficiency of its agents. As a result, the Company continues to invest in the enhancement and development of its contact center technology. The Company’s intellectual property consists primarily of proprietary business methods and software systems protected under copyright law, by U.S. and foreign patents and applications, and by registered or pending trademarks and service marks. The Company owns 14 patents, which protect technology and business methods used both to manage internal systems and processes effectively and to provide customer care and billing services to the Company’s clients. The first of these patents was issued in May 1998, while the most recent patent was granted in December 2003. These patents have a life of 17 years. Additional applications for U.S. and foreign patents currently are pending. The Company’s name and logo and the names of its primary software products are protected by trademarks and service marks that are registered or pending in the U.S. Patent and Trademark Office and under the laws of more than 50 foreign countries. Employees The Company employs approximately 56,500 people, 52,300 of whom work for CMG, 3,350 of whom work for IMG, with the remainder working in various corporate functions. Competition The industries in which the Company operates are extremely competitive. The Company’s competitors include: (i) existing clients and potential clients with substantial resources and the ability to provide billing and customer management and employee care capabilities internally; (ii) other customer management companies, such as Accenture, APAC Customer Services, Daksh, EDS, SITEL, Sykes, TeleTech Holdings, West Teleservices and Wipro Spectramind; (iii) other employee care providers such as Accenture, ADP, EDS, Exult, Fidelity, Hewitt Associates, IBM, Mellon Financial Corporation and Towers Perrin; and (iv) other billing software and/or services companies such as ADC, Amdocs, CSG Systems, DST Systems, Portal Software and SchlumbergerSema (a unit of Schlumberger Limited). In addition, niche providers or new entrants could capture a segment of the market by developing new systems or services that could impact the Company’s market potential.

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The Company believes that the principal competitive factors in its industry are technological expertise, service quality, the ability to develop customized products and services, the cost of services and sales and marketing skills. The Company differentiates itself from its competitors based on its size and scale, advanced technology, service quality, breadth of services provided, industry and client focus, financial resources, cost of services and business reputation. Interest in Cellular Partnerships The Company owns 45% limited partnership interests in Cincinnati SMSA Limited Partnership and Cincinnati SMSA Tower Holdings LLC (the Cellular Partnerships). Cincinnati SMSA Limited Partnership, a provider of wireless communications in central and southwestern Ohio and northern Kentucky, conducts its operations as a part of Cingular Wireless LLC (Cingular), a joint venture between SBC Communications and BellSouth Corporation and the second largest wireless provider in the United States. Cingular is the general partner and a limited partner with a partnership interest of approximately 53%. SBC Communications is the general partner and a limited partner of Cincinnati SMSA Tower Holdings LLC, an operator of cellular tower space, with a partnership interest of approximately 53%. The general partners are authorized to conduct and manage the business of the Cellular Partnerships. The Company, as a limited partner, does not take part in, or interfere with, the day-to-day management of the Cellular Partnerships by the general partners. Limited partners are entitled to their percentage share of earnings and cash distributions. The Company accounts for its interest in the Cellular Partnerships under the equity method of accounting. In 2003, the Company’s equity in earnings of the Cellular Partnerships was a loss of $12.6 million and the Company invested $22.9 million through capital calls. During the first quarter of 2003, the general partner of Cincinnati SMSA Limited Partnership settled a lawsuit against the partnership for $22.0 million. The Company’s share of this loss was $9.9 million, which it recorded as a loss from its equity investment in the partnership. Risks Relating to Convergys and Its Business The Company’s revenues are generated from a limited number of clients, and the loss of one or more of its clients could cause a reduction in its revenues. The Company relies on several significant clients for a large percentage of its revenues. Convergys’ three largest clients, AT&T Wireless, Sprint PCS and DirecTV, represented approximately 39% of Convergys’ 2003 revenues. The Company’s relationship with AT&T Wireless is represented by separate contracts/work orders with various operating units across both IMG and CMG. Its relationship with Sprint PCS is represented by one contract with IMG, which was recently extended, and two contracts with CMG. DirecTV is served by the Company under a customer management contract. These separate contracts/work orders with the above clients have varying expiration dates, payment provisions, termination provisions and other conditions. Therefore, Convergys does not believe that it is likely that its entire relationship with AT&T Wireless, Sprint PCS or DirecTV would terminate at one time; and, therefore, it is not substantially dependent on any particular contract/work order with these clients. However, the loss of all of the contracts/work orders within a particular client at the same time or the loss of one or more of the larger contracts/work orders within a client would adversely affect the Company’s total revenues if the revenues from such client were not replaced with revenues from that client or other clients. A large portion of the Company’s accounts receivable are payable by a limited number of clients; the inability of any of these clients to pay its accounts receivable could cause a reduction in the Company’s income. Several significant clients account for a large percentage of the Company’s accounts receivable. During 2003, 2002 and 2001, Convergys’ three largest clients, AT&T Wireless, Sprint PCS and DirecTV, together accounted for 31.1%, 34.9% and 21.7% of the Company’s accounts receivable (excluding the effects of the accounts receivable securitization) for these years. During the past three years, each of the clients set forth above has generally paid its accounts receivable on a timely basis, and Convergys has only had write-downs in connection with such accounts receivable in line with those that it incurs with other clients. The Company anticipates that, in 2004, several clients will continue to account for a large percentage of accounts receivable. Although as explained above, Convergys has numerous contracts/work orders with different units of these clients with varying terms and provisions including payment provisions, if any of these clients were unable, for any reason, to pay its accounts receivable, the Company’s income would decrease. Client consolidations could result in a loss of clients and reduce the Company’s revenues. Convergys serves clients in industries that have experienced a significant level of consolidation in recent years. The Company cannot assure that additional consolidations will not occur in which Convergys’ clients acquire additional businesses or are acquired. Such consolidations may result in the termination of an existing client contract, which would result in a decrease of the Company’s revenues.

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In February 2004, AT&T Wireless, the Company’s largest client in terms of revenue, accepted an offer from Cingular to be acquired. The impact, if any, of AT&T Wireless being acquired by Cingular is unknown. If Convergys’ clients are not successful, the amount of business that they outsource and the prices that they are willing to pay for such services may be diminished and could result in reduced revenues for the Company. Convergys’ revenues are dependent on the success of its clients. If Convergys’ clients are not successful, the amount of business that they outsource may be diminished. Thus, although the Company has signed contracts, many of which contain minimum revenue commitments, to provide services to its clients, there can be no assurance that the level of revenues to be received from such contracts will meet expectations. In addition, several clients, particularly in the communications and technology industries, have experienced substantial price competition. As a result, the Company may face increasing price pressure from such clients, which could negatively affect its operating performance. Furthermore, IMG’s results of operations have recently suffered as a result of weak conditions in the communications industry. If this weakness continues, the Company’s business, results of operations and financial condition could be adversely affected. The Company’s failure to keep its technology up to date may prevent the Company from remaining competitive. Technology is a critical component of the Company’s success, whether it is one of its billing software products provided to a client through a license or data processing outsourcing arrangement or technology used by customer management or employee care agents in connection with outsourcing services. In order to remain competitive, the Company will need to continue to invest in the development of new and enhanced technology. Although the Company is committed to further investment in development, there can be no assurance that the Company’s technology will be adequate to meet its future needs or enable the Company to remain competitive. The Company’s failure to keep its technology up to date may hinder its ability to remain competitive. As a result, competitors could attract business from the Company’s existing and potential clients and the Company’s revenues could decrease. Defects or errors within its software products could adversely affect the Company’s business, results of operations and financial condition. Design defects or software errors may delay product introductions or damage client satisfaction and may have a materially adverse effect on the Company’s business, results of operations and financial condition. The Company’s billing software products are highly complex and may, from time to time, contain design defects or software errors that may be difficult to detect and/or correct. Since the Company’s billing software products are used by the Company and its clients to perform critical business functions, design defects, software errors or other potential problems within or outside of the Company’s control may arise from the use of its software. It may also result in financial or other damages to the clients, for which the Company may be held responsible. Although the Company’s license agreements with its clients generally contain provisions designed to limit the Company’s exposure to potential claims and liabilities arising from client problems, these provisions may not effectively protect the Company against such claims in all cases and in all jurisdictions. Claims and liabilities arising from client problems could also damage the Company’s reputation, adversely affecting its business, results of operations and financial condition. Emergency interruption of data centers and customer management and employee care contact centers could have an adverse, material effect on the Company’s financial condition and results of operations. The Company’s outsourcing operations are dependent upon its ability to protect its proprietary software and client information maintained in its data processing, customer management and employee care contact centers against damage that may be caused by fire, natural disasters, power failure, telecommunications failures, computer viruses, acts of sabotage or terror and other emergencies. In the event the Company experiences a temporary or permanent interruption at one or more of its data or contact centers, through casualty, operating malfunction or other acts, the Company may be unable to provide the data processing, customer management and employee care services it is contractually obligated to deliver. This could result in the Company being required to pay contractual damages to some clients or allow some clients to terminate or renegotiate their contracts. Notwithstanding contingency plans and precautions taken to protect the Company and its clients from events that could interrupt delivery of services, there can be no assurance that such interruptions would not result in a prolonged interruption in the Company’s ability to provide support services to its clients. Additionally, the Company maintains property and business interruption insurance; however, such insurance may not adequately compensate the Company for any losses it may incur.

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If the global trend toward outsourcing does not continue, the Company’s financial condition and results of operations could be materially affected. Revenue growth depends in large part on the industry trend toward outsourcing these services, particularly as it relates to the Company’s customer management and employee care outsourcing operations. Outsourcing involves companies contracting with a third party, such as Convergys, to provide customer management and employee care services rather than perform such services in-house. There can be no assurance that this trend will continue, as organizations may elect to perform such services in-house. A significant change in this trend could have a materially adverse effect on the Company’s financial condition and results of operations. If the Company is unable to identify and complete appropriate acquisitions as it has historically, the Company may not be able to grow at the same rate that it has historically. Convergys’ growth has been enhanced through acquisitions of other businesses including their products and licenses. The Company continues to pursue strategic acquisitions. If the Company is unable to make appropriate acquisitions on reasonable terms, whether for cash, Convergys securities or both, it may be difficult for the Company to achieve the same level of growth as historically achieved. The Company is susceptible to business and political risks from international operations that could result in reduced revenues or earnings. Convergys operates businesses in many countries outside the United States, which are located throughout North and South America, Europe, the Middle East and the Asian Pacific region. In connection with its strategy, the Company plans to capture more of the international billing and employee care markets. Additionally, there is increasing demand for offshore customer management outsourcing capacity from North American companies. As a result, the Company expects to continue expansion through start-up operations and acquisitions in additional countries. Expansion of its existing international operations and entry into additional countries will require management attention and financial resources. In addition, there are certain risks inherent in conducting business internationally including: exposure to currency fluctuations, longer payment cycles, greater difficulties in accounts receivable collection, difficulties in complying with a variety of foreign laws, unexpected changes in regulatory requirements, difficulties in staffing and managing foreign operations, political instability and potentially adverse tax consequences. To the extent that the Company does not manage its international operations successfully, its business could be adversely affected and its revenues and/or earnings could be reduced. In addition, there has been an increasing amount of political discussion and debate related to worldwide outsourcing, particularly from the United States to offshore locations. There is federal and state legislation currently pending related to this issue. It is too early to determine if there would be any impact, however, future legislation, if enacted, could have an adverse effect on the Company’s results of operations and financial condition. If the U.S. dollar does not strengthen, the Company’s earnings will decrease. CMG serves an increasing number of its U.S.-based customer management clients using contact center capacity in Canada and in India. Although the contracts with these clients are typically priced in U.S. dollars, a substantial portion of the costs incurred by CMG to operate these non-U.S. contact centers are denominated in Canadian dollars or India rupees, which represents a foreign exchange exposure to the Company. Although the Company enters into forward exchange contracts to limit potential foreign currency exposure, the Company does not fully hedge this exposure. As the U.S. dollar weakened during 2003, the operating expenses of these contact centers, once translated into U.S. dollars, increased in comparison to prior years. The increase in operating expenses was mostly offset by gains realized through the settlement of Canadian dollar forward exchange contracts. However, if the U.S. dollar does not strengthen, the Company’s earnings will decrease. If the Company does not effectively manage its capacity, its results of operations could be adversely affected. The Company’s ability to profit from the global trend toward outsourcing depends largely on how effectively it manages its customer management and employee care contact center capacity. There are several factors and trends that have intensified the challenge of contact center management. In order to create the additional capacity necessary to accommodate new or expanded outsourcing projects, the Company must consider opening new contact centers. The opening or expansion of a contact center may result, at least in the short term, in idle capacity until any new or expanded program is implemented fully. The Company periodically assesses the expected long-term capacity utilization of its contact centers. As a result, it may, if deemed necessary, consolidate, close or partially close under-performing contact centers in order to maintain or improve targeted utilization and margins. There can be no assurance that the Company will be able to achieve or maintain optimal utilization of its contact center capacity.

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The Company’s failure to successfully manage consolidation could cause its business to suffer. During the fourth quarter of 2002, the Company announced a restructuring plan that included a reduction in work force and a consolidation of certain facilities to decrease its costs and create greater operational efficiencies. As part of the consolidation of facilities, the Company believes that it will sublease or assign a portion of that surplus space and recover certain costs associated with it. To the extent that it is not successful in achieving this result, the Company’s expenses will increase. If the Company is unable to hire or retain qualified personnel in certain areas of its business, its ability to execute its business plan could be impaired and revenues could decrease. Convergys employs over 55,000 employees worldwide. Despite the headcount reductions that were made in connection with its 2002 restructuring plan, the Company continues to recruit and hire qualified persons in the research and development, sales, marketing, and administrative and services areas of its business in several parts of the world. At times, the Company has experienced difficulties in hiring personnel with the right training or experience. Additionally, particularly with regards to CMG where the business is very labor-intensive, quality service depends on the Company’s ability to control personnel turnover. Any significant increase in the employee turnover rate could increase recruiting and training costs and decrease operating effectiveness and productivity. Also, if the Company would obtain several significant new clients or implement several new, large-scale programs, it may need to recruit, hire and train qualified personnel at an accelerated rate. The Company may not be able to continue to hire, train and retain sufficient, qualified personnel to adequately staff new client projects. Because a significant portion of the Company’s operating costs relate to labor costs, an increase in wages, costs of employee benefits or employment taxes could have a materially adverse effect on the Company’s business, results of operations or financial condition. Continued war and terrorist attacks or other civil disturbances could lead to economic weakness and could disrupt the Company’s operations resulting in a decrease of its revenues and earnings. In March 2003, the United States went to war against Iraq and, in September 2001, the United States was a target of unprecedented terrorist attacks. These attacks have caused uncertainty in the global financial markets and in the United States economy. The war and any additional terrorists attacks may lead to continued armed hostilities or further acts of terrorism and civil disturbances in the United States or elsewhere, which may contribute to economic instability in the United States and disrupt Convergys’ operations. Such disruptions could cause service interruptions or reduce the quality level of the services that the Company provides, resulting in a reduction of its revenues. In addition, these activities may cause the Company’s clients to delay or defer decisions regarding their use of the Company’s services and, thus, delay the Company’s receipt of additional revenues.

Item 2. Properties

The Company leases space for offices, data centers and contact centers on commercially reasonable terms. Domestic facilities are located in Arizona, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Louisiana, Mississippi, Missouri, Nebraska, New Jersey, North Carolina, Ohio, Oklahoma, Tennessee, Texas, Utah, Virginia, Washington and Wisconsin. International facilities are located in Australia, Brazil, Canada, China, England, France, Germany, India, Israel, Japan, Mexico, the Philippines, Portugal, Scotland, Singapore, Spain, Sri Lanka and Switzerland. Upon the expiration or termination of any such leases, the Company could obtain comparable office space. In October 2003, the Company purchased the Atrium One office building in downtown Cincinnati, Ohio, including adjacent land and buildings. The purchase was made in connection with the Company’s plan to consolidate its Cincinnati, Ohio, and Norwood, Ohio-based employees into Atrium One, its corporate headquarters. The Company anticipates that it will invest approximately $55 million in additional funds into the facility over the next three years related to building improvements, fixtures, equipment, lease buy-outs and adjacent land. In June 2003, Wachovia Development Corporation (“Lessor”), a wholly owned subsidiary of Wachovia Corporation, acquired the Orlando, Florida, office complex, which the Company previously leased from a special purpose entity under a synthetic lease arrangement that had qualified as an operating lease. The Lessor acquired the office complex for $65.0 million, its appraised value, and began leasing it to the Company under a lease that expires June 2010. Under the lease agreement, which has been classified as an operating lease, the Company’s monthly lease payments include a fixed and variable component. Upon termination or expiration, the Company must either purchase the property from the lessor for $65.0 million or arrange to have the office complex sold to a third party. If the office complex is sold to a third party for an amount less than the $65.0 million financed by the Lessor, the Company has agreed under a residual value guarantee to pay the Lessor up to $55.0 million. If the office complex is sold to a third party for an amount in excess of $65.0 million, the Company is entitled to collect the excess. For further discussion of this arrangement, see Note 13 of Notes to Financial Statements.

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IMG also leases some of the computer hardware, computer software and office equipment necessary to conduct its business. The Company believes that its facilities and equipment are adequate and have sufficient productive capacity to meet its current needs. The property of the Company is principally computer and communications equipment and software that does not lend itself to description by character and location of principal units. Other property of the Company is principally buildings and leasehold improvements.

Item 3. Legal Proceedings

None.

Item 4. Submission of Matters to a Vote of the Security Holders

There were no matters submitted to a vote of security holders in the fourth quarter of 2003.

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Executive Officers of the Registrant The following information is included in accordance with the provisions for Part III, Item 10. As of December 31, 2003, the Company’s management committee members were:

Officers are elected annually, but are removable at the discretion of the Board of Directors. JAMES F. ORR , Chairman of the Board since April 25, 2000; Chief Executive Officer of the Company since 1998; Chief Operating Officer of Cincinnati Bell Inc. (CBI), 1996-1998. KAREN R. BOWMAN , President, Employee Care since 1999; General Counsel of CMG from 1996–1999. THOMAS A. CRUZ, JR. , Senior Vice President, Human Resources and Administration since January 21, 2003; Vice President, Human Resources and Administration, 1997–2002. DAVID F. DOUGHERTY , Executive Vice President, Global Information Management since January 21, 2003; Chief Development Officer of the Company, 2000-2002; President of CMG, 1995-2000. JOHN C. FREKER , President of Customer Management since January 21, 2003; Executive Vice President, Operations, CMG, 1999-2002. MAUREEN P. GOVERN , Chief Technology Officer since 2002; Vice President of Advanced Technology Development, Cellular Infrastructure of Motorola, 1997-2002.

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Name

Age

Title

James F. Orr (a) 58 Chairman of the Board, President and Chief Executive Officer

Karen R. Bowman 40 President, Employee Care

Thomas A. Cruz, Jr.

56

Senior Vice President, Human Resources and Administration

David F. Dougherty

47

Executive Vice President, Global Information Management

John C. Freker 45 President, Customer Management

Maureen P. Govern 48 Chief Technology Officer

William H. Hawkins II

55

Senior Vice President, General Counsel and Secretary

Stephen L. Robertson

52

President, Information Management International

Steven G. Rolls

49

Executive Vice President, Global Customer Management and Employee Care

Ronald E. Schultz

49

Senior Vice President, Business Development

Larry S. Schwartz

44

President, Information Management North America

Earl C. Shanks 47 Chief Financial Officer

(a) Member of the Board of Directors and Executive Committee.

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WILLIAM H. HAWKINS II , Senior Vice President, General Counsel and Secretary of the Company since January 21, 2003; General Counsel and Secretary, 2001-2002; Associate General Counsel and Secretary of the Company, 2000-2001; Frost & Jacobs, 1977-2000; Partner of Frost & Jacobs, 1984-2000. STEPHEN L. ROBERTSON , President of Information Management International since June 1, 2002; Executive Vice President of IMG, 1999-2001, President of IMG’s Telecom Solutions Group, 1996-1999. STEVEN G. ROLLS , Executive Vice President, Global Customer Management and Employee Care since January 21, 2003; Chief Financial Officer of the Company, 1998-2003; Vice President and Controller of The BF Goodrich Company, 1993-1998. RONALD E. SCHULTZ , Senior Vice President, Business Development since January 21, 2003; President of CMG, 2000-2003; Chief Operating Officer of CMG, 1995-2000. LARRY S. SCHWARTZ , President, Information Management North America since January 21, 2003; Executive Vice President, Information Management North America, 2002-2003; Chief Executive Officer of E-Pen InMotion, 2001-2002; Group Vice President and General Manager of Compaq Telecom, 1997-2001. EARL C. SHANKS , Chief Financial Officer since November 13, 2003; Senior Vice President and Chief Financial Officer of NCR Corporation, 2001-2003; Vice President of Corporate Finance of NCR Corporation, 1998-2001.

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PART II

Item 5. Market for the Registrant’s Common Equity and Related Security Holder Matters

Convergys Corporation (symbol: CVG) common shares are listed on the New York Stock Exchange. As of January 31, 2004, there were 15,537 holders of record of the 174,659,684 outstanding common shares of the Company. The high, low and closing prices of its common shares for each quarter in 2003 and 2002 are listed below:

The Company did not declare any dividends during 2003 or 2002 and does not anticipate doing so in the near future. Equity Plans

Quarter

1st

2nd

3rd

4th

2003 High $ 16.50 $ 18.38 $ 19.60 $ 20.80 Low $ 11.30 $ 12.75 $ 15.23 $ 13.71 Close $ 13.20 $ 16.00 $ 18.34 $ 17.46

2002 High $ 37.98 $ 30.79 $ 19.47 $ 17.90 Low $ 29.10 $ 18.14 $ 13.38 $ 12.50 Close $ 29.57 $ 19.48 $ 15.03 $ 15.15

The following table shows certain information as of December 31, 2003 with respect to compensation plans under which common shares of the Company are authorized for issuance:

No. of Common Shares to be issued

upon exercise of outstanding options

Weighted average

exercise price of outstanding

options

Number of common

shares remaining available for

future issuance

Equity compensation plans approved by shareholders (1) 20,653,026 $ 25.14 9,471,298 Equity compensation plans not approved by shareholders (2) 536,890 $ 3.15 —

Total 21,189,916 $ 24.59 9,471,298

(1) Represents stock options or shares issued under the Company’s Long-Term Incentive Plan. See Note 12 to Notes to Financial Statements for further discussion.

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(2) As disclosed in Note 12 of Notes to Financial Statements, in connection with its acquisition of Geneva Technology Ltd. (Geneva), the Company converted outstanding options to acquire Geneva shares into options to acquire Convergys shares.

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Item 6. Selected Financial and Operating Data

(Amounts in Millions Except Per Share Amounts)

2003

2002

2001

2000

1999

Results of Operations

Revenues $ 2,288.8 $ 2,286.2 $ 2,320.6 $ 2,196.6 $ 1,784.9 Costs and expenses (1) 1,996.4 2,032.9 2,044.0 1,876.0 1,549.7 Operating income 292.4 253.3 276.6 320.6 235.2 Equity in earnings (loss) of Cellular Partnerships (2) (12.6 ) 6.4 6.4 20.5 20.0 Other income (expense), net (3) (1.3 ) (4.3 ) (8.1 ) 2.2 0.3 Interest expense (6.9 ) (11.0 ) (20.0 ) (33.1 ) (32.5 )

Income before income taxes 271.6 244.4 254.9 310.2 223.0 Income taxes 100.0 98.5 116.1 121.0 85.9

Net income $ 171.6 $ 145.9 $ 138.8 $ 189.2 $ 137.1

Earnings per share:

Basic $ 1.18 $ 0.90 $ 0.82 $ 1.13 $ 0.84 Diluted $ 1.15 $ 0.88 $ 0.80 $ 1.09 $ 0.81

Weighted average common shares outstanding:

Basic 145.7 162.9 169.4 167.6 162.7 Diluted 148.8 166.1 174.4 174.2 168.9

Financial Position

Total assets $ 1,810.2 $ 1,619.5 $ 1,742.9 $ 1,804.1 $ 1,605.4 Total debt 134.8 55.3 133.5 292.0 298.8 Shareholders’ equity 1,143.5 1,126.3 1,226.6 1,124.0 943.7

Other Data

Cash provided (used) by:

Operating activities $ 362.8 $ 429.3 $ 334.7 $ 188.7 $ 462.0 Investing activities (237.2 ) (119.2 ) (150.4 ) (214.2 ) (278.0 ) Financing activities (100.6 ) (339.0 ) (192.5 ) 29.4 (144.6 ) Free cash flows (4) 164.0 208.5 316.2 46.1 154.7

(1) This includes restructuring, impairment and other charges. As disclosed in Notes 3 and 5 of Notes to Financial Statements, the Company recorded $1.0 in earnings and $107.7 and $89.8 of charges related to business restructuring, asset impairment and other charges during 2003, 2002 and 2001, respectively.

(2) Equity in earnings (loss) of Cellular Partnerships includes a $9.9 ($6.4 after tax) loss from the settlement of a lawsuit during 2003. During 1999, $12.4 ($7.8 after tax) was recorded for non-recurring charges by the partnerships.

(3) Other income (expense), net in 2001 includes a write-down of equity investments of $6.5 ($6.5 after tax). During 1999, other income (expense) included a $1.9 ($1.2 after tax) non-recurring investment gain.

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(4 ) Free cash flows are not defined under accounting principles generally accepted in the United States and are calculated as cash flows from operations excluding the impact of the accounts receivable securitization less capital expenditures. Free cash flows are presented as an alternative measure of the Company’s ability to generate cash flows. For more detail, see the Financial Condition, Liquidity and Capital Resources section of this report.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Amounts in Millions Except Per Share Amounts)

Overview

Convergys Corporation (the Company or Convergys) is a global leader in the provision of outsourced customer management, employee care and integrated billing software services. The Company was spun off from its former parent company, Cincinnati Bell Inc. (CBI), in 1998. Convergys focuses on developing long-term strategic relationships with clients in employee- and customer-intensive industries including communications, technology and financial services as well as governmental agencies. The Company has two reporting segments: (i) the Customer Management Group (CMG), which provides outsourced marketing, customer support services and employee care services; and (ii) the Information Management Group (IMG), which provides outsourced billing and information services and software.

CMG

CMG provides outsourced customer management and employee care services for its clients utilizing its advanced information systems capabilities, human resource management skills and industry expertise. In its multi-channel contact centers, CMG service agents provide a full range of customer support and employee care services including initial product information requests, customer retention initiatives, technical support inquiries for consumers and business customers, staffing, benefits administration, payroll administration and general human resource and administration services.

CMG principally focuses on developing long-term strategic outsourcing relationships with large clients in the communications, technology and financial services industries for customer management services and large employers in any industry or government for employee care services. CMG focuses on these types of clients because of the complexity of services required, the anticipated growth of their market segments and their increasing need for more cost-effective customer management and employee care services. CMG generally recognizes revenues as services are performed based on staffing hours, number of contacts or participants handled by CMG or a flat monthly fee. Supplemental revenues can sometimes be earned depending on service levels or achievement of certain performance measurement targets. The Company recognizes these supplemental revenues only after it has achieved the required measurement target.

The Company expects that growth of outsourced customer management and employee care services will be driven by the trend of large companies and governmental agencies turning to outsourcers to provide cost-effective, high quality customer support and employee care solutions. Additionally, the Company also believes that the expansion of offshore capacity, which provides customer management clients with significantly lower costs and a highly educated labor force, will drive growth in the industry. Despite this trend, CMG’s operating margins in the near term will continue to be challenged as pricing pressure intensifies and as it continues to invest in its employee care operations and customer contact center capacity in India and in the Philippines.

IMG

IMG serves clients principally by providing and managing complex billing and information software that addresses all segments of the communications industry. IMG provides its software products in one of three delivery modes: outsourced, licensed or build-operate-transfer (BOT). In the outsourced delivery mode, IMG provides the billing services by running its software in one of its data centers. In the licensed delivery mode, the software is licensed to clients who perform billing internally. Finally, the BOT delivery mode entails IMG implementing and initially running its software in the client’s data center with the option of transferring the operation of the center to the client at a future date.

In 2003, 57.9% of IMG’s revenues were for data processing services generated from recurring monthly payments from its clients based upon the number of client subscribers or bills processed by IMG in its data centers. Most of IMG’s wireless data processing agreements, which are typically for multiple years, are priced on a monthly, per subscriber or per event basis. Professional and consulting services for installation, implementation, customization and enhancement services accounted for 12.1% of IMG’s 2003 revenues. The Company invoices its clients for these services based on time and material costs at contractually agreed upon rates, or in some instances, for a fixed fee. IMG’s remaining revenues were primarily from software license arrangements and international sales. International revenues consist of a mix of professional and consulting, license and support and maintenance revenues.

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After an extended period of rapid growth, the communications industry has experienced over the last couple of years one of the most difficult periods in its history. Communications companies have focused their attention on cost reduction and margin improvement, with lower investment in billing information systems. This has had an adverse impact on IMG’s revenues and operating margin. For the near future, IMG expects that it will continue to be challenged by pricing pressure and nominal subscriber growth by leading North American wireless carriers. However, as communications companies continue to expand their service offerings, the requirements of billing information systems are becoming increasingly complex. In order to remain competitive, the Company believes that many communications companies will turn to third-party vendors, such as Convergys, for their billing information system needs.

Despite the challenges facing both segments, the Company believes that its financial structure and condition are solid. At December 31, 2003, total capitalization was $1,278.3, consisting of $134.8 of short-term and long-term debt and $1,143.5 of equity. Although the Company has occasionally used its various borrowing facilities to help fund its investing and financing activities, cash flows from operating activities have been the major source of funding.

Results of Operations

Consolidated Results

2003 vs. 2002

2003

2002

% Change 03 vs. 02

2001

% Change 02 vs. 01

Revenues $ 2,288.8 $ 2,286.2 — $ 2,320.6 (1 ) Costs and Expenses:

Costs of products and services (1) 1,320.9 1,264.9 4 1,271.4 (1 ) Selling, general and administrative expenses 458.2 409.5 12 390.6 5 Research and development costs 94.3 113.7 (17 ) 115.9 (2 ) Depreciation 108.9 122.7 (11 ) 125.5 (2 ) Amortization 15.1 14.4 5 50.8 (72 ) Restructuring and impairment charges (1.0 ) 107.7 — 58.0 86 Acquisition and integration costs — — — 31.8 —

Total costs and expenses 1,996.4 2,032.9 (2 ) 2,044.0 (1 )

Operating Income 292.4 253.3 15 276.6 (8 ) Equity in earning of Cellular Partnerships (12.6 ) 6.4 — 6.4 — Other income (expense), net (1.3 ) (4.3 ) (70 ) (8.1 ) (47 ) Interest expense (6.9 ) (11.0 ) (37 ) (20.0 ) (45 )

Income Before Income Taxes 271.6 244.4 11 254.9 (4 ) Income taxes 100.0 98.5 2 116.1 (15 )

Net Income $ 171.6 $ 145.9 18 $ 138.8 5

Diluted Earnings Per Common Share $ 1.15 $ 0.88 31 $ 0.80 10

(1) Exclusive of depreciation and amortization.

The Company’s 2003 revenues totaled $2,288.8, flat compared to 2002. The revenue mix consisted of a 12% decrease in IMG revenues, offset by an 8% increase at CMG. The Company’s 2003 operating income was $292.4 versus $253.3 in the prior year. This 15% increase reflects the fluctuation in the restructuring and impairment charges, $19.4 in lower research and development costs and $13.8 in lower depreciation. Partially offsetting these items were the change in revenue mix (decrease in higher margin IMG revenues, partially offset by increase in lower margin CMG revenues), a $56.0 increase in the costs of providing services and a $48.7 increase in selling, general and administrative expenses.

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As discussed more fully under the heading “Restructuring, Impairment and Other Charges,” the Company incurred $107.7 in restructuring, impairment and other charges in 2002, of which $1.0 the Company reversed into income in 2003 as a change in accounting estimate.

The increase in costs of products and services was principally due to higher sales volume and direct labor costs at CMG, partially offset by savings that resulted from the restructuring actions that the Company initiated during the fourth quarter of 2002. As a percentage of revenues, 2003 costs of products and services increased to 57.7% from 55.3% in the prior year. The increase in selling, general and administrative expenses, which as a percentage of revenues increased to 20.0% during 2003 versus 17.9% in the prior year, reflects higher medical and benefit costs and further expansion of IMG’s international operations and CMG’s employee care operations. Research and development expenses decreased as a result of lower spending at both IMG and CMG. The decrease in depreciation expense was principally due to a recent slowdown in capital expenditures at IMG.

During the first quarter of 2003, the general partner of Cincinnati SMSA Limited Partnership, a provider of wireless communications of which the Company owns 45%, settled a lawsuit against the partnership for $22.0. The Company’s share of this loss was $9.9, which it recorded as a loss from its equity investment in the partnership. Including this settlement, the Company incurred an equity loss of $12.6 in 2003 versus equity earnings of $6.4 in 2002.

Interest expense decreased 37% in 2003 from the prior year, resulting from lower interest rates. The Company’s effective tax rate was 36.8% for 2003 versus 40.3% during 2002. The effective tax rate in 2002 was higher principally due to valuation allowances that were provided against international operating loss carryforwards.

As a result of the foregoing, 2003 net income was $171.6, an 18% increase from $145.9 in 2002. Earnings per diluted share increased by 31% to $1.15 from $0.88 in 2002. This includes the $9.9 ($6.4 after tax or $0.04 per diluted share) equity loss resulting from the partnership settlement in the first quarter of 2003. Additionally, this reflects the effect of $1.0 ($0.6 after tax or $0.00 per diluted share) in the restructuring accrual reversal and $107.7 ($76.8 after tax or $0.46) in restructuring and impairment charges recorded in 2003 and 2002, respectively. Weighted average diluted shares outstanding decreased to 148.8 from 166.1 as a result of the shares that were repurchased by the Company during 2003 and 2002 as discussed more fully in Note 11 of Notes to Financial Statements.

2002 vs. 2001

Revenues in 2002 totaled $2,286.2, a 1% decrease compared to 2001. The revenue decrease was attributable to a 4% decrease in IMG revenues offset by flat revenues at CMG. Operating income decreased 8% to $253.3 in 2002 from $276.6 in 2001, reflecting the decrease in revenues, an increase in CMG’s costs of products and services as a percentage of revenues, a higher level of sales, marketing and administrative expenses for both IMG and CMG and a $17.9 increase in restructuring activities, which is discussed more fully under the heading “Restructuring, Impairment and Other Charges.” Partially offsetting these items was $36.4 in lower amortization expenses resulting from the Company’s 2002 adoption of SFAS No. 142, which is discussed in further detail in Note 6 of Notes to Financial Statements.

Interest expense decreased 45% in 2002 as a result of lower borrowings and reduced interest rates. The Company’s effective tax rate was 40.3% in 2002, down from 45.5% in 2001 due to the 2001 non-deductible goodwill amortization and other charges, which were not fully tax deductible.

As a result of the foregoing, net income and diluted earnings per share increased to $145.9 and $0.88 in 2002 from $138.8 and $0.80 in 2001, respectively. This includes the effect of the $107.7 ($76.8 after tax or $0.46 per diluted share) and $89.8 ($76.7 after tax or $0.44) restructuring, impairment and other charges recorded in 2002 and 2001, respectively. This also reflects the impact of $36.4 ($29.4 after tax or $0.17 per diluted share) in lower amortization in 2002 versus 2001 due to the Company’s adoption of SFAS No. 142.

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Customer Management Group

2003 vs. 2002

2003

2002

% Change 03 vs. 02

2001

% Change 02 vs. 01

Revenues:

Communications $ 916.3 $ 911.6 1 $ 895.3 2 Technology 192.2 208.0 (8 ) 220.3 (6 ) Financial services 137.5 97.2 41 75.1 29 Other 258.9 180.7 43 204.0 (11 )

Total revenues 1,504.9 1,397.5 8 1,394.7 — Costs and Expenses:

Costs of products and services 943.5 858.3 10 837.1 3 Selling, general and administrative expenses 296.2 266.8 11 261.1 2 Research and development costs 6.5 10.7 (39 ) 12.1 (12 ) Depreciation 70.6 72.0 (2 ) 79.3 (9 ) Amortization 8.8 8.7 1 32.6 (73 ) Restructuring and impairment charges — 46.3 — 53.3 (13 )

Total costs and expenses 1,325.6 1,262.8 5 1,275.5 (1 )

Operating Income $ 179.3 $ 134.7 33 $ 119.2 13

Revenues

During 2003, CMG continued to capitalize on the growing trend of large companies and governmental agencies turning to outsourcers to provide cost-effective, high quality customer management and employee care services. Additionally, CMG benefited from the market’s growing demand for offshore services. However, despite its overall increase in revenues, CMG continued to face increasing pricing pressure. CMG’s 2003 revenues were $1,504.9, an 8% increase compared to 2002. This reflects increased levels of business with many of its top 20 clients, including several clients in the financial services sector, as well as revenues resulting from customer care services provided to the United States Postal Service and employee care services provided to the State of Florida. Also contributing to the increase was the July 2002 acquisition of Speech Solutions, a division of iBasis, Inc., which generated revenues of $21.5 in 2003 compared to $9.8 recognized from the date of acquisition through December 31, 2002. This was offset by $15.5 in lower revenues associated with the divestiture of two international contact centers in 2002. Revenues from communications clients were $916.3 during 2003, an increase of 1% compared to 2002. This reflects 38% growth in services provided to CMG’s largest wireless client, offset by a 30% reduction in spending by CMG’s largest long distance client. Technology service revenues decreased 8% compared to 2002, reflecting a 16% decrease in spending by CMG’s largest software client, offset by higher revenues from CMG’s largest Internet client. Revenues from financial services clients increased 41% to $137.5 as a result of an increase in volume from three of CMG’s largest clients in the financial services sector. Other revenues increased 43% compared to 2002, reflecting revenues generated from outsourcing services provided to the United States Postal Service and the State of Florida.

Costs and Expenses

CMG’s costs of products and services increased 10% from 2002 to $943.5, reflecting the higher volume of revenues and an approximate 2 point increase in direct labor costs as a percentage of revenues. The increase in direct labor costs as a percentage of revenues resulted from pricing pressure and higher wage, medical and benefit costs, partially offset by lower labor costs incurred as a result of increased utilization of CMG’s offshore contact centers in India. Selling, general and administrative expenses were $296.2 in 2003, an 11% increase compared to the prior year, reflecting higher medical and benefit costs, start-up costs associated with CMG’s expansion of its offshore facilities in India and the Philippines and approximately $18 in increased costs incurred in connection with further investment in CMG’s employee care business. This was partially offset by $9.2 in cost savings realized through restructuring activities initiated during the fourth quarter of 2002. Also, during 2003, CMG’s combined costs of products and services and selling, general and administrative expenses increased approximately $26 compared to 2002, as a result of the weakening of the U.S. dollar versus the Canadian dollar, where CMG operates a significant portion of its contact center capacity. However, this was mostly offset by gains that resulted from the settlement and maturity of CMG’s Canadian dollar forward exchange contracts. CMG’s research and development expenses decreased 39% to $6.5 from 2002, as CMG concentrated more of its technical resources on client service and administration rather than on research and development initiatives. Additionally, as discussed in further detail under the heading “Restructuring, Impairment and Other Charges,” CMG incurred $46.3 in restructuring and impairment charges in 2002.

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Operating Income

As a result of the foregoing, CMG’s 2003 operating income and margin increased to $179.3 and 11.9%, up from $134.7 and 9.6% in 2002.

2002 vs. 2001

Revenues

CMG’s 2002 revenues were $1,397.5, essentially flat compared to 2001, reflecting increased levels of business with several communications and financial services clients, partially offset by a $110.0 or 39% reduction in spending by CMG’s largest long distance client and by $12.0 in lower revenues associated with the divestiture of two international contact centers. Also contributing to the increase was the acquisition of Speech Solutions, a division of iBasis, Inc., which generated revenues of $9.8 in 2002 from the date of acquisition through the end of 2002. Revenues from communications clients were $911.6, a 2% increase compared to 2001, resulting from growth in services provided to two of CMG’s larger clients in this sector, offset by the reduction in spending by its largest long distance client. Revenues from financial services clients increased 29% to $97.2 as a result of an increase in volume from CMG’s three largest clients in the financial services sector. The lower revenues from CMG’s technology clients reflects a reduction of service provided to PC and equipment manufacturers, partially offset by $11.0 or 14% in increased revenues from CMG’s largest technology client. Other revenues decreased 11% from 2001 to $180.7, reflecting lower volume from clients in several sectors including consumer products, retail and transportation.

Costs and Expenses

The 3% increase in costs of products and services reflects higher compensation and medical benefit costs, partially offset by lower telecommunication rates which resulted in approximately $7 in savings. Selling, general and administrative expenses increased 2% to $266.8 in 2002 as a result of $3.5 in higher compensation and medical benefit costs and $4.0 in costs associated with further investment in CMG’s employee care business. This was partially offset by cost savings realized through the restructuring activities initiated during the third quarter of 2001. Depreciation expense decreased 9% to $72.0 in 2002 versus 2001, reflecting CMG’s reduction in contact center capacity that resulted from the restructuring activities initiated during the third quarter of 2001. The decrease in amortization expense resulted from the Company’s 2002 adoption of SFAS No. 142. As discussed more fully under the heading “Restructuring, Impairment and Other Charges,” restructuring and impairment charges reflect CMG’s restructuring activities initiated during the fourth quarter of 2002 and third quarter of 2001.

Operating Income

As a result of the foregoing, CMG’s operating income increased 13% to $134.7 in 2002 compared to $119.2 in 2001, and operating margin increased to 9.6% in 2002 from 8.6% in 2001.

Information Management Group

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2003

2002

% Change 03 vs. 02

2001

% Change 02 vs. 01

Revenues:

Data processing $ 458.0 $ 530.6 (14 ) $ 543.6 (2 ) Professional and consulting 95.8 169.5 (43 ) 184.0 (8 ) License and other 58.3 57.2 2 60.3 (5 ) International 171.8 131.4 31 138.0 (5 )

External revenues 783.9 888.7 (12 ) 925.9 (4 ) Intercompany revenues 4.8 10.5 (54 ) 12.0 (13 )

Total revenues 788.7 899.2 (12 ) 937.9 (4 ) Costs and Expenses:

Costs of products and services 383.2 417.1 (8 ) 446.3 (7 ) Selling, general and administrative expenses 161.4 145.2 11 133.2 9 Research and development costs 87.8 103.0 (15 ) 103.8 (1 ) Depreciation 30.6 42.9 (29 ) 38.7 11 Amortization 6.3 5.7 11 18.2 (69 ) Restructuring and impairment — 53.6 — 4.7 —

Total costs and expenses 669.3 767.5 (13 ) 744.9 3

Operating Income $ 119.4 $ 131.7 (9 ) $ 193.0 (32 )

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2003 vs. 2002

Revenues

Beginning in the second half of 2002 and continuing throughout 2003, IMG’s results of operations were adversely affected by global weakness in the communications industry. Although the global environment for IMG’s business does not appear to be weakening, it remains challenging. This has led to the deferral of billing decisions and delays in implementation of purchased systems by many operators as well as increased pricing pressure. Additionally, wireless subscriber growth in North America has slowed from prior years, and the rollout of advanced 3G services by wireless providers worldwide has been much slower than originally anticipated. IMG’s 2003 external revenues were $783.9, a 12% decrease from 2002. Data processing revenues decreased 14% in 2003 compared to 2002, reflecting a 4% decrease in the number of year-over-year wireless subscribers processed, a lower wireless average per subscriber processing rate and a decrease in wireline revenues. This was partially offset by a 16% increase in cable data processing revenues. The decrease in wireless subscribers resulted from subscribers transferred off IMG’s system to clients’ in-house systems during the third quarter of 2002 and the second quarter of 2003. This was partially offset by nominal subscriber growth by IMG’s other wireless clients and a new wireless client who was migrated to IMG’s system during the second half of 2003. Wireless average per subscriber processing rates decreased due to contractual subscriber rate reductions and a change in mix to a greater proportion of business with IMG’s larger clients, for whom the Company charged lower rates due to their significantly higher volumes. The decrease in wireline data processing revenues represents the impact of lower pricing granted to a client in connection with a contract extension. The increase in cable data processing revenues reflects services provided to a new client.

Professional and consulting revenues for 2003 decreased 43% from 2002 as a result of decreased enhancement requests and implementations of new systems from IMG’s wireless and cable clients. IMG’s license and other revenues increased to $58.3 in 2003, reflecting the expansion of IMG’s relationships with several of its North American cable clients. IMG’s international revenues increased 31% to $171.8, reflecting combined revenue growth of approximately $33 resulting from the July 2002 acquisition of Telesens and IMG’s expansion in the Asian Pacific and Latin American regions.

Costs and Expenses

IMG’s costs of products and services decreased 8% to $383.2 in 2003 compared to 2002, reflecting savings resulting from actions taken as a result of the restructuring announced in the fourth quarter 2002. Selling, general and administrative expenses increased 11%, reflecting IMG’s further expansion in its international operations, particularly in the Asian Pacific and Latin American markets, as well as increased benefit costs. Research and development expenses decreased 15%, reflecting savings resulting from the 2002 restructuring initiatives, as well as ongoing convergence of IMG’s billing platforms. Depreciation expense decreased 29%, reflecting a recent slowdown in capital expenditures, $2.6 in lower depreciation resulting from assets that were disposed of during the fourth quarter of 2002 and $2.1 of depreciation related to assets that were transferred from IMG to the Company’s corporate operations at the beginning of 2003. Additionally, as discussed in further detail under the heading “Restructuring, Impairment and Other Charges,” IMG incurred $53.6 in restructuring and impairment charges in 2002.

Operating Income

As a result of the foregoing, IMG’s operating income decreased to $119.4 in 2003 from $131.7 in 2002, and operating margin increased to 15.2% in 2003 from 14.8% in the prior year.

2002 vs. 2001

Revenues

Excluding intercompany revenues, IMG’s 2002 external revenues were $888.7, a 4% decrease from 2001. Data processing revenues decreased 2%. 16% wireless subscriber growth and an increase in cable data processing revenues were more than offset by lower wireless average per subscriber processing rates. Wireless average per subscriber processing rates decreased due to subscriber rate reductions in exchange for the extension of existing contractual relationships, increased amortization of client acquisition costs and a change in mix to a greater proportion of business with IMG’s larger clients, for whom the Company charged lower rates due to their significantly higher volumes. The 16% wireless subscriber growth rate represents a significant slowdown compared to the 33% subscriber growth rate in 2001. This decrease represents slow organic subscriber growth by IMG’s wireless clients as well as subscribers transferred off its systems to clients’ in-house systems for wireless properties they acquired. Professional and consulting service revenues decreased 8% in 2002 as a result of IMG’s wireless clients’ postponement of and reduction in further system enhancements. License and other revenues in 2002 decreased 5% compared to 2001, reflecting the transition of IMG’s license agreement with AT&T Broadband to a data processing outsourcing agreement, offset by a new license agreement with Time Warner. International revenues decreased $6.6 in 2002 due to approximately $24 in lower software sales from existing European and Middle Eastern markets and $12 in lower Latin American revenues resulting from the completion of the Atlys implementation for Telesp Celular during the first half of 2001. This was partially offset by combined revenue growth of approximately $30 resulting from the July 2002 acquisition of Telesens and IMG’s expansion into the Asian Pacific region.

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Costs and Expenses

IMG’s costs of products and services decreased 7% as a result of lower revenues and lower bill finishing rates that generated approximately $6 in savings. Selling, general and administrative expenses increased 9%, reflecting IMG’s further investment in its international operations, which was mainly driven by approximately $9 in additional costs incurred in connection with IMG’s expansion in the Asian Pacific market, as well as its increased focus on sales and marketing efforts. Depreciation expense increased 11% due to further upgrades of IMG’s two data centers as well as additional investment in its international operations. The decrease in amortization expense resulted from the Company’s 2002 adoption of SFAS No. 142. As discussed more fully under the heading “Restructuring, Impairment and Other Charges,” the increase in restructuring and impairment resulted from the restructuring plan initiated during the fourth quarter of 2002.

Operating Income

As a result of the foregoing, IMG’s operating income decreased 32% to $131.7 in 2002 versus prior year, and its operating margin decreased to 14.8% in 2002 from 20.8% in 2001.

Restructuring, Impairment and Other Charges

As discussed more fully in Notes 3 and 5 to Notes to Financial Statements, the Company recorded the following restructuring, impairment and other charges:

2002

In response to continued economic weakness, the Company announced a restructuring plan during the fourth quarter of 2002 that included a reduction in headcount affecting professional and administrative employees worldwide and the consolidation or closure of certain CMG and IMG facilities. The restructuring plan resulted in charges of $26.0 related to severance, $49.5 of facility abandonment costs associated with ongoing lease obligations and $6.7 of asset impairment for the disposal of leasehold improvements and equipment for the facilities that the Company had abandoned by the end of 2002. In addition, the Company recorded $12.7 in asset impairments, consisting principally of purchased software that the Company did not deploy or further market. The Company also recorded $12.8 of additional facility abandonment costs associated with the contact centers that were closed in connection with the restructuring plan initiated by CMG during the third quarter of 2001.

The facility abandonment component of the charge was equal to the future costs associated with those abandoned facilities, net of the proceeds from any probable future sublease agreements. The Company used estimates, based on consultation with real estate advisors, to arrive at the proceeds from any future sublease agreements. The Company will continue to evaluate its estimates in recording the facilities abandonment charge. As a result, there may be additional charges or reversals in the future.

Combined, these items reduced operating income, net income and earnings per diluted share for 2002 by $107.7, $76.8 and $0.46, respectively. These charges reduced 2002 operating income for IMG and CMG by $53.6 and $46.3, respectively, with the balance affecting Corporate.

During the fourth quarter of 2003, the Company reversed $1.5 of facility abandonment costs due to such costs being lower than originally anticipated. This was partially offset by $0.5 in additional severance costs. These items increased 2003 operating income, net income and earnings per diluted share by $1.0, $0.6 and $0.00, respectively.

The Company began the facility closures and headcount reductions during the fourth quarter of 2002 and substantially completed them by the end of 2003. These initiatives resulted in approximately 1,350 headcount reductions compared with the 1,050 that were originally planned. Despite the higher number of redundancies, the average severance payment per employee has been lower due to a lower mix of redundancies of higher paid employees. Accordingly, actual severance costs exceeded the original charge by only $0.5.

These actions are expected to result in cash costs of $85.8, of which $29.1 was spent through the end of 2003, related principally to facility abandonment costs and severance payments. Except for approximately $5 in severance that will be paid in early 2004, the remaining payments relate to facility abandonment costs that will be paid over several years until the leases expire. Completion of these actions is expected to result in annual operating expense savings of approximately $80, which should be fully realized during 2004. During 2003, the Company realized approximately $65 in savings as a result of these initiatives.

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Table of Contents

2001

During 2000, CMG revenues increased 25%, and early 2001 projections called for 20% or more revenue growth. Given the six- to nine-month lead time needed to build out a contact center, some of the contact center expansion initiated during 2000 was in anticipation of significant 2001 growth. In the second quarter of 2001, the impact of the general global economic slowdown and, in particular, the downturn of U.S. telecommunications companies, became apparent. Accordingly, after performing a detailed review of existing contact center capacity, the Company approved a plan in the third quarter of 2001 to reduce existing CMG contact center capacity and to eliminate 550 employees in contact center management and administrative functions. The plan resulted in charges of $11.8 for facility abandonment, $6.4 for severance and $10.8 for the impairment of leasehold improvements. As a result of the workstation reduction and changes in market demand for certain contact center technologies, the plan also resulted in the write-off of $16.2 in contact center software that was never deployed. Additionally, CMG’s plan resulted in a charge of $8.1 to write down investments in certain of CMG’s European contact center operations. In the aggregate, the approval of these plans resulted in the recording of a $53.3 restructuring and impairment charge in the third quarter of 2001. The Company closed the centers in 2001 and terminated 535 professional and administrative employees by the end of the third quarter of 2002. The remaining headcount reductions were completed during the fourth quarter of 2002.

The $11.8 charge for facility abandonment costs was equal to the future costs associated with those abandoned facilities, net of the proceeds from any probable future sublease agreements. The Company used estimates, based on consultation with real estate advisors, to arrive at the proceeds from any future sublease agreements.

Excluding the $12.8 of additional facility abandonment costs that was provided during the fourth quarter of 2002, the total cash cost of these actions is expected to be $20.2. Through the end of 2003, the Company paid $18.2 primarily for severance payments and facility abandonment costs. As of December 31, 2003, there was a remaining restructuring accrual of $2.0 related to ongoing facility and abandonment costs, which the Company will pay over the remaining lease terms.

Unrelated to the CMG restructuring activities, during the third quarter of 2001, IMG recorded an impairment charge of $4.7 related to purchased software intended to be marketed and sold that was never deployed. Also included in non-operating expense was a $6.5 charge to reflect the other than temporary decline in value of certain equity investments.

In conjunction with the Company’s acquisition of Geneva Technology Ltd. (Geneva) in 2001, the Company recorded $31.8 in transaction and integration costs during the second quarter of 2001. The integration activities were completed during 2002.

Combined, these items reduced operating income, income before taxes, net income and earnings per diluted share for 2001 by $89.8, $96.3, $76.7 and $0.44, respectively. These special items reduced 2001 operating income for CMG and IMG by $53.3 and $4.7, respectively.

The Company does not believe that these restructuring actions are indicative of known trends that should be expected in the future. However, if weakness in the communications market continues for extended periods of time, the Company may be required to take additional cost-cutting initiatives.

Client Concentration

Convergys’ five largest clients accounted for 51.7% of its revenues in 2003, down from 55.6% in 2002. The risk posed by this revenue concentration is reduced somewhat by the long-term contracts the Company has with some of its largest clients. The Company serves AT&T Wireless, its largest client with 21.2% of 2003 revenues; Sprint PCS, the Company’s second largest client; AT&T, the Company fourth largest client; and Comcast, the Company’s fifth largest client under information management and customer management contracts. DirecTV, its third largest client in 2003, is served by the Company under a customer management contract. It should be noted that during the fourth quarter of 2003, the Company announced that its information management contract with Sprint PCS had been extended. Volumes under certain of the Company’s multiple year contracts are subject to variation based, among other things, on the clients’ spending on outsourced customer support and subscriber levels.

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Table of Contents

Business Outlook

Current economic factors and other events may have a significant impact on the Company’s future period results. These include, but are not limited to the following:

• Both IMG and CMG will continue to face increasing competition within the industries in which they operate. As a result, the trend of granting contract rate reductions and cash signing bonuses in exchange for extensions of existing contractual relationships may continue, which could result in a negative near-term impact on the Company’s revenues, operating income and/or cash flow. More specifically, the Company expects a material decline in its IMG revenues related to its data processing relationship with its wireless clients, including Sprint PCS. Additionally, for the near future, IMG expects that it will likely experience nominal subscriber growth from leading North American wireless carriers.

• As discussed in Note 4 of the Notes to Financial Statements, in December 2003, the Company acquired certain billing and customer care assets from ALLTEL Communications Inc., a subsidiary of ALLTEL. As part of the acquisition, Convergys will begin providing billing services to more than 10.5 million additional wireless and wireline subscribers. Convergys paid $37, representing approximately one times the anticipated 2004 revenues. The acquisition is expected to have a neutral impact on the Company’s 2004 net income and diluted earnings per share.

• The Company, as most other companies, experienced during 2003, and will continue to see, increased costs for wages and benefits,

including health care.

• The Company’s operating margins in the near term will continue to be challenged as a result of its further investment in its employee

care operations, and expansion of its customer contact center capacity in India and in the Philippines. This includes its domestic and overseas employee care operations.

• Pursuant to its long-term incentive plan, the Company historically has granted stock options to certain employees and directors. The Company accounts for these awards using the intrinsic value method pursuant to Accounting Principles Board Opinion 25 and related interpretations. With few exceptions, this has resulted in the recognition of no compensation expense, as the exercise price generally has been equal to the fair market value of the stock at the grant date. Beginning in 2004, the Company is planning to discontinue the granting of stock options to employees and directors. Instead, the Company plans to grant certain employees and directors restricted stock awards. Under the terms of the awards, the restrictions will lapse over a period of 3 to 6 years and in certain cases, will be subject to performance measures. This will result in compensation being recorded over the vesting period based on the number of shares and the fair market value of the stock as of the measurement date. The Company anticipates that this plan will impact full year 2004 diluted EPS by approximately $0.03. This expense will begin in the second quarter. The Company’s previous financial guidance included this impact.

As a result of the factors discussed above, for the full year of 2004, IMG revenues are expected to decline by 5% to 10% from the 2003 level, and operating margin to be down for the year. CMG revenues are expected to increase 7% to 12% from the 2003 level, and operating margin to be down slightly. For the full year 2004, diluted EPS is expected to be in the range of $0.85 to $1.00.

Financial Condition, Liquidity and Capital Resources

Liquidity and Cash Flows

Historically, cash flows from operating activities have been the major source of funding for the Company’s investing and financing activities. Additionally, from time to time, the Company uses its borrowing facilities including a commercial paper program backed by a $325 credit facility and a $200 accounts receivable securitization agreement, to fund these activities. See further discussion of these borrowing facilities under the section titled “Capital Resources, Off-Balance Sheet Arrangements and Contractual Commitments.”

26

• Based on U.S.-based customer management clients using CMG’s contact center capacity in Canada, the Company’s operating margin

will experience pressure associated with the weakening of the U.S. dollar versus Canadian dollar. Although the Company enters into forward exchange contracts to limit potential foreign currency exposure, the Company does not fully hedge against such exposure.

2003

2002

2001

Net cash flows from operations $ 362.8 $ 429.3 $ 334.7 Net cash flows used in investing (237.2 ) (119.2 ) (150.4 ) Net cash flows used in financing (100.6 ) (339.0 ) (192.5 ) Computation of Free Cash Flows:

Net cash flows from operations $ 362.8 $ 429.3 $ 334.7 Change in accounts receivable securitization (25.0 ) (130.0 ) 95.0 Capital expenditures (173.8 ) (90.8 ) (113.5 )

Free Cash Flows $ 164.0 $ 208.5 $ 316.2

Table of Contents

The Company’s cash flows from operating activities totaled $362.8 in 2003, compared to $429.3 in 2002 and $334.7 in 2001. The decrease in operating cash flows in 2003 compared with 2002 was largely due to the accounts receivable securitization. During 2003, net proceeds collected under the securitization were $25.0 compared with $130.0 in net proceeds collected during 2002. Additionally, deferred charges increased by $58.4 during 2003, reflecting $98.8 incurred in connection with implementation and customer acquisition costs, offset by $40.4 in related amortization. This compares with an increase of $7.3 during 2002. The Company also contributed $30.8 in 2003 to fund its cash balance plan in order to satisfy its 2003 and 2004 ERISA funding requirements in pension contributions, which resulted in an increase in other assets. This compares to contributions of $0.5 in 2002.

These items were partially offset by improvement in the Company’s days sales outstanding (DSO). Excluding the effects of the securitization, DSO decreased by 3 days to 73 days as of December 31, 2003. DSO is computed as follows: receivables, net of allowances, plus outstanding receivables sold under the securitization program divided by average days sales. Average days sales are defined as consolidated revenues during the quarter just ended divided by the number of calendar days in the quarter just ended. Additionally, the Company paid approximately $62 in lower taxes during 2003 compared to 2002, reflecting in part the acceleration of depreciation expense for tax purposes. Finally, during 2003, there was $40.1 in cash provided by the increase in accounts payable and other current liabilities, which was principally due to cash received from clients and governmental agencies that was deferred because the revenue recognition criteria had not been satisfied.

The increase in operating cash flows in 2002 compared with 2001 largely reflected the $130.0 in net proceeds collected under the accounts receivable securitization program in 2002 compared with a net repayment of $95.0 in 2001. This was partially offset by the change in DSO, which increased 8 days during 2002 to 76 at December 31, 2002.

The Company used $237.2 for investing activities in 2003 compared to $119.2 in 2002 and $150.4 in 2001. The investing activities during 2003 reflected the Company’s $22.9 further investment in Cincinnati SMSA Limited Partnership resulting from capital calls, $40.5 used for the acquisitions of Cygent Inc. and the billing and customer care assets from ALLTEL Communications Inc. and $173.8 in capital expenditures. The 2003 capital expenditures includes $71.1 used for the Company’s October 2003 purchase of the Atrium One office building in downtown Cincinnati, Ohio, including adjacent land and buildings. The purchase was made in connection with the Company’s plan to consolidate its Cincinnati, Ohio, and Norwood, Ohio-based employees into Atrium One, its corporate headquarters. The Company partially funded the purchase of its headquarters facility with a $55.5, 10-year mortgage. See further discussion of this mortgage under the section titled “Capital Resources, Off-Balance Sheet Arrangements and Contractual Commitments.” The 2002 investing activities reflected $28.4 used for the acquisition of iBasis Speech Solutions and the assets of TelesensKSCL Limited and $90.8 in capital expenditures. The 2001 investing activities reflected $36.3 in acquisition costs related to Geneva and the customer support business of Keane, Inc., and $113.5 in capital expenditures.

The Company anticipates that it will invest an additional $55 in the Atrium facility over the next three years related to building improvements, fixtures, equipment, lease buy-outs and adjacent land. Also, the Company plans to invest approximately 6% of its revenues in capital expenditures in addition to any costs related to its corporate headquarters. The Company believes that its cash flows from operations and available capital resources will be sufficient to fund these investments. At this point, the Company is not aware of any additional capital calls from the general partner of Cincinnati SMSA Limited Partnership.

The Company used $100.6 for financing activities during 2003, compared to $339.0 in 2002 and $192.5 in 2001. The financing activities during 2003 primarily reflected the repurchase of 13.6 million shares of Convergys stock for $195.9 partially reduced by $79.5 in net debt borrowings, including the $55.5, 10-year mortgage used to partially fund the purchase of the Company’s corporate headquarters facility. See further discussion of the Company’s stock repurchase program under the section titled “Capital Resources, Off-Balance Sheet Arrangements and Contractual Commitments.” The 2002 financing activities primarily reflected the repurchase of 15.0 million shares of Convergys stock for $282.2 as well as $78.7 in net repayments of debt. The 2001 financing activities primarily reflected the repayment of $158.5 in short-term debt and the repurchase of 2.6 million shares of Convergys stock for $68.3.

The Company’s free cash flows, defined as cash flows from operating activities excluding the impact of the accounts receivable securitization less capital expenditures, were $164.0, $208.5 and $316.2 for 2003, 2002 and 2001, respectively. The Company uses free cash flows, which is a non-GAAP financial measure, as an alternative measure of the Company’s ability to generate cash flows. The $44.5 decrease in free cash flows in 2003 versus 2002 reflects the changes in operating cash flows as well as the increase in capital expenditures noted above. The $107.7 decrease in free cash flows in 2002 versus 2001 reflects the changes in operating cash flows noted above.

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Capital Resources, Off-Balance Sheet Arrangements and Contractual Commitments

The Company believes that its financial structure and condition are solid. At December 31, 2003, total capitalization was $1,278.3, consisting of $134.8 of short-term and long-term debt and $1,143.5 of equity. This results in a debt-to-capital ratio of 10.5%, which compares to 4.7% at December 31, 2002. If amounts sold under the securitization were to be treated as debt financing, the Company’s debt-to-capital ratio would have been 21.3% and 15.4% at December 31, 2003 and 2002, respectively.

The Company’s debt is considered investment grade by the rating agencies. The Company’s borrowing facilities include a commercial paper program backed by a credit facility with $325 in borrowing capacity that expires in July 2005. As of December 31, 2003, the Company had $68.0 in commercial paper and short-term notes borrowed under this facility. The participating agents in the credit facility include JPMorgan Chase Bank, Citicorp USA, PNC Bank, Bank One, US Bank and The Royal Bank of Scotland. The credit facility includes certain restrictive covenants including maintenance of interest coverage and debt-to-capitalization ratios. The Company’s interest coverage ratio, defined as the ratio of consolidated earnings before interest, tax, depreciation and amortization (EBITDA) to consolidated interest expense, cannot be less than 4.00 to 1.00 for four consecutive quarters. The Company’s debt-to-capitalization ratio cannot be greater than 0.6 to 1.0 at any time. The Company was in compliance with all covenants throughout 2003.

The Company has a $200 accounts receivable securitization agreement, under which it had sold $175.0 in accounts receivable at December 31, 2003. The accounts receivable securitization agreement in effect at the beginning of the year expired in September 2003. The Company renewed the $150 securitization agreement with Bank One in September 2003, extending the agreement until September 2004. In November 2003, the Company added a $50 co-purchasing agreement with Fifth Third Bank, increasing the securitization agreement to $200, still expiring in September 2004.

In November 2003, the Company borrowed $55.5 under a 10-year mortgage with General Electric Capital Assurance Company. The proceeds were used to partially fund the Company’s purchase of its corporate headquarters facility in downtown Cincinnati, Ohio. The Company’s corporate headquarters facility secures the mortgage.

Additionally, under a Shelf Registration Statement, which became effective in June 2003, the Company has the ability to offer up to $500.0 in debt securities, common shares, preferred shares and/or warrants to purchase such securities. To date, the Company has not offered any securities under the Shelf Registration Statement.

As more fully discussed in Note 13 of Notes to Financial Statements, the Company leases certain facilities and equipment used in its operations under operating leases. The Company had previously leased its office complex in Orlando, Florida, from a special purpose entity, which served as a conduit between an unrelated commercial lender and the Company, under a synthetic lease arrangement that had qualified as an operating lease. In June 2003, Wachovia Development Corporation (“Lessor”), a wholly owned subsidiary of Wachovia Corporation, acquired the office complex for $65.0, its appraised value, and began leasing it to the Company under a lease that expires June 2010.

The Lessor partially funded the purchase of the office complex with the issuance of $55.0 in notes sold to two non-affiliated institutional investors. The remaining $10.0 was funded through a combination of bank debt and equity. Under the lease agreement, which has been classified as an operating lease, the Company’s monthly lease payments include a fixed and variable component. The Company chose this structure as it provides a cost of financing lower than a traditional mortgage loan or a traditional operating lease.

Upon termination or expiration, the Company must either purchase the property from the lessor for $65.0 or arrange to have the office complex sold to a third party. If the office complex is sold to a third party for an amount less than the $65.0 financed by the Lessor, the Company has agreed under a residual value guarantee to pay the Lessor up to $55.0. If the office complex is sold to a third party for an amount in excess of $65.0, the Company is entitled to collect the excess. The Company recognized a liability of approximately $5 for the related residual value guarantee. The value of the guarantee was determined by computing the estimated present value of probability-weighted cash flows that might be expended under the guarantee. The Company has recorded a liability for the fair value of the obligation with a corresponding asset recorded as prepaid rent, which will be amortized to rental expense over the lease term. The liability will remain on the balance sheet until the end of the lease term.

Under the terms of the lease, the Company also provides certain indemnities to the Lessor, including environmental indemnities. Due to the nature of such potential obligations, it is not possible to estimate the maximum amount of such exposure or the fair value. The Company does not expect such amounts, if any, to be material.

The Company has concluded that it is not required to consolidate the Lessor pursuant to Interpretation No. 46, “Consolidation of Variable Interest Entities,” an interpretation of ARB No. 51, as the Company is not the primary beneficiary. Additionally, the Company is not required to consolidate the office complex and the related lease as the lease does not qualify as a variable interest entity.

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The Company believes that its present ability to borrow is greater than its established credit facilities in place. If market conditions change and the Company experiences a significant decline in revenues, its cash flows and liquidity could be reduced. This could cause rating agencies to lower the Company’s credit ratings, thereby increasing its borrowing costs, or even causing a reduction in or elimination of its access to debt and ability to raise additional equity.

On January 25, 2003, the Company’s Board of Directors authorized the repurchase of up to 10 million of its common shares. On April 2, 2003, the Board of Directors authorized the additional repurchase of up to 10 million of its common shares. The Company repurchased 13.6 million shares of Convergys stock for $195.9 pursuant to these authorizations. The Company may continue to execute share repurchases from time to time in order to take advantage of attractive share price levels, as determined by management. The timing and terms of the transactions depend on a number of considerations including market conditions and the Company’s liquidity. The following summarizes the Company’s contractual obligations at December 31, 2003, and the effect such obligations are expected to have on its liquidity and cash flows in future periods:

Contractual Obligation

Total

Less Than

1 Year

1-3 Years

After 3 Years

Debt $ 134.8 $ 76.0 $ 12.3 $ 46.5 Operating leases 323.8 85.1 107.5 131.2 Purchase commitments (1) 56.7 20.0 36.7 —

Total $ 515.3 $ 181.1 $ 156.5 $ 177.7

(1) This relates to contractual payments for various communication services.

At December 31, 2003, the Company had outstanding letters of credit of approximately $14 related to performance and payment guarantees. The Company believes that any obligation that may arise will not be material.

Market Risk

The Company’s activities expose it to a variety of market risks, including the effects of changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices. The Company’s risk management strategy includes the use of derivative instruments to reduce the effects on its operating results and cash flows from fluctuations caused by volatility in currency exchange and interest rates. In using derivative financial instruments to hedge exposures to changes in exchange rates and interest rates, the Company exposes itself to some counterparty credit risk. The Company manages exposure to counterparty credit risk by entering into derivative financial instruments with highly rated institutions that can be expected to perform fully under the terms of the agreements and by diversifying the number of financial institutions with which it enters into such agreements.

Interest Rate Risk

At December 31, 2003, the Company had $126.2 in outstanding variable rate borrowings and had sold $175.0 in accounts receivable on a variable rate basis. The carrying amount of the Company’s borrowings reflects fair value due to its short-term and variable interest rate features.

The Company uses cash flow hedges for interest rate exposure from time to time. These instruments are hedges of forecasted transactions or of the variability of cash flows to be received or paid related to a recognized asset or liability. These contracts are entered into to protect against the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in interest rates. There were no outstanding cash flow hedges covering interest rate exposure at December 31, 2003.

Based upon the Company’s exposure to variable rate borrowings, a one percentage point change in the weighted average interest rate would change the Company’s annual interest expense by approximately $1.3.

Foreign Currency Exchange Rate Risk

Foreign currency exposures arise from transactions denominated in a currency other than the functional currency and from foreign denominated revenue and profit translated into U.S. dollars. The primary currencies to which the Company is exposed include the British pound, the Indian rupee, the euro and the Canadian dollar. The Company currently uses forward exchange contracts to limit potential losses in earnings or cash flows from adverse foreign currency exchange rate movements. These contracts are entered into to protect against the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates. The potential loss in fair value at December 31, 2003 for such contracts resulting from a hypothetical 10% adverse change in all foreign currency exchange rates is approximately $49. This loss would be mitigated by corresponding gains on the underlying exposures.

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CMG serves a number of its U.S.-based customer management clients using contact center capacity in Canada and in India. Although the contracts with these clients are typically priced in U.S. dollars, a substantial portion of the costs incurred by CMG to operate these non-U.S. contact centers are denominated in Canadian dollars or India rupees, which represents a foreign exchange exposure to the Company.

The Canadian dollar (CAD) strengthened from $1.57 per U.S. dollar at December 31, 2002 to $1.30 per U.S. dollar at December 31, 2003. Once translated into U.S. dollars, this resulted in approximately $26 in additional operating expenses, which was mostly offset by gains that resulted from the settlement and maturity of the Company’s Canadian dollar forward exchange contracts. As of December 31, 2003, the Company had open Canadian forward exchange contracts maturing during the first half of 2004, the second half of 2004, the first half of 2005 and the second half of 2005 with notional values in Canadian dollars of CAD 170.0, CAD 166.0, CAD 70.0 and CAD 57.0, respectively. The average exchange rates of these forward exchange contracts were $1.49, $1.42, $1.35 and $1.35, respectively. This compares to an average hedged exchange rate of $1.54 during 2003.

Critical Accounting Policies

Goodwill

At December 31, 2003, the Company had goodwill with a net carrying value of $726.3. As disclosed in Note 6 of Notes to Financial Statements, the Company is required to test goodwill for impairment annually and at other times if events have occurred or circumstances exist that indicate the carrying value of goodwill may no longer be recoverable. The impairment test for goodwill involves a two-step process. The first step compares the fair value of a reporting unit with its carrying amount, including the goodwill allocated to each reporting unit. If the carrying amount is in excess of the fair value, the second step requires the comparison of the implied fair value of the reporting unit goodwill with the carrying amount of the reporting unit goodwill. Any excess of the carrying value of the reporting unit goodwill over the implied fair value of the reporting unit goodwill will be recorded as an impairment loss. Fair value of the reporting unit was determined using the income approach. Under the income approach, value is dependent on the present value of net cash flows to be derived from the ownership. The income approach requires significant estimates about future cash flows and discount rates. As required, the Company completed its annual impairment tests for its reporting units during the fourth quarter of 2003. Based on the results of the first step, the Company had no goodwill impairment related to its four reporting units: Information Management International, Information Management North America, Customer Management and Employee Care. Although the Company makes every reasonable effort to ensure the accuracy of its estimate of the fair value of its reporting units, future changes in the assumptions used to make these estimates could result in the recording of an impairment loss. For example, a 30% variance in the Company’s estimate of its Information Management International reporting unit’s fair value could result in it performing the second step of the impairment test as described above for the $99.1 of goodwill recorded by this reporting unit. A 30% decrease, however, in the estimate of any of the other three reporting units would not lead to any further tests for impairment.

Deferred Charges

In connection with certain of the Company’s outsourcing arrangements, the Company from time to time will incur direct and incremental costs, consisting principally of non-refundable cash payments made to clients, to acquire or extend a contractual relationship. To the extent recovery of these costs is probable, the Company capitalizes these costs and amortizes them ratably over the life of the contract as a reduction of revenue.

In connection with its outsourcing arrangements, the Company also performs initial implementations, which include the installation and customization of its proprietary software in its centers. Under these arrangements, the client does not take possession of the software nor has the right to take possession of the software without incurring a significant economic penalty. In accordance with Emerging Issues Task Force (EITF) Issue 00-03, “Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware,” the implementations are not treated as separate elements for revenue recognition purposes. Any proceeds collected for the implementations are deferred and recognized over the service period. Additionally, with respect to certain license arrangements, the Company defers all revenue related to the arrangement (including revenues related to the implementation services) and recognizes it over the period the Company is providing support and maintenance. The Company capitalizes all direct and incremental costs of the implementations, to the extent recovery is probable, and amortizes them ratably over the life of the arrangements as costs of providing service.

At inception and throughout the term of the contract, the Company evaluates recoverability by considering profits to be earned under the related contract, the creditworthiness of the client and, if applicable, contract termination penalties payable by the client in the event that the client terminates the contract early. The Company’s estimate of profitability is dependent in large part on its estimate of costs. Although the Company makes every reasonable effort to accurately estimate costs, revisions may be made based on actual costs incurred that could result in the recording of an impairment loss. Additionally, if the financial condition of a client were to deteriorate, resulting in a reduced ability to make payments, the Company may be unable to recover the costs, which would result in an impairment loss. Finally, the Company’s entitlement to termination fees may be subject to challenge if a client were to allege that the Company was in breach of contract. However, based on its evaluation of the related contracts as of December 31, 2003, the Company believes that the $153.5 of deferred charges is recoverable.

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Revenue Recognition

For certain IMG contracts, the Company recognizes software license and related professional and consulting revenues using the percentage-of-completion method of accounting by relating contract costs incurred to date to total estimated contract costs at completion. During 2003, less than 5% of the Company’s consolidated revenues were recognized using the percentage-of-completion method. This method of accounting relies on estimates of total expected contract revenues and costs. This method is used because reasonably dependable estimates of the revenues and costs applicable to various stages of a contract can be made. Because the financial reporting of these contracts depends on estimates, which are assessed continually during the term of the contracts, recognized revenues are subject to revisions as the contracts progress to completion. Revisions in estimates are reflected in the period in which the facts that give rise to a revision become known. Accordingly, favorable changes in estimates result in additional revenue recognition, and unfavorable changes in estimates result in the reversal of previously recognized revenues. When estimates indicate a loss under a contract, a provision for such loss is recorded as a component of the costs of providing services. As work progresses under a loss contract, revenues continue to be recognized, and a portion of the contract loss incurred in each period is charged to the contract loss reserve. The Company believes it makes every reasonable effort to ensure the accuracy of its estimates of completion.

Restructuring Accrual

The Company recorded significant restructuring and impairment charges related to the reduction in headcount and facility closures during 2002 and 2001. As of December 31, 2003, the Company had $62.7 of remaining restructuring accruals, principally related to facility closure costs, which will be paid over several years as the leases expire. The accrual is equal to the future costs associated with those abandoned facilities, net of the proceeds from any probable future sublease agreements. The Company has used estimates, based on consultation with real estate advisors, to arrive at the proceeds from any future sublease agreements. The Company will continue to evaluate its estimates in recording the facilities abandonment charge. As a result, there may be additional charges or reversals in the future.

Contingencies

The Company considers the likelihood of various loss contingencies, including tax and legal contingencies arising in the ordinary course of business, and its ability to make a reasonable estimate of its loss. Pursuant to SFAS No. 5, “Contingent Liabilities,” the Company accrues for a loss contingency when it is probable that a liability has been incurred and the amount of such loss can be reasonably estimated. As disclosed in Note 13 of Notes to Financial Statements, the Company was named as an additional defendant in an action filed with the Employment Tribunal in Glasgow, Scotland, by 156 former employees of Telesens against Telesens (in receivership) and the three individual receivers (Receivers). Prior to the Company’s acquisition of Telesens’ assets, the Receivers declared certain employees of Telesens redundant and terminated their employment. The claimants allege that the dismissals were unlawful under Scottish law and that the Company, as purchaser of the Telesens business, is liable for the dismissals. Although not specified in the complaint, the Company believes the claimants are seeking damages of approximately $15. The Company is defending the case vigorously and intends to continue to do so. In the event of an adverse judgment, the Company believes that the results of the claim would not have a materially adverse effect on the Company’s financial condition.

The Company has made certain other estimates that, while not involving the same degree of judgment, are important to understanding the Company’s financial statements. These estimates are in the areas of measuring its obligations related to its defined benefit plans, valuation allowances related to its deferred tax assets, self-insurance accruals, determining vendor specific objective evidence (VSOE) of fair value in connection with its license arrangements and assessing recoverability of intangible assets. On an ongoing basis, management evaluates its estimates and judgments in these areas based on its historical experience and other relevant factors. The Company’s estimates as of the date of the financial statements reflect its best judgment giving consideration to all currently available facts and circumstances. As such, these estimates may require adjustment in the future, as additional facts become known or as circumstances change.

New Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This pronouncement is effective for exit or disposal activities that are initiated after December 31, 2002, and requires these costs to be recognized when the liability is incurred and not at the project initiation. The adoption of this statement impacts the timing of exit costs, primarily related to lease terminations, associated with future restructuring charges. Under prior rules, these costs were accrued when the Company committed to an exit plan. Under the new rules, exit costs are expensed as the costs are incurred.

In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on Issue 00-21, “Revenue Arrangements with Multiple Deliverables,” providing further guidance on how to account for multiple element contracts. Issue 00-21 is effective for all arrangements entered into after the second quarter of 2003. Issue 00-21 did not have a material impact on the Company’s accounting treatment of multiple element contracts.

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In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation clarifies the requirement for a guarantor’s accounting for and disclosure of certain guarantees issued and outstanding. The initial recognition and measurement provisions are applicable to guarantees issued or modified after December 31, 2002. The disclosure requirements were effective for the Company’s December 31, 2002 financial statements. The adoption of this interpretation did not have a material impact on the Company’s financial position or results of operations. See Note 13 of Notes to Financial Statements for a discussion of the Company’s guarantees.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” an interpretation of ARB No. 51, which changes the criteria currently used by companies in deciding whether they are required to consolidate another entity. As disclosed in Note 13, the adoption of Interpretation No. 46 had no impact on the Company’s results of operations or financial condition.

In May 2003, the Emerging Issues Task Force (EITF) reached consensus on EITF Issue No. 03-04, “Determining the Classification and Benefit Attribution Method for a ‘Cash Balance’ Pension Plan,” to specifically address the accounting for certain cash balance pension plans. EITF 03-04 requires certain cash balance pension plans to be accounted for as defined benefit plans. For cash balance plans described in the consensus, the consensus also requires the use of the traditional unit credit method for purposes of measuring the benefit obligation and annual cost of benefits earned as opposed to the projected unit credit method. The Company has historically accounted for its cash balance plan as a defined benefit plan; however, the Company adopted the measurement provisions of EITF 03-04 as of December 31, 2003. The adoption of EITF 03-04 will reduce pension expense in 2004 by $4.5.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The information required by Item 7A is included in Item 7 on pages 29 - 30 of this Form 10-K.

Item 8. Financial Statements and Supplementary Data

Beginning on page 34 and continuing through page 60 are the consolidated financial statements with applicable notes and the related Report of Independent Accountants, and the supplementary financial information specified by Item 302 of Regulation S-K.

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Report of Management Management is responsible for the preparation of the consolidated financial statements and all related information appearing in this Annual Report. The consolidated financial statements and notes have been prepared in conformity with accounting principles generally accepted in the United States and include certain amounts, which are estimates based upon currently available information, and management’s judgment of current conditions and circumstances. To provide reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition and that accounting records are reliable for preparing financial statements, management maintains a system of accounting, internal, disclosure and other controls, including an internal audit function. Even an effective internal control system, no matter how well designed, has inherent limitations, including the possibility of circumvention or overriding of controls and, therefore, can provide only reasonable assurance with respect to financial statement presentation. The system of accounting and other controls is improved and modified in response to changes in business conditions and operations and recommendations made by the independent accountants and the internal auditors. The Audit Committee of the Board of Directors, which is composed of independent directors who are not employees, meets regularly with management, the internal auditors and the independent accountants to review the manner in which these groups of individuals are performing their responsibilities and to carry out the Committee’s oversight role with respect to auditing, internal and disclosure controls and financial reporting matters. Periodically, both the internal auditors and the independent accountants meet privately with the Committee and have access to its individual members. Convergys engaged Ernst & Young LLP, independent accountants, in 2003 to audit the consolidated financial statements in accordance with auditing standards generally accepted in the United States, which include consideration of the internal control structure. Their report appears on the following page.

33

/s/ James F. Orr

James F. Orr President and Chief Executive Officer

/s/ Earl C. Shanks

Earl C. Shanks Chief Financial Officer

/s/ Michael D. Jones

Michael D. Jones Chief Accounting Officer

Table of Contents

Report of Independent Accountants

To the Board of Directors and Shareholders of Convergys Corporation

We have audited the consolidated balance sheets of Convergys Corporation as of December 31, 2003 and 2002, and the related consolidated statements of income and comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Convergys Corporation at December 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule for each of the three years ended December 31, 2003, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 6 to the financial statements, the Company adopted Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets,” effective January 1, 2002.

34

/s/ Ernst & Young LLP

Ernst & Young LLP Cincinnati, Ohio February 6, 2004

Table of Contents

Consolidated Statements of Income and Comprehensive Income

The accompanying notes are an integral part of the financial statements.

35

Year Ended December 31,

(Amounts in Millions Except Per Share Amounts)

2003

2002

2001

Revenues $ 2,288.8 $ 2,286.2 $ 2,320.6 Costs and Expenses:

Costs of products and services 1,320.9 1,264.9 1,271.4 Selling, general and administrative expenses 458.2 409.5 390.6 Research and development costs 94.3 113.7 115.9 Depreciation 108.9 122.7 125.5 Amortization 15.1 14.4 50.8 Restructuring and impairment charges (1.0 ) 107.7 58.0 Acquisition and integration costs — — 31.8

Total costs and expenses 1,996.4 2,032.9 2,044.0

Operating Income 292.4 253.3 276.6 Equity in earnings (loss) of Cellular Partnerships (12.6 ) 6.4 6.4 Other income (expense), net (1.3 ) (4.3 ) (8.1 ) Interest expense (6.9 ) (11.0 ) (20.0 )

Income before income taxes 271.6 244.4 254.9 Income taxes 100.0 98.5 116.1

Net Income $ 171.6 $ 145.9 $ 138.8

Other Comprehensive Income, Net of Tax:

Currency translation adjustments $ 14.8 $ 5.9 $ (7.2 ) Minimum pension liability (9.8 ) — — Unrealized gain (loss) on hedging activities 19.1 4.5 (1.0 ) Unrealized loss on investments — — (1.8 )

Total Comprehensive Income $ 195.7 $ 156.3 $ 128.8

Earnings per common share:

Basic $ 1.18 $ 0.90 $ 0.82 Diluted $ 1.15 $ 0.88 $ 0.80

Weighted average common shares outstanding:

Basic 145.7 162.9 169.4 Diluted 148.8 166.1 174.4

Table of Contents

Consolidated Balance Sheets

The accompanying notes are an integral part of the financial statements.

36

At December 31,

(Amounts in Millions)

2003

2002

Assets

Current Assets

Cash and cash equivalents $ 37.2 $ 12.2 Receivables, net of allowances of $20.4 and $15.7 298.1 315.2 Deferred income tax benefits 23.0 41.2 Prepaid expenses and other current assets 61.2 49.6

Total current assets 419.5 418.2 Property and equipment, net 363.8 298.0 Goodwill, net 726.3 698.8 Other intangibles, net 45.0 32.5 Investments in Cellular Partnerships 47.2 38.1 Deferred charges 153.5 95.1 Other assets 54.9 38.8

Total Assets $ 1,810.2 $ 1,619.5

Liabilities and Shareholders’ Equity

Current Liabilities

Debt maturing within one year $ 76.0 $ 50.7 Payables and other current liabilities 466.7 411.3

Total current liabilities 542.7 462.0 Long-term debt 58.8 4.6 Other long-term liabilities 65.2 26.6

Total liabilities 666.7 493.2 Commitments and Contingencies

Shareholders’ Equity

Preferred shares—without par value, 5.0 authorized; none outstanding — — Common shares—without par value, 500.0 authorized; 174.6 outstanding in 2003 and 173.4 in 2002 839.4 822.0 Treasury stock—31.4 shares in 2003 and 17.8 shares in 2002 (547.0 ) (351.1 ) Retained earnings 835.4 663.8 Accumulated other comprehensive income (loss) 15.7 (8.4 )

Total shareholders’ equity 1,143.5 1,126.3

Total Liabilities and Shareholders’ Equity $ 1,810.2 $ 1,619.5

Table of Contents

Consolidated Statements of Cash Flows

The accompanying notes are an integral part of the financial statements.

37

Year Ended December 31,

(Amounts in Millions)

2003

2002

2001

Cash Flows From Operating Activities:

Net income $ 171.6 $ 145.9 $ 138.8 Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 124.0 137.1 176.3 Deferred income tax expense (benefit) 44.7 (10.6 ) 9.6 Restructuring, impairment and integration costs — 19.4 45.2 Cellular Partnerships distributions in excess of (less than) earnings 13.8 (2.8 ) 30.7 Income tax benefit from stock option exercises 1.6 3.7 7.8 Proceeds from (repayments of) receivables securitization, net 25.0 130.0 (95.0 )

Changes in assets and liabilities, net of effects from acquisitions:

Decrease (increase) in receivables (7.9 ) (27.4 ) 77.1 Decrease (increase) in other current assets 19.0 (12.8 ) 6.6 Increase in deferred charges (58.4 ) (7.3 ) (54.6 ) Decrease (increase) in other assets (16.1 ) 1.9 (14.0 ) Increase (decrease) in payables and other current liabilities 40.1 51.7 (11.4 ) Other, net 5.4 0.5 17.6

Net cash provided by operating activities 362.8 429.3 334.7

Cash Flows From Investing Activities:

Capital expenditures (173.8 ) (90.8 ) (113.5 ) Investments in Cellular Partnerships (22.9 ) — — Acquisitions, net of cash acquired (40.5 ) (28.4 ) (36.3 ) Other, net — — (0.6 )

Net cash used in investing activities (237.2 ) (119.2 ) (150.4 )

Cash Flows From Financing Activities:

Borrowings (repayments) of debt, net 24.0 21.3 (158.5 ) Borrowings of mortgage note 55.5 — — Repayment of medium-term notes — (100.0 ) — Purchase of treasury shares (195.9 ) (282.2 ) (68.3 ) Issuance of treasury shares — — 1.2 Issuance of common shares 15.8 21.9 33.1

Net cash used in financing activities (100.6 ) (339.0 ) (192.5 )

Net increase (decrease) in cash and cash equivalents 25.0 (28.9 ) (8.2 ) Cash and cash equivalents at beginning of year 12.2 41.1 49.3

Cash and cash equivalents at end of year $ 37.2 $ 12.2 $ 41.1

Supplemental Cash Flow Information:

Cash paid for interest $ 6.3 $ 13.2 $ 18.1 Income taxes paid, net of refunds $ 50.7 $ 112.9 $ 101.6

Table of Contents

Consolidated Statements of Shareholders’ Equity

The accompanying notes are an integral part of the financial statements.

38

(Amounts in Millions)

Number Of

Common Shares

Common Shares

Treasury Stock

Retained Earnings

Accumulated Other

Comprehensive Income (Loss)

Total

Balance at January 1, 2001 169.7 $ 755.5 $ (1.8 ) $ 379.1 $ (8.8 ) $ 1,124.0 Issuance of common shares 2.5 31.8 1.2 33.0 Repurchase of common shares (68.3 ) (68.3 ) Net income 138.8 138.8 Other comprehensive loss (10.0 ) (10.0 ) Amortization of stock-based compensation 9.1 9.1

Balance at December 31, 2001 172.2 796.4 (68.9 ) 517.9 (18.8 ) 1,226.6 Issuance of common shares 1.2 11.5 11.5 Repurchase of common shares (282.2 ) (282.2 ) Net income 145.9 145.9 Other comprehensive income 10.4 10.4 Amortization of stock-based compensation 14.1 14.1

Balance at December 31, 2002 173.4 822.0 (351.1 ) 663.8 (8.4 ) $ 1,126.3 Issuance of common shares 1.2 6.7 6.7 Repurchase of common shares (195.9 ) (195.9 ) Net income 171.6 171.6 Other comprehensive income 24.1 24.1 Amortization of stock-based compensation 10.7 10.7

Balance at December 31, 2003 174.6 $ 839.4 $ (547.0 ) $ 835.4 $ 15.7 $ 1,143.5

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Notes to Financial Statements (Amounts in Millions Except Share and Per Share Amounts)

1. Background and Basis of Presentation

Convergys Corporation (the Company or Convergys) is a global leader in the provision of outsourced customer management, employee care and integrated billing software services. The Company was spun off from its former parent company, Cincinnati Bell Inc. (CBI), in 1998. Convergys focuses on developing long-term strategic relationships with clients in employee- and customer-intensive industries including communications, technology and financial services as well as governmental agencies. The Company has two reporting segments: (i) the Customer Management Group (CMG), which provides outsourced marketing, customer support services and employee care services; and (ii) the Information Management Group (IMG), which provides outsourced billing and information services and software. The Company has developed a base of recurring revenues by providing value-added billing and customer management and employee care solutions for its clients, generally under long-term contracts.

Certain prior year amounts have been reclassified in the consolidated financial statements and accompanying notes to conform to 2003 classifications.

2. Accounting Policies

Consolidation—The consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated upon consolidation.

Use of Estimates—Preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates.

Foreign Currency—Assets and liabilities of foreign operations are translated to U.S. dollars at yearend exchange rates. Revenues and expenses are translated at average exchange rates for the year. Translation adjustments are accumulated and reflected as adjustments to comprehensive income.

Revenue Recognition—Revenues for outsourced customer management and employee care services related to CMG are recognized after the related services are performed based on hourly, monthly, per call or per participant rates detailed in the client contract. IMG generates its revenues from three primary sources: data processing, professional and consulting services and license and other services. Data processing revenues consist of monthly fees for processing client transactions in IMG’s data centers and, in some cases, the clients’ data centers, using IMG’s proprietary software. Professional and consulting revenues consist of fees generated for installation, implementation, customization, project management and training services related either to the clients’ use of IMG’s software in IMG’s data centers or in their own processing environments. License and other revenues consist of revenues generated from the sale of licenses to use IMG’s proprietary software and related software support and maintenance fees.

The Company’s revenues are recognized in conformity with Securities and Exchange Commission Staff Accounting Bulletin No. 104, “Revenue Recognition,” Emerging Issues Task Force (EITF) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables,” and Statement of Position (SOP) 97-2, “Software Revenue Recognition.” Revenues are recognized only when there is evidence of an arrangement and the Company determines that the fee is fixed and determinable and collection of the fee included in the arrangement is considered probable. When determining whether the fee is considered fixed and determinable and collection is probable, the Company considers a number of factors including the creditworthiness of the client and the contractual payment terms. If a client is not considered creditworthy, all revenue under arrangements with that client is recognized upon receipt of cash. If payment terms extend beyond what is considered customary or standard in the related industry and geographic location, the related fees are considered extended and deferred until they become due and payable.

Combined, CMG revenues and IMG data processing revenues accounted for 85.8%, 84.3% and 83.5% of the Company’s consolidated revenues in 2003, 2002 and 2001, respectively. These revenues are recognized as services are performed on a per subscriber, per event, per call, per participant or flat monthly fee basis using rates that are detailed in the client contract. Supplemental revenues can sometimes be earned depending on service levels or achievement of certain performance measurement targets. The Company recognizes these supplemental revenues only after it has achieved the required measurement target. The Company normally invoices its clients for these services on a monthly basis.

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The majority of IMG’s professional and consulting fees are invoiced monthly to the Company’s clients based on time and materials incurred at contractually agreed upon rates. In some instances, particularly as it relates to IMG’s international license arrangements, the Company invoices for professional and consulting services based upon a fixed fee. Professional and consulting services provided in connection with license arrangements are evaluated to determine whether those services are essential to the client’s functionality of the software. When significant customization or modification of the software and the development of complex interfaces are required to meet the client’s functionality, those services are considered essential. Accordingly, the related professional and consulting revenue is recognized together with the license fee using the percentage-of-completion method. The Company calculates the percentage of work completed by comparing contract costs incurred to date to total estimated contract costs at completion. When the professional and consulting services provided in connection with license arrangements are not considered essential or when professional and consulting services are provided in connection with outsourcing arrangements, the revenues are recognized as the related services are delivered.

IMG’ s license arrangements are contracted as either perpetual or term licenses, depending on the software product. As noted above, when IMG provides professional and consulting services that are considered essential to the software’s functionality, the license element is recognized together with the professional and consulting element using the percentage-of-completion method. When IMG is not required to provide services that are considered essential to the software’s functionality, the license element is recognized upon delivery of the software, assuming all other revenue recognition criteria have been met.

The Company typically is engaged to provide support and maintenance services in connection with its license arrangements. Revenues for support and maintenance services are recognized ratably over the term of the agreement. For these multiple element arrangements, the Company allocates the contract value to the elements based on fair value of the individual elements. Fair value is determined using vendor specific objective evidence (VSOE), which represents the normal pricing for these elements when sold separately. For a limited number of its license arrangements, the Company does not have sufficient VSOE of fair value of its undelivered elements, principally related to support and maintenance. As a result, revenue for the entire arrangement, including license fees and related professional and consulting fees, is deferred and recognized over the term of the support and maintenance period.

In connection with the Company’s outsourcing arrangements, the Company often performs initial implementations, including the installation and customization of its proprietary software in its centers. Under these arrangements, a client does not take possession of the software nor has the right to take possession of the software without incurring a significant economic penalty. In accordance with EITF Issue 00-03, “Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware,” the implementations are not treated as separate elements. Accordingly, any proceeds collected for the implementations are deferred and recognized over the service period.

Stock Compensation—Convergys provided stock options and other stock-based awards to certain employees and directors. The Company accounts for these awards using the intrinsic value method pursuant to Accounting Principles Board Opinion 25 and related interpretations. If the Company had elected to recognize compensation cost for the issuance of options to Company employees based on the fair value at the grant dates, prescribed by SFAS No. 123, “Accounting for Stock-Based Compensation,” net income and earnings per share would have been impacted as follows:

Net income for 2003, 2002 and 2001 included $6.8, $9.0 and $5.8, respectively, in compensation expense, net of tax, related to stock-based awards.

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Year Ended December 31,

2003

2002

2001

Net income:

Net income, as reported $ 171.6 $ 145.9 $ 138.8 Deduct: Stock-based employee compensation expense determined under fair value based

method for all awards, net of related tax effects (38.5 ) (45.2 ) (43.5 )

Pro forma $ 133.1 $ 100.7 $ 95.3 Basic earnings per share:

As reported $ 1.18 $ 0.90 $ 0.82 Pro forma $ 0.91 $ 0.62 $ 0.56

Diluted earnings per share:

As reported $ 1.15 $ 0.88 $ 0.80 Pro forma $ 0.90 $ 0.61 $ 0.54

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Income Taxes—The Company accounts for income taxes pursuant to SFAS No. 109, “Accounting for Income Taxes,” which requires recognition of deferred tax assets and liabilities for the expected future income tax consequences of transactions that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Gross deferred tax assets then may be reduced by a valuation allowance for amounts that do not satisfy the realization criteria of SFAS No. 109.

During 2003, the Company initially adopted the accounting policy to recognize the tax benefits from current and unrealized prior years’ stock option deductions after recognition of net operating loss carryforwards (i.e., determined before consideration of current and prior years’ stock option deductions). This accounting policy principally relates to the Company’s foreign operations.

Other Comprehensive Income (Loss)—Components of other comprehensive income consist of currency translation adjustment, minimum pension liabilities, net of tax, unrealized gains (losses) on hedging activities, net of tax, and unrealized gains (losses) on available for sale securities, net of tax. Foreign currency translation adjustments generally are not adjusted for income taxes as they relate to indefinite investments in non-U.S. operations.

Concentration of Credit Risk—In the normal course of business, the Company is exposed to credit risk. The principal concentrations of credit risk are cash deposits, accounts receivable and derivative instruments. The Company regularly monitors credit risk exposures and takes steps to mitigate the likelihood of these exposures resulting in a loss.

Historically, credit losses on accounts receivable have not been material because of the large concentration of revenues with a small number of large, established companies. The Company does not require collateral or other security to support accounts receivable. The Company evaluates the credit worthiness of its clients in conjunction with its revenue recognition processes, as discussed above, as well as through its ongoing collectibility assessment processes for accounts receivable. The Company maintains an allowance for doubtful accounts receivable based upon factors surrounding the credit risk of specific clients, historical trends and other information.

Cash Equivalents—Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less.

Receivables—Trade receivables are comprised primarily of amounts owed to the Company through its billing and information services and software, customer management and employee care services and are presented net of an allowance for doubtful accounts of $20.4 and $15.7 at December 31, 2003 and 2002, respectively. Contracts with individual clients determine when receivables are due, generally within 30 days, and whether interest is accrued on late payments.

Property and Equipment—Property and equipment is stated at cost. Depreciation is based on the straight-line method over the estimated useful lives of the assets. Buildings are depreciated over a 30-year life, software over a three- to six-year life and equipment generally over a three- to five-year life. Leasehold improvements are depreciated over the shorter of their estimated useful life or the remaining term of the associated lease.

Software Development Costs—Research and development expenditures are charged to expense as incurred. The development costs of software to be marketed are charged to expense until technological feasibility is established, and capitalized thereafter, subject to assessment of realizability. Amortization of the capitalized amounts is computed using the greater of the sales ratio method or the straight-line method over a life of four years or less.

Internal Use Software—The Company follows SOP 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,” that requires the capitalization of certain expenditures for software that is purchased or internally developed for use in the business. Amortization of internal use software begins when the software is ready for service and continues on the straight-line method generally over a three-year life.

Goodwill and Other Intangibles—On January 1, 2002, the Company adopted, on a prospective basis, Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” which eliminated the amortization of goodwill. Prior to the adoption of SFAS No. 142, goodwill was amortized on a straight-line basis with lives ranging from 25 to 40 years. As discussed more fully in Note 6, goodwill is tested at least annually for impairment.

Other intangibles are amortized over a straight-line basis with lives ranging from two to ten years and evaluated periodically if events or circumstances indicate a possible inability to recover their carrying amounts.

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Deferred Charges—In connection with certain of the Company’s outsourcing arrangements, the Company from time to time will incur direct and incremental costs, consisting principally of non-refundable cash payments to clients, to acquire or extend a contractual relationship. To the extent recovery of these costs is probable, the Company capitalizes these client acquisition costs and amortizes them ratably over the life of the contract as a reduction of revenue.

As more fully described under the heading “Revenue Recognition,” the Company often performs, in connection with its outsourcing arrangements, initial implementations, including the installation and customization of its proprietary software in its centers. Additionally, with regard to certain license arrangements where the Company does not have sufficient VSOE of support and maintenance elements, the Company defers all revenue related to the arrangement (including revenues related to implementations) and recognizes it over the term of the support and maintenance period. In connection with these arrangements, the Company capitalizes all direct and incremental costs of the implementations, to the extent recovery of these costs is probable, and amortizes them ratably over the life of the arrangements as costs of providing service.

During 2003, 2002 and 2001, the Company capitalized $98.8, $38.1 and $84.8 of client acquisition and implementation costs, respectively. The related amortization for these years was $40.4, $30.8 and $30.2, respectively.

Investments—The Company owns 45% limited partnership interests in Cincinnati SMSA Limited Partnership and Cincinnati SMSA Tower Holdings LLC (the Cellular Partnerships). Cincinnati SMSA Limited Partnership, a provider of wireless communications in central and southwestern Ohio and northern Kentucky, conducts its operations as a part of Cingular Wireless LLC (Cingular), a joint venture between SBC Communications and BellSouth Corporation and the second largest wireless provider in the United States. Cingular is the general partner as well as a limited partner with a combined partnership interest of approximately 53%. SBC Communications is the general partner and a limited partner of Cincinnati SMSA Tower Holdings LLC, an operator of cellular tower space, with a combined partnership interest of approximately 53%. The general partners are authorized to conduct and manage the business of the Cellular Partnerships. The Company, as a limited partner, does not take part in, or interfere with, the day-to-day management of the Cellular Partnerships by the general partners. Limited partners are entitled to their percentage share of earnings and cash distributions. The Company accounts for its interest in the Cellular Partnerships under the equity method of accounting.

Equity investments in other entities are classified as available-for-sale and recorded at fair value where such value is readily determinable. Unrealized gains or losses on those investments, net of tax, are reported as a component of other comprehensive income and included in shareholders’ equity, but excluded from the determination of net income until realized. As of December 31, 2003 and 2002, the Company’s carrying value of other equity investments was $0.

Postemployment Benefits—The Company provides severance benefits to certain employees. Pursuant to SFAS No. 112, “Employers’ Accounting for Postemployment Benefits,” the Company accrues the benefits when it becomes probable that such benefits will be paid and when sufficient information exists to make reasonable estimates of the amounts to be paid.

Self-Insurance Accruals—The Company self-insures for certain levels of workers’ compensation and employee health insurance. Estimated costs of these self-insurance programs are accrued at the projected settlements for known and incurred but not reported claims. Self-insurance liabilities of the Company amounted to $15.9 and $14.9 at December 31, 2003 and 2002, respectively.

Deferred Revenue and Government Grants—Client payments in excess of revenue recognized are recorded as deferred revenue. From time to time, the Company receives grants from local or state governments as an incentive to locate or retain operations in their jurisdictions. Depending on the arrangement, the grants are either received up-front or at the point the Company achieves the milestones set forth in the grant. The Company’s policy is to record the grant monies received as deferred income and recognize income as either a reduction of costs of service expense, selling, general and administrative expense or depreciation expense as the milestones are met over the life of the grant. The Company’s deferred revenue and government grants amounted to $75.8 and $46.6 at December 31, 2003 and 2002, respectively.

Derivative Instruments—The Company’s risk management strategy includes the use of derivative instruments to reduce the effects on its operating results and cash flows from fluctuations caused by volatility in currency exchange and interest rates. The Company currently uses cash flow hedges. These instruments are hedges of forecasted transactions or of the variability of cash flows to be received or paid related to a recognized asset or liability. The Company generally enters into forward exchange contracts expiring within 24 months as hedges of anticipated cash flows denominated in foreign currencies. These contracts are entered into to protect against the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in exchange rates. In using derivative financial instruments to hedge exposures to changes in exchange rates and interest rates, the Company exposes itself to some counterparty credit risk. Additionally, the Company from time to time enters into interest rate swap agreements to effectively fix the interest rates of variable rate borrowings.

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All derivatives, including foreign currency exchange contracts, are recognized in the balance sheet at fair value. Fair values for the Company’s derivative financial instruments are based on quoted market prices of comparable instruments or, if none are available, on pricing models or formulas using current assumptions. On the date the derivative contract is entered into, the Company determines whether the derivative contract should be designated as a hedge. For derivatives that are designated as hedges, the Company further designates the hedge as either a fair value or cash flow hedge. Changes in the fair value of derivatives that are highly effective and designated as fair value hedges are recorded in the consolidated statement of income along with the loss or gain on the hedged asset or liability. Changes in the fair value of derivatives that are highly effective and designated as cash flow hedges are recorded in other comprehensive income, until the underlying transactions occur. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedging activities. This process includes linking all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively. At December 31, 2003 and 2002, no hedges were determined to be ineffective.

Fair Value of Financial Instruments—Fair values of cash equivalents and current accounts receivable and payable approximate the carrying amounts because of their short-term nature. Long-term debt carried on the Company’s consolidated balance sheets at December 31, 2003 and 2002 has a carrying value that approximates its estimated fair value. The fair value is based on discounting future cash flows using current interest rates adjusted for risk. The fair value of short-term debt approximates its recorded value because of its short-term nature.

New Accounting Pronouncements—In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This pronouncement is effective for exit or disposal activities that are initiated after December 31, 2002, and requires these costs to be recognized when the liability is incurred and not at the project initiation. The adoption of this statement impacts the timing of exit costs, primarily related to lease terminations, associated with future restructuring charges. Under prior rules, these costs were accrued when the Company committed to an exit plan. Under the new rules, exit costs are expensed as the costs are incurred.

In November 2002, the EITF reached a consensus on Issue 00-21, “Revenue Arrangements with Multiple Deliverables,” providing further guidance on how to account for multiple element contracts. Issue 00-21 is effective for all arrangements entered into after the second quarter of 2003. Issue 00-21 did not have a material impact on the Company’s accounting treatment of multiple element contracts.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation clarifies the requirement for guarantor’s accounting for and disclosure of certain guarantees issued and outstanding. The initial recognition and measurement provisions are applicable to guarantees issued or modified after December 31, 2002. The disclosure requirements were effective for the Company’s December 31, 2002 financial statements. The adoption of this interpretation did not have a material impact on the Company’s financial position or results of operations. See Note 13 of Notes to Financial Statements for a discussion of the Company’s guarantees.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” an interpretation of ARB No. 51, which changes the criteria currently used by companies in deciding whether they are required to consolidate another entity. As disclosed in Note 13, the adoption of Interpretation No. 46 had no impact on the Company’s results of operations or financial condition.

In May 2003, the EITF reached consensus on EITF Issue No. 03-04, “Determining the Classification and Benefit Attribution Method for a ‘Cash Balance’ Pension Plan,” to specifically address the accounting for certain cash balance pension plans. EITF 03-04 requires certain cash balance pension plans to be accounted for as defined benefit plans. For cash balance plans described in the consensus, the consensus also requires the use of the traditional unit credit method for purposes of measuring the benefit obligation and annual cost of benefits earned as opposed to the projected unit credit method. The Company has historically accounted for its cash balance plan as a defined benefit plan; however, the Company adopted the measurement provisions of EITF 03-04 as of December 31, 2003. The adoption of EITF 03-04 will reduce pension expense in 2004 by $4.5.

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3. Acquisition of Geneva

In April 2001, the Company acquired 100% of the outstanding shares of Geneva Technology Ltd. (Geneva). The acquisition of Geneva was accounted for under the pooling-of-interests method of accounting.

In connection with the acquisition of Geneva, the Company recorded one-time costs of $31.8 in the second quarter of 2001 to expense transaction costs and certain costs to integrate the combined businesses. Transaction costs totaled $20.6. The integration costs totaled $11.2, which includes $1.0 for lease terminations and other costs associated with the consolidation of facilities, $6.2 for severance associated with the consolidation of facilities and certain functions, $3.0 for the expensing of software that will not be deployed by the combined businesses and $1.0 for other integration costs. The after-tax impact of the charge was $26.3. The integration activities were completed during 2002.

4. Other Acquisitions

On December 31, 2003, the Company acquired certain billing and customer care assets from ALLTEL Communications Inc., a subsidiary of ALLTEL Corporation (ALLTEL). Convergys paid $37.0, representing approximately one times the anticipated 2004 revenues. Additional earn-out payments are possible based on future performance. As part of the acquisition, Convergys will begin providing billing services to more than 10.5 million additional wireless and wireline subscribers, and will add several new companies to its list of billing clients including Cingular, Centennial Communications and Commonwealth Telephone.

In February 2003, the Company acquired Cygent, Inc. (Cygent), a software provider of a Web-based customer, order and service management platform for the communications industry. The purchase price was $3.5. Cygent was acquired in order to expand the Company’s offering to the global communications market place, especially in the wireline market.

In July 2002, the Company purchased substantially all the assets of iBasis Speech Solutions, Inc. (Speech Solutions), a wholly owned subsidiary of iBasis, Inc., a provider of international Internet-based communication services. The Company paid approximately $19. In early 2004, an additional earn-out payment of approximately $1 was made as a result of Speech Solutions achieving certain revenue milestones. The earn-out payment was treated as additional purchase price consideration. The acquisition of Speech Solutions supplements the Company’s existing customer management and employee care capabilities with state-of-the-art interactive voice response (IVR) and advanced speech recognition (ASR) technology allowing for broader account penetration.

Also in July 2002, the Company purchased substantially all of the assets of TelesensKSCL Limited (in receivership) (Telesens) for approximately $10. Telesens, of Edinburgh, Scotland, and a subsidiary of TelesensKSCL AG, of Cologne, Germany, develops and licenses billing systems for voice and data services for mobile networks in the global telecommunications industry. The acquisition enables the Company to expand its position as one of the top billing and customer care companies in the European, Middle Eastern and Asian markets, and opens opportunities to provide advanced billing and customer care products to Telesens’ existing client base. As discussed further in Note 13, the Company is a defendant in a lawsuit filed by former employees of Telesens.

In February 2001, the Company paid approximately $16 to acquire the customer support business of Keane, Inc.

5. Business Restructuring and Asset Impairment

In response to continued economic weakness, the Company announced a restructuring plan during the fourth quarter of 2002 that included a reduction in headcount affecting professional and administrative employees worldwide and the consolidation or closure of certain CMG and IMG facilities. The restructuring plan resulted in charges of $26.0 related to severance, $49.5 of facility abandonment costs associated with ongoing lease obligations and $6.7 of asset impairment for the disposal of leasehold improvements and equipment for the facilities that the Company had abandoned by the end of 2002. In addition, the Company recorded $12.7 in asset impairments, including $5.4 in software originally capitalized pursuant to SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,” which the Company decided to discontinue marketing. The remaining portion of the $12.7 consisted principally of software intended for internal use that was capitalized pursuant to SOP 98-1 that the Company did not deploy. The impairment charge was based on the carrying value of the software at the date of discontinuance or disposal, as the net realizable value or proceeds from disposal was $0.

The Company also recorded $12.8 of additional facility abandonment costs associated with the contact centers that were closed in connection with the restructuring plan initiated by CMG during the third quarter of 2001. Based on its limited success in subleasing these facilities and further consultation with its real estate advisors, CMG revised its estimate related to the proceeds it expects to receive through the sublease of these facilities, which resulted in this additional restructuring charge.

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The facility abandonment component of the charge was equal to the future costs associated with those abandoned facilities, net of the proceeds from any probable future sublease agreements. The Company used estimates, based on consultation with real estate advisors, to arrive at the proceeds from any future sublease agreements. The Company will continue to evaluate its estimates in recording the facilities abandonment charge. As a result, there may be additional charges or reversals in the future.

Combined, these items reduced operating income, net income and earnings per diluted share for 2002 by $107.7, $76.8 and $0.46, respectively. These charges reduced 2002 operating income for IMG and CMG by $53.6 and $46.3, respectively, with the balance affecting Corporate. The 2002 restructuring and impairment charges included the following components:

Severance costs $ 26.0 Facility abandonment costs 62.3 Asset impairment 19.4

Total $ 107.7

During the fourth quarter of 2003, the Company reversed $1.5 of facility abandonment costs due to such costs being lower than originally anticipated. This was partially offset by $0.5 in additional severance costs. This change in estimate increased 2003 operating income, net income and earnings per diluted share by $1.0, $0.6 and $0.00, respectively.

The Company began the facility closures and headcount reductions during the fourth quarter of 2002 and was substantially completed by the end of 2003. These initiatives resulted in approximately 1,350 headcount reductions compared with the 1,050 that were originally planned. Despite the higher number of redundancies, the average severance payment per employee had been lower due to a lower mix of redundancies of higher paid employees. Accordingly, actual severance costs exceeded the original charge by only $0.5.

These actions are expected to result in cash costs of $85.8, of which $29.1 was spent through the end of 2003 principally related to facility abandonment costs and severance payments. Except for approximately $5 in severance that will be paid in early 2004, the remaining payments relate to facility abandonment costs that will be paid over several years until the leases expire.

During the third quarter of 2001, the Company approved a plan to reduce existing CMG contact center capacity and to eliminate 550 employees in contact center management and administrative functions. The plan resulted in charges of $11.8 for facility abandonment, $6.4 for severance and $10.8 for the impairment of leasehold improvements. As a result of the workstation reduction and changes in market demand for certain contact center technologies, the plan also resulted in the write-off of $16.2 in software that was capitalized pursuant to SOP 98-1 and intended to support CMG’s expanding contact center. The impairment charge was recognized based on the carrying value of the assets at the date of discontinuance or disposal, as the net realizable value or the proceeds from disposal was $0. Additionally, CMG’s plan resulted in a charge of $8.1 to write down investments in certain of CMG’s European contact center operations. In the aggregate, the approval of these plans resulted in the recording of a $53.3 restructuring and impairment charge in the third quarter of 2001. The Company closed the centers in 2001 and terminated 535 professional and administrative employees by the end of the third quarter of 2002. The remaining headcount reductions were completed during the fourth quarter of 2002.

The $11.8 charge for facility abandonment costs was equal to the future costs associated with those abandoned facilities, net of the proceeds from any probable future sublease agreements. The Company used estimates, based on consultation with real estate advisors, to arrive at the proceeds from any future sublease agreements.

Excluding the $12.8 of additional facility abandonment costs that was provided during the fourth quarter of 2002, the total cash cost of these actions is expected to be approximately $20.2. Through the end of 2002, the Company paid $18.2 primarily for severance payments and facility abandonment costs. As of December 31, 2003, there was a remaining restructuring accrual of $2.0 related to ongoing facility and abandonment costs, which the Company will pay over the remaining lease terms.

Unrelated to the CMG restructuring charges, IMG recorded an impairment charge of $4.7 related to purchased software that was originally capitalized pursuant to SFAS No. 86. The impairment charge was based on the carrying value of the software as its net realizable value was $0.

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The 2001 restructuring and impairment charges included the following components:

Also during 2001, the Company recorded a non-operating expense of $6.5, included in other income (expense), net to reflect the other than temporary decline in the value of certain equity investments whose valuations had been affected adversely by recent economic conditions.

Facility Closing Costs:

Severance costs $ 6.4 Lease terminations 11.8

Subtotal 18.2 Impairment Costs and Other Special Items:

Leasehold improvements 10.8 Software 20.9 Investments in European contact centers 8.1

Subtotal 39.8

Total $ 58.0

Restructuring liability activity for the 2002 and 2001 plans consisted of the following:

2003

2002

Balance at January 1 $ 89.6 $ 13.6 Charge (reversal) (1.0 ) 107.7 Severance payments (18.8 ) (3.5 ) Lease termination payments (11.7 ) (6.2 ) Non-cash (i.e. asset impairment) — (20.9 ) Other 2.5 (1.1 )

Balance at December 31 $ 60.6 $ 89.6

6. Goodwill and Other Intangible Assets

On January 1, 2002, the Company adopted, on a prospective basis, SFAS No. 142, which eliminated the amortization of goodwill. Under SFAS No. 142, the Company is required to test goodwill for impairment annually and at other times if events have occurred or circumstances exist that indicate the carrying value of goodwill may no longer be recoverable. The impairment test for goodwill involves a two-step process. The first step compares the fair value of a reporting unit with its carrying amount, including the goodwill allocated to each reporting unit. If the carrying amount is in excess of the fair value, the second step requires the comparison of the implied fair value of the reporting unit goodwill with the carrying amount of the reporting unit goodwill. Any excess of the carrying value of the reporting unit goodwill over the implied fair value of the reporting unit goodwill will be recorded as an impairment loss. Fair value of the reporting unit is determined using the income approach. Under the income approach, value is dependent on the present value of net cash flows to be derived from the ownership. Based on the results of its first step impairment tests, the Company had no goodwill impairment during 2003 and 2002. Goodwill, net increased to $726.3 at December 31, 2003 from $698.8 at December 31, 2002, principally as a result of goodwill acquired and currency translations adjustments.

The impact of discontinuing amortization of goodwill on net income, basic and diluted earnings per share for the year ended December 31, 2001 is as follows:

As required by SFAS No. 142, intangible assets that do not meet the criteria for recognition apart from goodwill must be reclassified. As a result of the Company’s analysis, $19.2 of acquisition costs, net of accumulated amortization, were transferred to goodwill during 2001.

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As Reported

Goodwill Amortization,

Net of Tax

Adjusted

2001:

Net income $ 138.8 $ 29.4 $ 168.2 Basic earnings per common share $ 0.82 $ 0.17 $ 0.99 Diluted earnings per common share $ 0.80 $ 0.17 $ 0.96

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As of December 31, 2003 and 2002, the Company’s other intangible assets acquired through business combinations consisted of the following:

The intangible assets are being amortized using the following amortizable lives: six years for software and two to ten years for contracts and other. The weighted average amortization period for intangible assets is eight years (five years for software, eight years for contracts and other).

Gross Carrying

Amount

Accumulated

Amortization

Net

2003:

Software (classified with Property, Plant & Equipment) $ 31.7 $ (22.3 ) $ 9.4 Contracts and other intangibles 96.8 (51.8 ) 45.0

Total $ 128.5 $ (74.1 ) $ 54.4

2002:

Software (classified with Property, Plant & Equipment) $ 28.9 $ (17.1 ) $ 11.8 Contracts and other intangibles 74.4 (41.9 ) 32.5

Total $ 103.3 $ (59.0 ) $ 44.3

Intangible amortization expense for the year ended December 31, 2003 was $15.1. Estimated intangible amortization expense for the four subsequent fiscal years is as follows:

For the year ended 12/31/04 $ 18 For the year ended 12/31/05 $ 14 For the year ended 12/31/06 $ 4 For the year ended 12/31/07 $ 3 Thereafter $ 15

7. Income Taxes

The Company’s provision for income taxes consists of the following:

47

Year Ended December 31,

2003

2002

2001

Current:

United States Federal $ 56.5 $ 80.1 $ 82.3 Foreign (7.4 ) 22.5 19.6 State and local 6.2 6.5 4.6

Total current 55.3 109.1 106.5 Deferred 44.7 (10.6 ) 9.6

Total $ 100.0 $ 98.5 $ 116.1

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The following is a reconciliation of the statutory federal income tax rate with the effective tax rate for each year:

The components of deferred tax assets and liabilities are as follows:

At December 31, 2003, the Company had a $34.1 U.S. capital loss carryforward, of which $27.6 expires in December 2005, and international operating loss carryforwards of $83.9, $79.3 of which had no expiration date and $4.6 expires between 2007 and 2008. Of the international operating loss carryforwards, $37.8 will be credited to additional paid in capital if realized. The net change in loss carryforwards and the related valuation allowance from 2002 principally is due to the elimination of a capital loss carryforward in connection with an audit settlement with the U.S. Internal Revenue Service.

Year Ended December 31,

2003

2002

2001

U.S. federal statutory rate 35.0 % 35.0 % 35.0 % State and local income taxes, net of federal income tax benefit 2.6 1.3 1.5 Research tax credits (1.4 ) (2.5 ) (2.5 ) Non-deductible amortization of intangible assets 0.5 0.6 2.2 Foreign rate differential and valuation allowances (1.0 ) 6.6 4.8 Non-deductible transaction costs — — 2.1 Other 1.1 (0.7 ) 2.4

Effective rate 36.8 % 40.3 % 45.5 %

At December 31,

2003

2002

Deferred tax asset:

Loss carryforwards $ 37.6 $ 47.0 Pension and employee benefits 25.5 18.5 Restructuring charges 24.6 29.7 State income taxes (0.3 ) 6.1 Allowance for doubtful accounts 4.5 11.4 Other 3.9 9.2 Valuation allowance (37.6 ) (47.0 )

Total deferred tax asset 58.2 74.9 Deferred tax liability:

Depreciation and amortization 61.5 29.2 Other comprehensive income 5.4 1.1

Total deferred tax liability 66.9 30.3

Net deferred tax asset (liability) $ (8.7 ) $ 44.6

The Company’s combined pre-tax earnings (losses) from foreign subsidiaries were $(15.5), $16.9 and $10.3 during 2003, 2002 and 2001, respectively.

The Company has not provided for U.S. federal income taxes or foreign withholding taxes on $56.1 of undistributed earnings of its foreign subsidiaries at December 31, 2003, because such earnings are intended to be reinvested indefinitely. It is not practicable to determine the amount of applicable taxes that would be due if such earnings were distributed.

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8. Debt

Debt consists of the following:

At December 31, 2003, the Company’s borrowing facilities included a credit facility with $325 in borrowing capacity that expires in July 2005 and a commercial paper program backed by this $325 credit facility. The participating agents in the credit facility include JPMorgan Chase, Citicorp USA, PNC Bank, Bank One, US Bank and The Royal Bank of Scotland. At December 31, 2003, the Company had $68.0 in commercial paper, backed by the revolving credit facility. The Company’s credit agreements include certain restrictive covenants including maintenance of interest coverage and debt-to-capitalization ratios. The Company was in compliance at December 31, 2003. Interest rates under the revolving credit facility are based on LIBOR adjusted for an index related to the Company’s credit ratings.

At December 31,

2003

2002

Commercial paper $ 68.0 $ 43.0 Mortgage debt 55.5 — Other 11.3 12.3

Total debt 134.8 55.3 Less current maturities 76.0 50.7

Long-term debt $ 58.8 $ 4.6 Weighted average interest rates:

Commercial paper 1.5 % 2.0 % Mortgage debt 2.3 % — Other 2.3 % 15.7 %

In November 2003, the Company borrowed $55.5 against a 10-year mortgage. Interest rates under the mortgage are based on LIBOR adjusted for an index related to the Company’s credit ratings. The mortgage is secured by the Company’s corporate headquarters facility in downtown Cincinnati, Ohio, which was purchased in October 2003.

Other debt of $11.3 and $12.3 at December 31, 2003 and 2002, respectively, consisted of capital leases and international credit facilities.

At December 31, 2003, future minimum payments of the Company’s debt arrangements are as follows:

2004 $ 76.0 2005 6.1 2006 6.2 2007 6.3 2008 5.8 Thereafter 34.4

Total $ 134.8

9. Sale of Receivables

The Company maintains a receivables purchase agreement with two third-party financial institutions. As accounts receivables are generated by certain of the Company’s domestic customers, those receivables are sold to Convergys Funding Corporation (CFC), a wholly owned, consolidated subsidiary of the Company. CFC then sells, on a revolving basis, an undivided percentage interest in designated pools of accounts receivable to the financial institutions.

The accounts receivable securitization agreement in effect at the beginning of the year expired in September 2003. The Company renewed the $150 securitization agreement with Bank One in September 2003, extending the agreement until September 2004. In November 2003, the Company added a $50 co-purchasing agreement with Fifth Third Bank also expiring in September 2004. These agreements allow the Company to receive up to $200 at a cost of funds linked to commercial paper rates. The Company services and retains an interest in the receivables sold under this agreement. The Company’s retained interest in the receivables sold is measured at the time of sale and is based on the sales of similar assets and classified with receivables.

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At December 31, 2003 and 2002, the Company had sold $175.0 and $150.0 of outstanding receivables, respectively. The amounts sold are reflected as reductions of accounts receivable in the Consolidated Balance Sheets as of the respective dates. Increases and decreases in the amount sold are reported as operating cash flows in the Consolidated Statements of Cash Flows. The cost of the program was $2.2 in 2003, $1.1 in 2002 and $4.4 in 2001. This cost is based on the amount and timing of outstanding sold receivables and is recorded as a component of interest expense.

10. Employee Benefit Plans

Pensions

The Company sponsors a defined benefit pension plan, which includes both a qualified and a non-qualified portion, for all eligible employees (the cash balance plan). The Company also sponsors a non-qualified, unfunded executive deferred compensation plan and a supplemental, non-qualified, unfunded plan for certain senior executives. The pension benefit formula for the cash balance plan is determined by a combination of compensation-based credits and annual guaranteed interest credits. Benefits for the executive deferred compensation plan are based on employee deferrals, matching contributions and investment earnings on participant accounts. Benefits for the supplemental plan are based on age, years of service and eligible pay. Funding of the cash balance plan has been achieved through contributions made to a trust fund. The contributions have been determined using the aggregate cost method. The Company’s measurement date for all plans is December 31. The projected unit credit cost method is used for determining pension cost for financial reporting purposes. As discussed in Note 2 under the heading “New Accounting Pronouncements,” 2004 pension costs for the cash balance plan will be determined based on the traditional unit credit cost method pursuant to EITF 03-04.

Pension cost for the cash balance plan included the following components:

The following table sets forth the cash balance plan’s funded status:

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Year Ended December 31,

2003

2002

2001

Service cost (benefits earned during the period) $ 18.2 $ 17.4 $ 14.6 Interest cost on projected benefit obligation 11.1 9.9 8.5 Expected return on plan assets (14.6 ) (17.9 ) (17.6 ) Amortization and deferrals—net 0.3 (3.0 ) (5.7 )

Pension cost (income) $ 15.0 $ 6.4 $ (0.2 )

At December 31,

2003

2002

Change in benefit obligation:

Benefit obligation at beginning of year $ 167.5 $ 136.8 Service cost 18.2 17.4 Interest cost 11.1 9.9 Amendments 0.9 — Actuarial (gain) loss (18.2 ) 10.0 Benefits paid (19.5 ) (6.6 )

Benefit obligation at end of year $ 160.0 $ 167.5

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Pension cost for the unfunded executive pension plans included the following components:

The following table sets forth the unfunded executive pension plans’ funded status:

51

At December 31,

2003

2002

Change in plan assets:

Fair value of plan assets at beginning of year $ 135.7 $ 170.3 Actual return on plan assets 34.3 (28.5 ) Employer contribution 30.8 0.5 Benefits paid (19.5 ) (6.6 )

Fair value of plan assets at end of year $ 181.3 $ 135.7

Funded status $ 21.3 $ (31.8 ) Unrecognized transition asset (0.3 ) (0.6 ) Unrecognized prior service cost 4.5 4.1 Unrecognized net loss 4.8 42.8

Prepaid benefit expense $ 30.3 $ 14.5

Accumulated benefit obligation at end of year $ 160.0 $ 131.5

Year Ended December 31,

2003

2002

2001

Service cost (benefits earned during the period) $ 3.8 $ 4.0 $ 4.3 Interest cost on projected benefit obligation 4.2 5.5 4.9 Amortization and deferrals—net 0.3 2.8 2.5

Pension cost $ 8.3 $ 12.3 $ 11.7 Other comprehensive loss $ 15.2 — —

At December 31,

2003

2002

Change in benefit obligation:

Benefit obligation at beginning of year $ 63.5 $ 72.9 Service cost 3.8 4.0 Interest cost 4.2 5.5 Amendments 0.5 — Actuarial (gain) loss 12.1 (13.3 ) Benefits paid (4.8 ) (5.6 )

Benefit obligation at end of year $ 79.3 $ 63.5

At December 31,

2003

2002

Funded status $ (79.3 ) $ (63.5 ) Unrecognized transition asset — — Unrecognized prior service cost 2.3 2.0 Unrecognized net loss 18.9 6.9

Accrued benefit expense $ (58.1 ) $ (54.6 )

Accumulated benefit obligation at end of year $ 75.5 $ 56.7 Intangible asset $ (2.3 ) $ (2.0 ) Accumulated other comprehensive loss $ (15.2 ) — Additional minimum pension liability $ 17.5 $ 2.0

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The following rates were used in determining the benefit obligations at December 31:

The following rates were used in determining the pension cost for all years ended December 31:

As of December 31, 2003 and 2002, plan assets for the cash balance plan consisted of approximately 70% of marketable equity and 30% of debt instruments, respectively, which is consistent with the Company’s targeted allocation. Plan assets for the cash balance plan included $7.2 and $6.3 of Company common shares at December 31, 2003 and 2002. The Company’s expected long-term rate of return was determined based on the asset mix of the plan, past performance and other factors. The Company contributed $30.8 in 2003 to fund its cash balance plan in order to satisfy its 2003 and 2004 ERISA funding requirements in pension contributions. The Company expects to make $0.2 in contributions in 2004.

Savings Plans

At December 31,

2003

2002

Discount rate—projected benefit obligation 6.25 % 6.75 % Future compensation growth rate 4.75 % 4.75 % Expected long-term rate of return on plan assets 9.00 % 9.00 %

Year Ended December 31,

2003

2002

2001

Discount rate—projected benefit obligation 6.75 % 7.25 % 7.50 % Future compensation growth rate 4.75 % 4.75 % 4.75 % Expected long-term rate of return on plan assets 9.00 % 9.00 % 9.00 %

The Company sponsors defined contribution plans covering substantially all employees. The Company’s contributions to the plans are based on either matching a portion of the employee contributions or a percentage of employee earnings. Total Company contributions to the defined contribution plans were $12.1, $12.7 and $11.1 for 2003, 2002 and 2001, respectively.

Employee Postretirement Benefits Other Than Pensions

The Company sponsors postretirement health and life insurance plans for certain eligible employees. The Company funds life insurance benefits of certain retirees through a Voluntary Employee Benefit Association (VEBA) trust. Contributions to the VEBA are subject to IRS limitations developed using the aggregate cost method. The Company’s postretirement benefit cost was $2.7, $2.4 and $2.3 for 2003, 2002 and 2001, respectively.

11. Common and Preferred Shares

Share Repurchases

In September 2001, the Securities and Exchange Commission (SEC) issued an exemptive order temporarily easing pooling-of-interest accounting qualification provisions and other restrictions under the federal securities laws related to issuers repurchasing their own common stock. Accordingly, during the exemptive period, which expired in October 2001, the Company repurchased 2.6 million shares for $68.3.

On January 18, 2002, the Company’s Board of Directors authorized the repurchase of up to 10 million of its common shares. On July 23, 2002, the Board of Directors authorized an increase in the number of common shares the Company may repurchase to 15 million shares. During 2002, the Company repurchased 15.0 million additional shares at a cost of $282.2.

On February 25, 2003, the Company’s Board of Directors authorized the repurchase of up to 10 million of its common shares. On April 2, 2003, the Board of Directors authorized the additional repurchase of up to 10 million of its common shares. The Company repurchased 13.6 million additional shares at a cost of $195.9 during 2003 pursuant to these authorizations.

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Shareholder Rights Plan

Under the Shareholder Rights Plan, a dividend of one preferred share purchase right for each outstanding common share was granted to shareholders of record at the close of business on December 1, 1998. Under certain conditions, each right entitles the holder to purchase one one-hundredth of a Series A preferred share. The rights cannot be exercised or transferred separately from common shares, unless a person or group acquires 15% or more of the Company’s outstanding common shares. The rights will expire on December 1, 2008, unless earlier redeemed by the Company.

Preferred Shares

The Company is authorized to issue up to 5 million preferred shares, of which 4 million would have voting rights. At December 31, 2003 and 2002, there were no preferred shares outstanding.

12. Stock-Based Compensation Plans

At December 31, 2003, the Company had authorized 38 million common shares for issuance under the Convergys Corporation 1998 Long-Term Incentive Plan (Convergys LTIP), as amended on February 26, 2002. The Convergys LTIP provides for the issuance of stock options and other stock-based awards to certain employees. In general, stock options are granted with exercise prices that are no less than market value of the stock at the grant date, have a ten-year term and have vesting terms of three to four years. In connection with the Company’s acquisition of Geneva in April 2001, all outstanding options to acquire Geneva common shares were converted into options to acquire 2.7 million Convergys shares at exercise prices ranging from $0.84 to $8.19. The Company’s operating results for 2003, 2002 and 2001 reflect the recognition of $2.5, $2.3 and $1.9, respectively, in compensation expense related to these options. The Convergys LTIP also permits the granting of other restricted stock awards, which generally have vesting terms of three to five years. During the restriction period, restricted stock awards entitle the holder to all the rights of a holder of common shares, including dividend and voting rights. Unvested shares are restricted as to disposition and subject to forfeiture under certain circumstances. The amount of compensation expense recognized for restricted stock was $8.2, $11.8 and $7.2 in 2003, 2002 and 2001, respectively.

Presented below is a summary of Company stock option activity:

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Shares in Thousands

Shares

Weighted

Average Exercise

Price

Options granted in 2001 3,924 $ 42.59 Options exercised in 2001 (2,749 ) 6.81 Options forfeited in 2001 (853 ) 31.09

Options outstanding at December 31, 2001 15,191 $ 24.55

Options exercisable at December 31, 2001 6,857 $ 17.10

Options granted in 2002 3,982 $ 35.25 Options exercised in 2002 (1,008 ) 7.40 Options forfeited in 2002 (637 ) 31.49

Options outstanding at December 31, 2002 17,528 $ 27.70

Options exercisable at December 31, 2002 9,466 $ 21.26

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The following table summarizes the status of the Company stock options outstanding and exercisable at December 31, 2003:

Presented below are the Company’s unvested restricted shares as of December 31, 2003:

54

Shares in Thousands

Shares

Weighted

Average Exercise

Price

Options granted in 2003 5,385 $ 12.08 Options exercised in 2003 (857 ) 7.47 Options forfeited in 2003 (866 ) 26.61

Options outstanding at December 31, 2003 21,190 $ 24.59

Options exercisable at December 31, 2003 13,123 $ 24.16

Shares in Thousands

Options Outstanding

Options Exercisable

Range of Exercise Prices

Shares

Weighted Average

Remaining Contractual

Life

Weighted

Average Exercise

Price

Shares

Weighted

Average Exercise

Price

$0.84 to $9.64 1,243 2.0 $ 5.59 1,122 $ 5.88 $11.55 to $11.56 3,605 9.2 11.55 85 11.55 $12.01 to $15.00 2,587 6.4 13.98 2,518 14.02 $15.02 to $19.50 2,400 4.6 17.32 2,055 17.36 $19.97 to $22.22 1,707 5.0 22.08 1,707 22.08 $22.75 to $29.53 2,487 6.2 29.37 2,414 29.48 $29.78 to $36.49 320 7.3 32.93 236 33.34 $36.67 to $36.68 3,133 8.0 36.67 786 36.67 $37.12 to $43.62 777 6.5 39.11 691 38.98 $43.63 to $52.53 2,931 7.0 43.70 1,509 43.78

Total 21,190 6.6 $ 24.58 13,123 $ 24.16

Range of Fair Value

Shares

Weighted

Average

$11.73 to $15.39 322 $ 11.73 $15.40 to $16.03 95 15.40 $16.04 to $19.15 130 17.27 $19.16 to $19.47 246 19.16 $19.48 to $25.49 51 23.52 $25.50 to $36.99 56 27.81 $37.00 to $37.15 414 37.00 $37.16 to $45.47 61 40.39

Total 1,375 $ 23.81

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The weighted average fair value on the date of grant for the Convergys options granted during 2003, 2002 and 2001 was $5.00, $13.73 and $16.03, respectively. Such amounts were estimated using the Black-Scholes option pricing model with the following weighted average assumptions:

Convergys

2003

2002

2001

Expected volatility 49.4 % 42.5 % 39.7 % Risk free interest rate 2.9 % 4.5 % 4.7 % Expected holding period, in years 4 4 4

13. Commitments and Contingencies

Commitments

The Company leases certain facilities and equipment used in its operations under operating leases. Total rent expense was $112.0, $119.4 and $110.3 in 2003, 2002 and 2001, respectively.

At December 31, 2003, the total minimum rental commitments under non-cancelable leases are as follows:

2004 $ 85.1 2005 62.4 2006 45.1 2007 29.5 2008 23.8 Thereafter 77.9

Total $ 323.8

The above amounts include obligations related to facilities that were closed in conjunction with the 2002 and 2001 restructuring plans as further described in Note 5.

The above amounts also include the Company’s obligations related to the lease of its office complex in Orlando, Florida. The Company previously leased its office complex in Orlando, Florida, from a special purpose entity, which served as a conduit between an unrelated commercial lender and the Company, under a synthetic lease arrangement that qualified as an operating lease. In June 2003, Wachovia Development Corporation (“Lessor”), a wholly owned subsidiary of Wachovia Corporation, acquired the office complex for $65.0, its appraised value, and began leasing it to the Company under a lease that expires June 2010.

The Lessor partially funded the purchase of the office complex with the issuance of $55.0 in notes sold to two non-affiliated institutional investors. The remaining $10.0 was funded through a combination of bank debt and equity. Under the lease agreement, which has been classified as an operating lease, the Company’s monthly lease payments include a fixed and variable component.

Upon termination or expiration, the Company must either purchase the property from the lessor for $65.0 or arrange to have the office complex sold to a third party. If the office complex is sold to a third party for an amount less than the $65.0 financed by the Lessor, the Company has agreed under a residual value guarantee to pay the Lessor up to $55.0. If the office complex is sold to a third party for an amount in excess of $65.0, the Company is entitled to collect the excess. The Company recognized a liability of approximately $5 for the related residual value guarantee. The value of the guarantee was determined by computing the estimated present value of probability-weighted cash flows that might be expended under the guarantee. The Company has recorded a liability for the fair value of the obligation with a corresponding asset recorded as prepaid rent, which is being amortized to rental expense over the lease term. The liability will remain on the books until the end of the lease term.

Under the terms of the lease, the Company also provides certain indemnities to the Lessor, including environmental indemnities. Due to the nature of such potential obligations, it is not possible to estimate the maximum amount of such exposure or the fair value. However, the Company does not expect such amounts, if any, to be material.

The Company has concluded that it is not required to consolidate the Lessor pursuant to Interpretation No. 46 as the Company is not the primary beneficiary. Additionally, the Company is not required to consolidate the office complex and the related debt as the lease does not qualify as a variable interest entity.

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At December 31, 2003, the Company had outstanding letters of credit of approximately $14 related to performance and payment guarantees. The Company believes that any obligation that may arise will not be material.

The Company also has annual purchase commitments of $20.0, $20.0 and $16.7 in 2004, 2005 and 2006, respectively, related to various communication services.

Contingencies

The Company is from time to time subject to claims and administrative proceedings that are filed in the ordinary course of business. The Company believes that the results of any such claims or administrative proceedings, either individually or in the aggregate, will not have a materially adverse effect on the Company’s financial condition.

In September 2002, the Company was named as an additional defendant in an action filed with the Employment Tribunal in Glasgow, Scotland, by 156 former employees of Telesens against Telesens (in receivership) and the three individual receivers (Receivers). Prior to the Company’s acquisition of Telesens’ assets, the Receivers declared certain employees of Telesens redundant and terminated their employment. The claimants allege that the dismissals were unlawful under Scottish law and that the Company, as purchaser of the Telesens business, is liable for the dismissals.

Although not specified in the complaint, the Company believes the claimants are seeking damages of approximately $15. The Employment Tribunal has scheduled a hearing for June 2004 to hear evidence from all parties and then determine whether the Company is correctly named as a defendant to this action. It is expected that further orders for discovery will be made. The Company is defending the case vigorously and intends to continue to do so. In the event of an adverse judgment, the Company believes that the results of the claim would not have a materially adverse effect on the Company’s financial condition.

From December 2003 through February 2004, six separate lawsuits were filed in the Court of Common Pleas, Cuyahoga County, Ohio, against Cincinnati SMSA Limited Partnership and other defendants. As disclosed in Note 2, Convergys is a limited partner of Cincinnati SMSA Limited Partnership, with a 45% ownership interest. Five of the suits were filed by companies purporting to be resellers (the “Resellers Cases”), while the sixth was filed by an individual consumer purporting to represent a class of damaged consumers (the “Consumer Case”). Each of the Reseller Cases seeks damages ranging from $1 to $3 plus treble damages under Ohio law. The Consumer Case seeks damages in excess of $60 and treble damages under Ohio law.

Pursuant to the partnership agreement, Convergys, as a limited partner, has no right to participate in the operation of the partnership, no right to direct or participate in the defense of these actions, and therefore has no current ability to assess the merit of any claims made in these actions or identify any possible loss which could result from these claims against the partnership.

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14. Additional Financial Information

At December 31,

2003

2002

Property and equipment, net:

Land $ 18.4 $ 7.6 Buildings 108.4 47.7 Leasehold improvements 132.7 121.9 Equipment 459.6 413.5 Software 316.9 278.4 Construction in progress and other 39.6 42.7

1,075.6 911.8

Less: Accumulated depreciation (711.8 ) (613.8 ) $ 363.8 $ 298.0 Payables and other current liabilities:

Accounts payable $ 29.2 $ 30.7 Accrued taxes 33.2 33.9 Accrued payroll-related expenses 100.9 81.4 Deferred compensation 67.2 50.0 Accrued expenses, other 97.7 77.0 Restructuring and exit costs 62.7 91.7 Deferred revenue and government grants 75.8 46.6

$ 466.7 $ 411.3

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Other Comprehensive Income (Loss)

Cellular Partnerships

At December 31,

2003

2002

Accumulated other comprehensive income:

Currency translation adjustments $ 7.2 $ (7.6 ) Minimum pension liability, net of tax of $5.4 (9.8 ) — Unrealized gain (loss) on hedging activities, net of tax of ($12.1) and $0.6 18.3 (0.8 )

$ 15.7 $ (8.4 )

Summarized financial information for the Cellular Partnerships is as follows:

At December 31,

2003

2002

2001

Current assets $ 31.8 $ 35.0 $ 22.7 Non-current assets 195.2 216.3 173.7 Current liabilities 18.6 41.0 22.0 Non-current liabilities 102.0 98.5 93.9

Year Ended December 31,

2003

2002

2001

Revenues $ 213.0 $ 201.5 $ 180.3 Operating income (loss) (24.0 ) (1) 17.8 14.0 Net income (loss) (28.0 ) (1) 14.2 13.8

(1) Includes a $22.0 loss related to the settlement of a lawsuit against Cincinnati SMSA Limited Partnership.

15. Industry Segment and Geographic Operations

Industry Segment Information

The Company has two segments, which are identified by service offerings. CMG provides outsourced customer care and employee care services. IMG provides outsourced billing and information services and software.

The Company does not allocate activities below the operating income level to its reported segments. The Company’s business segment information is as follows:

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Year Ended December 31,

2003

2002

2001

Revenues:

CMG $ 1,504.9 $ 1,397.5 $ 1,394.7 IMG 788.7 899.2 937.9 Less intersegment (4.8 ) (10.5 ) (12.0 )

$ 2,288.8 $ 2,286.2 $ 2,320.6 Depreciation:

CMG $ 70.6 $ 72.0 $ 79.3 IMG 30.6 42.9 38.7 Corporate 7.7 7.8 7.5

$ 108.9 $ 122.7 $ 125.5

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Year Ended December 31,

2003

2002

2001

Amortization:

CMG $ 8.8 $ 8.7 $ 32.6 IMG 6.3 5.7 18.2

$ 15.1 $ 14.4 $ 50.8 Operating income (loss):

CMG $ 179.3 $ 134.7 $ 119.2 IMG 119.4 131.7 193.0 Corporate and other (6.3 ) (13.1 ) (35.6 )

$ 292.4 $ 253.3 $ 276.6 Restructuring, Impairment and Other Charges:

CMG $ — $ 46.3 $ 53.3 IMG — 53.6 4.7 Corporate and other (1.0 ) 7.8 31.8

$ (1.0 ) $ 107.7 $ 89.8 Capital expenditures:

CMG $ 51.1 $ 42.8 $ 56.6 IMG 25.6 34.0 43.4 Corporate and other 97.1 14.0 13.5

$ 173.8 $ 90.8 $ 113.5

At December 31,

2003

2002

Total assets:

CMG $ 1,022.6 $ 956.9 IMG 582.1 572.7 Corporate and other 205.5 89.9

$ 1,810.2 $ 1,619.5 Goodwill, net:

CMG $ 551.5 $ 542.6 IMG 174.8 156.2

$ 726.3 $ 698.8

Intersegment revenues are for services charged at rates which approximate cost.

Geographic Operations

The following table presents certain geographic information regarding the Company’s operations:

58

Year Ended December 31,

2003

2002

2001

Revenues:

North America $ 2,087.7 $ 2,119.5 $ 2,139.6 Rest of World 201.1 166.7 181.0

$ 2,288.8 $ 2,286.2 $ 2,320.6

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At December 31,

2003

2002

Long-lived assets:

North America $ 1,223.3 $ 1,032.4 Rest of World 133.8 150.8

$ 1,357.1 $ 1,183.2

Concentrations

Both of the Company’s segments derive significant revenues from AT&T Wireless Services, Inc. (AT&T Wireless) and AT&T Corporation (AT&T).

Revenues from AT&T Wireless were 21.2%, 19.7% and 18.2% of the Company’s consolidated revenues for 2003, 2002 and 2001, respectively. Related accounts receivable from AT&T Wireless totaled $61.9 and $75.2 at December 31, 2003 and 2002, respectively.

Revenues from AT&T were less than 10% of the Company’s consolidated revenues for 2003. Revenues from AT&T were 10.4% and 14.9% of the Company’s consolidated revenues for 2002 and 2001, respectively.

16. Earnings Per Share

The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per share (EPS) computations:

Shares in Millions

Net Income

Shares

Per Share Amount

2003:

Basic EPS $ 171.6 145.7 $ 1.18 Effect of dilutive securities:

Stock-based compensation arrangements — 3.1 0.03

Diluted EPS $ 171.6 148.8 $ 1.15

2002:

Basic EPS $ 145.9 162.9 $ 0.90 Effect of dilutive securities:

Stock-based compensation arrangements — 3.2 0.02

Diluted EPS $ 145.9 166.1 $ 0.88

2001:

Basic EPS $ 138.8 169.4 $ 0.82 Effect of dilutive securities:

Stock-based compensation arrangements — 5.0 0.02

Diluted EPS $ 138.8 174.4 $ 0.80

The diluted EPS calculation excludes the effect of 13.7 million, 14.0 million and 4.1 million outstanding stock options for the years ended December 31, 2003, December 31, 2002, and December 31, 2001, respectively, because they are anti-dilutive.

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17. Financial Instruments

The Company did not have interest rate swaps at December 31, 2003, but did have derivative liabilities related to interest rate swaps with a fair value of $1.2 at December 31, 2002. The Company had derivative liabilities related to outstanding forward exchange contracts maturing within 24 months, consisting primarily of Canadian dollar, Indian rupee, Philippine peso and euro contracts with a notional value of $501.1 and $133.2, respectively. These derivatives were classified as other current assets of $29.6 at December 31, 2003 and accrued liabilities of $0.8 at December 31, 2002. In 2003, the Company recorded deferred tax liabilities of $12.1 related to these derivatives and deferred tax assets of $0.6 in 2002. A total of $18.3 of deferred gains and $0.1 of deferred losses, net of tax, on derivative instruments in 2003 and 2002, respectively, were accumulated in other comprehensive income and is expected to be reclassified to earnings during the next 24 months.

18. Quarterly Financial Information (Unaudited)

1 st

Quarter

2 nd

Quarter

3 rd

Quarter

4 th

Quarter

Total

2003:

Revenues $ 560.4 $ 563.2 $ 570.7 $ 594.5 $ 2,288.8 Operating income $ 68.5 $ 71.0 $ 74.2 $ 78.7 $ 292.4 Net income $ 34.9 $ 42.8 $ 45.5 $ 48.4 $ 171.6

Earnings per share:

Basic $ 0.23 $ 0.29 $ 0.32 $ 0.34 $ 1.18 Diluted $ 0.22 $ 0.29 $ 0.31 $ 0.33 $ 1.15

2002:

Revenues $ 587.5 $ 572.7 $ 561.2 $ 564.8 $ 2,286.2 Operating income (loss) $ 98.5 $ 94.5 $ 89.8 $ (29.5 ) $ 253.3 Net income (loss) $ 59.6 $ 59.1 $ 55.6 $ (28.4 ) $ 145.9

Earnings per share:

Basic $ 0.35 $ 0.35 $ 0.34 $ (0.18 ) $ 0.90 Diluted $ 0.35 $ 0.35 $ 0.34 $ (0.18 ) $ 0.88

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

No disagreements with accountants on any accounting or financial disclosure or auditing scope or procedure occurred during 2003.

Item 9A. Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer evaluated, together with other members of senior management, the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Sarbanes-Oxley Act) as of the year ended December 31, 2003. Based on this review, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act, as amended, is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure, and are effective to ensure that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There have been no material changes in the Company’s internal controls or in other factors that could materially affect, or could reasonably be likely to materially affect, those controls subsequent to the date of their evaluation including any corrective actions with regard to material deficiencies and weaknesses.

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PART III

Item 10. Directors and Officers of the Registrant

The information required by Item 10 with respect to directors, the Audit Committee of the Board of Directors, Audit Committee financial experts, Code of Ethics and Section 16 compliance is incorporated herein by reference to the section of the Company’s proxy statement relating to its annual meeting of shareholders to be held on April 27, 2004. Certain information concerning the executive officers of the Company is contained on Pages 14 - 15 of this Form 10-K.

Item 11. Executive Compensation

The Executive Compensation section is incorporated herein by reference to the Company’s proxy statement relating to its annual meeting of shareholders to be held on April 27, 2004.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The Share Ownership of Directors and Officers section is incorporated herein by reference to the Company’s proxy statement relating to its annual meeting of shareholders to be held on April 27, 2004.

Item 13. Certain Relationships and Related Transactions

Not applicable.

Item 14. Principal Accounting Fees and Services

The information required by Item 14 is incorporated by reference to the Company’s proxy statement relating to its annual meeting of shareholders to be held on April 27, 2004.

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PART IV

Item 15. Exhibits, Financial Statement Schedule and Reports on Form 8-K

Item 15(a)(1) and (2). List of Financial Statements and Financial Statement Schedule The following consolidated financial statements of Convergys are included in Item 8:

Financial statement schedules other than that listed above have been omitted because the required information is not required or applicable.

Page

(1) Consolidated Financial Statements:

Consolidated Statements of Income and Comprehensive Income 35 Consolidated Balance Sheets 36 Consolidated Statements of Cash Flows 37 Consolidated Statements of Shareholders’ Equity 38 Notes to Financial Statements 39 Report of Independent Accountants 34

(2) Financial Statement Schedule:

II - Valuation and Qualifying Accounts 65

(3) Exhibits: Exhibits identified in parenthesis below, on file with the Securities and Exchange Commission (SEC), are incorporated herein by reference as exhibits hereto.

62

Exhibit Number

3.1

Amended Articles of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1 to Form S-3 filed on August 10, 2000, File No. 333-43404.)

3.2 Regulations of the Company. (Incorporated by reference to Exhibit 3.2 to Registration Statement No. 333-53619.)

4

Rights Agreement dated November 30, 1998 between Convergys Corporation and The Fifth Third Bank. (Incorporated by reference to Exhibit 4.1 to Form 8-A filed December 23, 1998, File No. 001-14379.)

10.1

Convergys Corporation 1998 Long-Term Incentive Plan as amended effective as of April 22, 2002. (Incorporated by reference to Exhibit 4.2 to Form S-8 filed July 19, 2002, File No. 333-96727.)

10.2

Convergys Corporation Deferred Compensation and Option Gain Deferral Plan for Non-Employee Directors. (Incorporated by reference to Exhibit 4.2 to Form S-8 filed on July 19, 2002, File No. 333-96729.)

10.3

Convergys Corporation Executive Deferred Compensation Plan as amended effective as of October 29, 2001. (Incorporated by reference to Exhibit 10.3 to the Company’s 2001 Annual Report on Form 10-K.)

10.4

Employment Agreement between the Company and James F. Orr and December 16, 1998 Amendment to Employment Agreement. (Incorporated by reference to Exhibit 10.8 to the Company’s 1998 Annual Report on Form 10-K.)

10.5

Employment Agreement between the Company and Steven G. Rolls and December 16, 1998 Amendment to Employment Agreement. (Incorporated by reference to Exhibit 10.10 to the Company’s 1998 Annual Report on Form 10-K.)

10.6

Employment Agreement between the Company and David F. Dougherty and December 16, 1998 Amendment to Employment Agreement. (Incorporated by reference to Exhibit 10.12 to the Company’s 1998 Annual Report on Form 10-K.)

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63

10.7

Employment Agreement between the Company and Ronald E. Schultz and November 1, 1998 Amendment to Employment Agreement. (Incorporated by reference to Exhibit 10.14 to the Company’s 1998 Annual Report on Form 10-K.)

10.8

June 26, 2001 Amendment to Employment Agreement between the Company and Ronald E. Schultz. (Incorporated by reference to Exhibit 10.10 to the Company’s 2001 Annual Report on Form 10-K.)

10.9 Employment Agreement between the Company and Earl C. Shanks.

10.10 Employment Agreement between the Company and William H. Hawkins II.

10.11

Convergys Corporation Supplemental Executive Retirement Plan. (Incorporated by reference to Exhibit 10.10 to the Company’s 2000 Annual Report on Form 10-K.)

10.12

Convergys Corporation Supplemental Executive Retirement Plan. (Incorporated by reference to Exhibit 10.10 to the Company’s 2000 Annual Report on Form 10-K.)

10.13

Convergys Corporation Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 4.2.1 to post-effective Amendment No. 2 to Registration Statement No. 333-69633 filed on July 7, 2000.)

10.14

$325,000,000 Three-Year Competitive Advance and Revolving Credit Facility Agreement dated as of August 1, 2002. (Incorporated by reference to Exhibit 10.18 to the Company’s 2002 Annual Report on Form 10-K.)

10.15

Convergys Corporation Retirement and Savings Plan. (Incorporated by reference to Exhibit 4.2 to Form S-8 filed on July 19, 2002, File No. 333-96733.)

10.16

Participation Agreement between Convergys Corporation, Various Guarantors and Wachovia Development Corporation dated as of June 30, 2003. (Incorporated by reference to Exhibit 10.1 to Form 10-Q filed on August 12, 2003.)

10.17

Amended and Restated Lease Agreement between Wachovia Development Corporation and Convergys Corporation as of June 30, 2003. (Incorporated by reference to Exhibit 10.2 to Form 10-Q on August 12, 2003.)

10.18

Security Agreement between Wachovia Development Corporation and Wachovia Bank, National Association and accepted and agreed to by Convergys Corporation as of June 30, 2003. (Incorporated by reference to Exhibit 10.3 to Form 10-Q on August 12, 2003.)

10.19

Assignment and Recharacterization Agreement between Convergys Corporation, Wells Fargo Bank Northwest, National Association, Bank of America, N.A. (Incorporated by reference to Exhibit 10.4 to Form 10-Q on August 12, 2003.)

10.20 $55,500,000 Promissory Note with General Electric Capital Assurance Company dated as of November 7, 2003.

10.21 Amended and Restated Receivables Purchase Agreement dated as of November 20, 2003.

10.22

Geneva Technology Limited Unapproved Share Option Scheme 1998. (Incorporated by reference to Exhibit 4.2 to Form S-8 filed on August 7, 2001, File No. 333-66992.)

10.23

Convergys Corporation Canadian Employee Share Plan. (Incorporated by reference to Exhibit 4.2 to Form S-8 filed on December 29, 1999, File No. 333-86137.)

12 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends.

21 Subsidiaries of the Company.

23 Consent of Ernst & Young LLP.

24 Powers of Attorney.

31.1 Certification by Chief Executive Officer of Periodic Financial Reports Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification by Chief Financial Officer of Periodic Financial Reports Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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The Company will furnish, without charge, to a security holder upon request, a copy of the documents, or the portions thereof, which are incorporated by reference, and will furnish any other exhibit at cost.

32.1 Certification by Chief Executive Officer of Periodic Financial Reports Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification by Chief Financial Officer of Periodic Financial Reports Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Item 15(b). Reports on Form 8-K

On October 22, 2003, the Company announced that Earl Shanks would replace Steve Rolls as its Chief Financial Officer effective November 13, 2003. On December 12, 2003, the Company announced the purchase of certain billing and customer care assets from ALLTEL Communication Inc. As part of the acquisition, Convergys will begin providing billing services to more than 10.5 million additional wireless and wireline subscribers. Item 15(c) and (d). Exhibits and Financial Statement Schedule The responses to these portions of Item 15 are submitted as a separate section of this report.

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CONVERGYS CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(Millions of Dollars)

COL. A

COL. B

COL. C

COL. D

COL. E

Additions

(1) (2)

Description

Balance at

Beginning of Period

Charged to Expense

Charged to Other Accounts

Deductions

Balance at End

of Period

Year 2003

Allowance for Doubtful Accounts $ 15.7 $ 8.1 — $ 3.4 (a) $ 20.4 Deferred Tax Asset Valuation Allow. $ 47.0 $ 2.6 (b) — $ 12.0 (d) $ 37.6 Restructuring Reserve $ 91.7 $ (1.0 ) — $ 28.0 $ 62.7

Year 2002

Allowance for Doubtful Accounts $ 14.7 $ 10.9 — $ 9.9 (a) $ 15.7 Deferred Tax Asset Valuation Allow. $ 38.3 $ 14.7 (b) $ 2.3 (b) $ 8.3 (c) $ 47.0 Restructuring Reserve $ 19.6 $ 86.8 — $ 14.7 $ 91.7

Year 2001

Allowance for Doubtful Accounts $ 11.9 $ 18.5 — $ 15.7 (a) $ 14.7 Deferred Tax Asset Valuation Allow. $ 19.8 $ 9.5 (b) $ 9.0 (b) — $ 38.3 Restructuring Reserve $ 4.5 $ 26.4 — $ 11.3 $ 19.6

(a) Primarily includes amounts written off as uncollectible.

(b) Amounts relate to valuation allowances being recorded for international, operating and capital loss carryforwards.

(c) Includes the reversal of valuation allowances related to operating and capital loss carryforwards that expired during 2002.

65

(d) Includes reversal of valuation allowances related to operating loss carryforwards and a 2003 IRS audit settlement of capital loss carryforwards.

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Signatures Pursuant to the requirements of Section 13 or 15(d) 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.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

CONVERGYS CORPORATION

March 5, 2004 By /s/ Earl C. Shanks

Earl C. Shanks Chief Financial Officer

Signature

Title

Date

JAMES F. ORR*

Chairman of the Board; Principal Executive Officer; President, Chief Executive Officer and Director

James F. Orr

EARL C. SHANKS*

Principal Financial Officer; Chief Financial Officer

Earl C. Shanks

MICHAEL D. JONES*

Principal Accounting Officer; Vice President and Controller

Michael D. Jones

ZOË BAIRD* Director

Zoë Baird

JOHN F. BARRETT* Director

John F. Barrett

GARY C. BUTLER* Director

Gary C. Butler

DAVID B. DILLON* Director

David B. Dillon

ERIC C. FAST* Director

Eric C. Fast

JOSEPH E. GIBBS* Director

Joseph E. Gibbs

ROGER L. HOWE* Director

Roger L. Howe

66

STEVEN C. MASON* Director

Steven C. Mason

PHILIP A. ODEEN* Director

Philip A. Odeen

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67 Exhibit 10.9 to 2003 10-K

EMPLOYMENT AGREEMENT

This Agreement is made as of November 13, 2003 (the “Effective Date”) between Convergys Corporation, an Ohio corporation (“Employer”), and Earl Shanks (“Employee”).

Employer and Employee agree as follows: 1. Employment . By this Agreement, Employer and Employee set forth the terms of Employer’s employment of Employee on and after the Effective Date. 2. Term of Agreement . The term of this Agreement shall be the 4 year period commencing on the Effective Date. On the third anniversary of the Effective Date and on each subsequent anniversary of the Effective Date, the term of this Agreement automatically shall be extended for a period of one additional year. Notwithstanding the foregoing, the term of this Agreement is subject to termination as provided in Section 13. 3. Duties .

A. Employee will serve as Chief Financial Officer of Employer or in such other equivalent capacity with Employer or an Affiliate as may be designated by the Chairman and CEO of Employer. Employee will report to the Chairman, President and CEO of Employer. For purposes of this Agreement, “Affiliate” means each corporation which is a member of a controlled group of corporations (within the meaning of section 1563(a) of the Internal Revenue Code of 1986, as amended) which includes Employer.

B. Employee shall furnish such managerial, executive, financial, technical, and other skills, advice, and assistance in operating Employer and its Affiliates as Employer may reasonably request.

C. Employee shall also perform such other duties as are reasonably assigned to Employee by the Chairman, President and CEO of Employer.

D. Employee shall devote Employee’s entire time, attention, and energies to the business of Employer and its Affiliates. The words “entire time, attention, and energies” are intended to mean that Employee shall devote Employee’s full effort during reasonable working hours to the business of Employer and its Affiliates and shall devote at least 40 hours per week to the business of Employer and its Affiliates. Employee shall travel to such places as the Employer deems necessary in the performance of Employee’s duties.

1

Signature

Title

Date

SIDNEY A. RIBEAU* Director

Sidney A. Ribeau

DAVID R. WHITWAM* Director

David R. Whitwam

JAMES M. ZIMMERMAN* Director

James M. Zimmerman

*By: /s/ Earl C. Shanks March 5, 2004

Earl C. Shanks as attorney-in-fact and as Chief Financial Officer

4. Compensation .

A. Employee shall receive a base salary (the “Base Salary”) of at least $400,000 per year, payable not less frequently than monthly, for each year during the term of this Agreement, subject to proration for any partial year. Such Base Salary, and all other amounts payable under this Agreement, shall be subject to withholding as required by law.

B. In addition to the Base Salary, Employee shall be entitled to receive an annual incentive bonus (the “Annual Incentive Bonus”) for each calendar year for which services are performed under this Agreement. Any Annual Incentive Bonus for a calendar year shall be payable after the conclusion of the calendar year in accordance with Employer’s annual incentive policy. For each year beginning with the 2004 calendar year, Employee shall be given an Annual Incentive Bonus target, by Employer’s Compensation & Benefits Committee, valued at no less than $300,000, subject to proration for a partial year.

C. Employee shall be paid a signing bonus of $150,000 payable within five business days of the Effective Date.

D. On at least an annual basis, Employee shall receive a performance review and be considered for Base Salary and/or Annual Incentive Bonus target increases. 5. Business Expenses and Relocation Expenses . All reasonable and necessary expenses incurred by Employee in the course of the performance of Employee’s duties to Employer shall be reimbursable in accordance with Employer’s then current travel and expense policies. In addition, all reasonable and necessary expenses incurred by Employee in relocating from Dayton, Ohio to Cincinnati, Ohio shall be reimbursable in accordance with Employer’s current management relocation policy. 6. Benefits .

A. While Employee remains in the employ of Employer, Employee shall be entitled to participate in all of the various employee benefit plans and programs, or equivalent plans and programs which are either (i) generally made available to other employees of Employer or (ii) described in Attachment A.

B. Notwithstanding anything contained herein to the contrary, the Base Salary and Annual Incentive Bonuses otherwise payable to Employee shall be reduced by any benefits paid to Employee by Employer under any disability plans made available to Employee by Employer.

C. Subject to the approval of Employer’s Compensation & Benefits Committee, Employee shall be granted options to purchase 80,000 common shares of Employer under Employer’s 1998 Long Term Incentive Plan. For each calendar year beginning after December 31, 2003 in which this Agreement is in effect, Employee will be eligible for stock option grants under Employer’s 1998 Long Term Incentive Plan or any similar plan made available to employees of Employer.

2

D. Subject to the approval of Employer’s Compensation & Benefits Committee, Employee shall receive a restricted stock award of 30,000 common shares of Employer. Such award shall be made under Employer’s 1998 Long Term Incentive Plan on the terms set forth in Attachment B.

E. For each calendar year beginning after December 31, 2003 in which this Agreement is in effect, Employee will be given a long term incentive target under Employer’s 1998 Long Term Incentive Plan or any similar plan made available to employees of Employer (i.e., aggregate stock options, restricted stock, performance share targets and/or equivalents). In no event will the value of Employee’s long term incentive target for any calendar year be less than $800,000.

F. Subject to the approval of Employer’s Compensation & Benefits Committee and as long as Employee remains employed under this Agreement, Employee shall be entitled to participate in Employer’s Supplemental Executive Retirement Plan. 7. Confidentiality . Employer and its Affiliates are engaged in the information management and customer management industries within the U.S. and worldwide. Employee acknowledges that in the course of employment with Employer, Employee will be entrusted with, obtain access to and obtain intimate, detailed and comprehensive knowledge or information proprietary to the Employer and its Affiliates with respect to the following (all of which information is referred to hereinafter collectively as the “Information”): the organization and management strategies of Employer and its Affiliates; the names, addresses, buying habits, and other special information regarding past, present and potential customers, employees and suppliers of Employer and its Affiliates; employee lists; customer relationships; customer and supplier contracts and transactions; pricing; price lists of Employer, its Affiliates and their suppliers; products, services, programs and processes sold, licensed or developed by the Employer or its Affiliates; technical data, plans and specifications, present and/or future development projects of Employer and its Affiliates; financial and/or marketing data respecting the conduct of the present or future phases of business of Employer and its Affiliates; computer programs, systems and/or software; ideas, inventions, trademarks, trade secrets, business information, know-how, processes, improvements, designs, redesigns, discoveries and developments of Employer and its Affiliates; and other information considered confidential by any of the Employer, its Affiliates or customers or suppliers of Employer, its Affiliates. Employee agrees to retain the Information in absolute confidence and not to permit access to or disclose the Information to any person or organization except as required in the performance of Employee’s duties for Employer, without the express written consent of Employer; provided that Employee’s obligation of confidentiality shall not extend to any Information which becomes generally available to the public other than as a result of disclosure by Employee. 8. New Developments . All ideas, inventions, discoveries, concepts, trademarks, or other developments or improvements, whether patentable or not, conceived by the Employee, alone or with others, at any time during the term of Employee’s employment, whether or not during working hours or on Employer’s premises, which are within the scope of or related to the

3

business operations of Employer or its Affiliates (“New Developments”), shall be and remain the exclusive property of Employer. Employee shall do all things reasonably necessary to ensure ownership of such New Developments by Employer, including the execution of documents assigning and transferring to Employer all of Employee’s rights, title and interest in and to such New Developments, and the execution of all documents required to enable Employer to file and obtain patents, trademarks, and copyrights in the United States and foreign countries on any of such New Developments. 9. Surrender of Material Upon Termination . Employee hereby agrees that upon cessation of Employee’s employment, for whatever reason and whether voluntary or involuntary, Employee will immediately surrender to Employer all of the property and other things of value in his possession or in the possession of any person or entity under Employee’s control that are the property of Employer or any of its Affiliates, including without any limitation all personal notes, drawings, manuals, documents, photographs, or the like, including copies and derivatives thereof, relating directly or indirectly to any confidential information or materials or New Developments, or relating directly or indirectly to the business of Employer or any of its Affiliates. 10. Remedies .

A. Employer and Employee hereby acknowledge and agree that the services rendered by Employee to Employer, the information disclosed to Employee during and by virtue of Employee’s employment, and Employee’s commitments and obligations to Employer and its Affiliates herein are of a special, unique and extraordinary character, and that the breach of any provision of this Agreement by Employee will cause Employer irreparable injury and damage, and consequently the Employer shall be entitled to, in addition to all other remedies available to it, injunctive and equitable relief to prevent a breach of Sections 7, 8, 9, 11 and 12 of this Agreement and to secure the enforcement of this Agreement.

B. Except as provided in Section 10.A., the parties agree to submit to final and binding arbitration any dispute, claim or controversy arising between Employee and Employer concerning (1) termination of employment, (2) loss of promotion, (3) sexual or other harassment, (4) failure to accommodate a disability or (5) an intentional tort, and waive their right to sue in court and have such claims decided by a judge or jury. Claims subject to arbitration on these five subjects include allegations of unlawful discrimination based on race, sex, religion, age, national origin, disability, and retaliation and any other claim of a violation of a right created or protected by local, state, or federal law. This Agreement does not limit Employee’s right to file a charge with or to assist any administrative agency, including the Equal Employment Opportunity Commission.

(i) This agreement to arbitrate and any resulting arbitration award are enforceable under and subject to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”). If the FAA is held not to apply for any reason then Ohio Revised Code Chapter 2711 regarding the enforceability of arbitration agreements and awards will govern this Agreement and the arbitration award.

4

(ii) (a) All of a party’s claims must be presented at a single arbitration hearing. Any claim not raised at the arbitration hearing is waived and released. The arbitration hearing will take place in Cincinnati, Ohio.

(b) The arbitration process will be governed by the National Rules for the Resolution of Employment Disputes of the

American Arbitration Association (“AAA”) except to the extent they are modified by this Agreement.

(c) Employee has had an opportunity to review the AAA rules and the requirements that Employee must pay a filing fee (which the Employer has agreed to split on an equal basis).

(d) The arbitrator will be selected from a panel of arbitrators chosen by the AAA in White Plains, New York, the arbitrators

from such panel being those who are also members of AAA’s labor-management panel and who have at least fifteen years of experience as an arbitrator. After the filing of a Request for Arbitration, the AAA will send simultaneously to Employer and Employee an identical list of names of five persons chosen from the panel. Each party will have 10 days from the transmittal date in which to strike up to two names, number the remaining names in order of preference and return the list to the AAA.

(e) Any pre-hearing disputes will be presented to the arbitrator for expeditious, final and binding resolution.

(f) The award of the arbitrator will be in writing and will set forth each issue considered and the arbitrator’s finding of fact and

conclusions of law as to each such issue.

(g) The remedy and relief that may be granted by the arbitrator to Employee are limited to lost wages, benefits, cease and desist and affirmative relief, compensatory, liquidated and punitive damages and reasonable attorney’s fees, and will not include reinstatement or promotion. If the arbitrator would have awarded reinstatement or promotion, but for the prohibition in this Agreement, the arbitrator may award front pay. Employer will pay the arbitrator’s fees and expenses. The arbitrator may assess to either party, or split, the administrative expenses and the cost of the transcript, if any, in accordance with the arbitrator’s determination of the merits of each party’s position, but each party will bear any cost for its witnesses and proof.

(h) Employer and Employee recognize that a primary benefit each derives from arbitration is avoiding the delay and costs

normally associated with litigation. Therefore, neither party will be entitled to conduct any discovery prior to the arbitration hearing except that: (i) Employer will furnish Employee with copies of all non-privileged documents in Employee’s personnel file; (ii) if the claim is for discharge, Employee will furnish Employer with records of earnings and benefits relating to Employee’s subsequent employment (including self-employment) and all documents relating to Employee’s efforts to obtain subsequent employment; (iii) the parties will exchange copies of all documents they intend to introduce as evidence at the

5

arbitration hearing at least 10 days prior to such hearing; (iv) Employee will be allowed (at Employee’s expense) to take the depositions, for a period not to exceed four hours each, of two representatives of Employer, and Employer will be allowed (at its expense) to depose Employee for a period not to exceed four hours; and (v) Employer or Employee may ask the arbitrator to grant additional discovery to the extent permitted by AAA rules upon a showing that such discovery is necessary.

(i) Nothing herein will prevent either party from taking the deposition of any witness where the sole purpose for taking the

deposition is to use the deposition in lieu of the witness testifying at the hearing and the witness is, in good faith, unavailable to testify in person at the hearing due to poor health, residency and employment more than 50 miles from the hearing site, conflicting travel plans or other comparable reason.

(iii) Arbitration must be requested in writing no later than 6 months from the date of the party’s knowledge of the matter disputed

by the claim. A party’s failure to initiate arbitration within the time limits herein will be considered a waiver and release by that party with respect to any claim subject to arbitration under this Agreement.

(iv) Employer and Employee consent that judgment upon the arbitration award may be entered in any federal or state court that has

jurisdiction.

(v) Except as provided in Section 10.A., neither party will commence or pursue any litigation on any claim that is or was subject to arbitration under this Agreement.

(vi) All aspects of any arbitration procedure under this Agreement, including the hearing and the record of the proceedings, are

confidential and will not be open to the public, except to the extent the parties agree otherwise in writing, or as may be appropriate in any subsequent proceedings between the parties, or as may otherwise be appropriate in response to a governmental agency or legal process.

11. Covenant Not to Compete . For purposes of this Section 11, the term “Employer” shall mean, collectively, Employer and each of its Affiliates. During Employee’s employment by Employer and for a period of two-years following termination of Employee’s employment with Employer for any reason Employee will not engage in any business offering services related to Employer’s then existing business or the products or services being researched or developed by Employer at the time of termination, whether as a principal, partner, joint venturer, agent, employee, salesperson, consultant, director or officer, where such position would involve Employee (i) in any business activity in competition with Employer; (ii) in any position with any customer of Employer where such position relates to the services that Employer does or did provide to such customer; (iii) in any business that provides billing and/or billing related systems and/or services to third parties (including wireless, wireline, cable and other communication businesses); (iv) in any business that provides outsourced customer management services (including but not limited to product information or technical support, customer retention, sales or account management, and/or human resources and benefits administration); or (v) in any business that provides employee care services (including but not limited to human resources and

6

employee benefits consulting). This restriction will be limited to the geographical area where Employer is doing business at the time of termination of Employee’s employment.

During Employee’s employment by Employer and for a period of two-years following termination of Employee’s employment with Employer for any reason Employee will not (except as a private consumer), directly or indirectly, or through any person or entity, divert, call on, contact, solicit, or communicate with (i) any of Employer’s customers from which Employer generated revenue during the two years preceding the termination of Employee’s employment or (ii) any prospective customers identified by Employer during the two-year period prior to the termination of Employee’s employment.

During Employee’s employment by Employer and for a period of three years after the termination of Employee’s employment with Employer, Employee will not, directly or indirectly, induce or seek to induce, any employee of Employer to terminate his or her employment relationship with Employer. 12. Goodwill . Employee will not disparage or act in any manner that may damage the business of Employer or any of its Affiliates or that would adversely affect the goodwill, reputation and business relationships of Employer or any of its Affiliates with the public generally, or with any of their customers, suppliers or employees. Employer will not disparage Employee. 13. Termination .

A. (i) Employer or Employee may terminate this Agreement upon Employee’s failure or inability to perform the services required hereunder because of any physical or mental infirmity for which Employee receives disability benefits under any disability benefit plans made available to Employee by Employer (the “Disability Plans”), over a period of one hundred twenty consecutive working days during any twelve consecutive month period (a “Terminating Disability”).

(ii) If Employer or Employee elects to terminate this Agreement in the event of a Terminating Disability, such termination shall be effective immediately upon the giving of written notice by the terminating party to the other.

(iii) Upon termination of this Agreement on account of Terminating Disability, Employer shall pay Employee Employee’s accrued

compensation hereunder, whether Base Salary, Annual Incentive Bonus or otherwise (subject to offset for any amounts received pursuant to the Disability Plans), to the date of termination. For as long as such Terminating Disability may exist, Employee shall continue to be an employee of Employer for all other purposes and Employer shall provide Employee with disability benefits and all other benefits according to the provisions of the Disability Plans and any other Employer plans in which Employee is then participating.

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(iv) If the parties elect not to terminate this Agreement upon an event of a Terminating Disability and Employee returns to active employment with Employer prior to such a termination, or if such disability exists for less than one hundred twenty consecutive working days, the provisions of this Agreement shall remain in full force and effect.

B. This Agreement terminates immediately and automatically on the death of the Employee, provided, however, that the Employee’s

estate shall be paid Employee’s accrued compensation hereunder, whether Base Salary, Annual Incentive Bonus or otherwise, to the date of death.

C. Employer may terminate this Agreement immediately, upon written notice to Employee, for Cause. For purposes of this Agreement, Employer shall have “Cause” to terminate this Agreement only if Employer’s Board of Directors determines that there has been fraud, misappropriation, embezzlement, commission of a felony or an act of moral turpitude on the part of Employee.

D. Employer may terminate this Agreement immediately, upon written notice to Employee, for any reason other than those set forth in Sections 13.A., B. and C.; provided, however, that Employer shall have no right to terminate under this Section 13.D. within two years after a Change in Control. In the event of a termination by Employer under this Section 13.D. or a constructive termination by Employer without Cause, Employer shall pay Employee an amount equal to the greater of (i) two times the sum of the annual Base Salary rate in effect at the time of termination plus the Annual Incentive Bonus target in effect at the time of termination or (ii) if the Current Term is longer than two years, the sum of the Base Salary for the remainder of the Current Term (at the rate in effect at the time of termination) plus the Annual Incentive Bonus targets (at the amount in effect at the time of termination) for each calendar year commencing or ending during the remainder of the Current Term (subject to proration in the case of any calendar year ending after the Current Term). For the remainder of the Current Term, Employer shall continue to provide Employee with medical, dental, vision and life insurance coverage comparable to the medical, dental, vision and life insurance coverage in effect for Employee immediately prior to the termination; and, to the extent that Employee would have been eligible for any post-retirement medical, dental, vision or life insurance benefits from Employer if Employee had continued in employment through the end of the Current Term, Employer shall provide such post-retirement benefits to Employee after the end of the Current Term. For purposes of any restricted stock grant(s) outstanding immediately prior to the termination, Employee’s employment with Employer shall not be deemed to have terminated until the end of the Current Term. For purposes of any stock option(s) outstanding immediately prior to the termination, Employee’s employment with Employer shall not be deemed to have terminated until the end of the Current Term; that is, such stock option(s) shall become exercisable on the exercise dates otherwise specified in the stock option agreement that occur on or prior to the end of the Current Term and may continue to be exercised until the end of the Current Term. In addition, Employee shall be entitled to receive, as soon as practicable after termination, an amount equal to the sum of (i) any forfeitable benefits under any qualified or nonqualified pension, profit sharing, 401(k) or deferred compensation plan of Employer or any Affiliate which would have vested prior to the end of the Current Term if Employee’s

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employment had not terminated plus (ii) if Employee is participating in a qualified or nonqualified defined benefit plan of Employer or any Affiliate at the time of termination, an amount equal to the present value of the additional vested benefits which would have accrued for Employee under such plan if Employee’s employment had not terminated prior to the end of the Current Term and if Employee’s annual Base Salary and Annual Incentive Bonus target had neither increased nor decreased after the termination. For purposes of this Section 13.D., “Current Term” means the longer of (i) the two year period beginning at the time of termination or (ii) the unexpired term of this Agreement at the time of the termination, determined as provided in Section 2 but assuming that there is no automatic extension of the Agreement term after the termination. For purposes of this Section 13.D. and Section 13.E., “Change in Control” means a change in control as defined in Employer’s 1998 Long Term Incentive Plan. In order to receive the payments and benefits set forth in this Section 13.D., Employee must first execute a separation agreement and release of all claims in a form suitable to Employer.

E. This Agreement shall terminate automatically in the event that there is a Change in Control and either (i) Employee elects to resign within 90 days after the Change in Control or (ii) Employee’s employment with Employer is actually or constructively terminated by Employer within two years after the Change in Control for any reason other than those set forth in Sections 13.A., B. and C. For purposes of the preceding sentence, a “constructive” termination of Employee’s employment shall be deemed to have occurred if, without Employee’s consent, there is a material reduction in Employee’s authority or responsibilities or if there is a reduction in Employee’s Base Salary or Annual Incentive Bonus target from the amount in effect immediately prior to the Change in Control or if Employee is required by Employer to relocate from the city where Employee is residing immediately prior to the Change in Control. In the event of a termination under this Section 13.E., Employer shall pay Employee an amount equal to three times the sum of the annual Base Salary rate in effect at the time of termination plus the Annual Incentive Bonus target in effect at the time of termination, all stock options shall become immediately exercisable (and Employee shall be afforded the opportunity to exercise them), the restrictions applicable to all restricted stock shall lapse and any long term awards shall be paid out at target. For the remainder of the Current Term, Employer shall continue to provide Employee with medical, dental, vision and life insurance coverage comparable to the medical, dental, vision and life insurance coverage in effect for Employee immediately prior to the termination; and, to the extent that Employee would have been eligible for any post-retirement medical, dental, vision or life insurance benefits from Employer if Employee had continued in employment through the end of the Current Term, Employer shall provide such post-retirement benefits to Employee after the end of the Current Term. Employee’s accrued benefit under any nonqualified pension or deferred compensation plan maintained by Employer or any Affiliate shall become immediately vested and nonforfeitable and Employee also shall be entitled to receive a payment equal to the sum of (i) any forfeitable benefits under any qualified pension or profit sharing or 401(k) plan maintained by Employer or any Affiliate plus (ii) if Employee is participating in a qualified or nonqualified defined benefit plan of Employer or any Affiliate at the time of termination, an amount equal to the present value of the additional benefits which would have accrued for Employee under such plan if Employee’s employment had not terminated prior to the end of the Current Term and if Employee’s annual Base Salary and Annual Incentive Bonus target had neither increased nor decreased after the termination. Finally,

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to the extent that Employee is deemed to have received an excess parachute payment by reason of the Change in Control, Employer shall pay Employee an additional sum sufficient to pay (i) any taxes imposed under section 4999 of the Code plus (ii) any federal, state and local taxes resulting from the payment of the amount called for under clause (i) of this sentence. For purposes of this Section 13.E., “Current Term” means the longer of (i) the three year period beginning at the time of termination or (ii) the unexpired term of this Agreement at the time of the termination, determined as provided in Section 2 but assuming that there is no automatic extension of the Agreement term after the termination.

F. Employee may resign upon 60 days’ prior written notice to Employer. In the event of a resignation under this Section 13.F., this Agreement shall terminate and Employee shall be entitled to receive Employee’s accrued compensation and benefits, including accrued Base Salary, through the date of termination.

G. Employee may retire (i) upon six months’ prior written notice to Employer at any time after Employee has attained age 55 and completed at least ten years of service with Employer and its Affiliates or (ii) on such earlier date as may be approved by the Chairman, President and CEO of Employer. In the event of a retirement under this Section 13.G., this Agreement shall terminate and Employee shall be entitled to receive Employee’s accrued compensation and benefits, including accrued Base Salary, through the date of termination. In addition, Employee shall be entitled to receive any compensation or benefits made available to retiree under Employer’s standard policies and programs, including retiree medical and life insurance benefits, a prorated Annual Incentive Bonus for the year of termination and the right to exercise options after retirement.

H. Employer and Employee may mutually agree to terminate this Agreement at any time under terms and conditions that, in the aggregate, are no more favorable than the terms and conditions described in Section 13.D.

I. Upon termination of this Agreement as a result of an event of termination described in this Section 13 and except for Employer’s payment of the required payments under this Section 13 (including any Base Salary accrued through the date of termination, any Annual Incentive Bonus earned for the year preceding the year in which the termination occurs and any nonforfeitable amounts payable under any employee plan), all further compensation under this Agreement shall terminate.

J. The termination of this Agreement shall not amend, alter or modify the rights and obligations of the parties under Sections 7, 8, 9, 10, 11, and 12 hereof, the terms of which shall survive the termination of this Agreement. 14. Assignment . As this is an agreement for personal services involving a relation of confidence and a trust between Employer and Employee, all rights and duties of Employee arising under this Agreement, and the Agreement itself, are non-assignable by Employee.

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15. Notices . Any notice required or permitted to be given under this Agreement shall be sufficient, if in writing, and if delivered personally or by certified mail to Employee at Employee’s place of residence as then recorded on the books of Employer or to Employer at its principal office. 16. Waiver . No waiver or modification of this Agreement or the terms contained herein shall be valid unless in writing and duly executed by the party to be charged therewith. The waiver by any party hereto of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such party. 17. Governing Law . This agreement shall be governed by the laws of the State of Ohio, without giving effect to any conflict of law provisions. 18. Entire Agreement . This Agreement contains the entire agreement of the parties with respect to Employee’s employment by Employer. There are no other contracts, agreements or understandings, whether oral or written, existing between them except as contained or referred to in this Agreement. 19. Severability . In case any one or more of the provisions of this Agreement is held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or other enforceability shall not affect any other provisions hereof, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions have never been contained herein. 20. Successors and Assigns . Subject to the requirements of Paragraph 14 above, this Agreement shall be binding upon Employee, Employer and Employer’s successors and assigns. 21. Confidentiality of Agreement Terms . The terms of this Agreement shall be held in strict confidence by Employee and shall not be disclosed by Employee to anyone other than Employee’s spouse, Employee’s legal counsel, and Employee’s other advisors, unless required by law. Further, except as provided in the preceding sentence, Employee shall not reveal the existence of this Agreement or discuss its terms with any person (including but not limited to any employee of Employer or its Affiliates) without the express authorization of the Chairman and CEO of Employer. To the extent that the terms of this Agreement have been disclosed by Employer, in a public filing or otherwise, the confidentiality requirements of this Section 21 shall no longer apply to such terms.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

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CONVERGYS CORPORATION

By: /s/ J AMES F. O RR

EARL SHANKS

By: /s/ E ARL C. S HANKS

Attachment A

EMPLOYEE BENEFITS

Note: Paid time off and holidays are pro-rated for partial year.

13 Exhibit 10.10 to 2003 10-K

EMPLOYMENT AGREEMENT

This Agreement is made as of September 11, 2000 (the “Effective Date”) between Convergys Corporation, an Ohio corporation (“Employer”), and William H. Hawkins II (“Employee”).

Employer and Employee agree as follows: 1. Employment . By this Agreement, Employer and Employee set forth the terms of Employer’s employment of Employee on and after the Effective Date. Any prior agreements or understandings with respect to Employee’s employment by Employer are canceled as of the Effective Date. 2. Term of Agreement . The term of this Agreement initially shall be the four year period commencing on the Effective Date. On the third anniversary of the Effective Date and on each subsequent anniversary of the Effective Date, the term of this Agreement automatically shall be extended for a period of one additional year. Notwithstanding the foregoing, the term of this Agreement is subject to termination as provided in Section 13. 3. Duties .

A. Employee will serve as Associate General Counsel of Employer or in such other equivalent capacity as may be designated by the Chief Executive Officer of Employer. Employee will report to the General Counsel of Employer or to such other officer as may be designated by the Chief Executive Officer of Employer.

B. Employee shall furnish such managerial, executive, financial, technical, and other skills, advice, and assistance in operating Employer and its Affiliates as Employer may reasonably request. For purposes of this Agreement, “Affiliate” means each corporation which is a member of a controlled group of corporations (within the meaning of section 1563(a) of the Internal Revenue Code of 1986, as amended (the “Code”)) which includes Employer.

C. Employee shall also perform such other duties, consistent with the provisions of Section 3.A., as are reasonably assigned to Employee by the Chief Executive Officer of Employer.

D. Employee shall devote Employee’s entire time, attention, and energies to the business of Employer and its Affiliates. The words “entire time, attention, and energies” are intended to mean that Employee shall devote Employee’s full effort during reasonable working hours to the business of Employer and its Affiliates and shall devote at least 40 hours per week to the business of Employer and its Affiliates. Employee shall travel to such places as are necessary in the performance of Employee’s duties.

Legal/Financial/Insurance Allowance $7,500 per calendar year Automobile Allowance $1,065 per month Cellular Telephone Yes Lap Top Yes Parking Yes 401(k) and Executive Deferred Compensation Plans Yes Short Term Disability Supplement Yes Annual Executive Physical Yes Paid Time Off 32 days per calendar year Holidays

For 2003, New Year’s Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day and day after, Christmas Day

Business Club Membership Yes

4. Compensation .

A. Employee shall receive a base salary (the “Base Salary”) of at least $290,000 per year, payable not less frequently than monthly, for each year during the term of this Agreement, subject to proration for any partial year. Such Base Salary, and all other amounts payable under this Agreement, shall be subject to withholding as required by law.

B. In addition to the Base Salary, Employee shall be entitled to receive an annual bonus (the “Bonus”) for each calendar year for which services are performed under this Agreement. Any Bonus for a calendar year shall be payable after the conclusion of the calendar year in accordance with Employer’s regular bonus payment policies. Each year, Employee shall be given a Bonus target of not less than $90,000, subject to proration for a partial year; provided, however, that Employee’s Bonus for calendar year 2000 shall be guaranteed to be not less than $30,082 and that Employee’s Bonus for calendar year 2001 shall be guaranteed to be not less than $90,000.

C. On January 2, 2001, Employer shall pay Employee a signing bonus in the amount of $50,000. Such signing bonus shall be in addition to the Bonuses called for under Section 4.B. but shall not be used in the calculation of any benefits that are otherwise provided by Employer.

D. On at least an annual basis, Employee shall receive a formal performance review and be considered for Base Salary and/or Bonus target increases. 5. Expenses . All reasonable and necessary expenses incurred by Employee in the course of the performance of Employee’s duties to Employer shall be reimbursable in accordance with Employer’s then current travel and expense policies. 6. Benefits .

A. While Employee remains in the employ of Employer, Employee shall be entitled to participate in all of the various employee benefit plans and programs, or equivalent plans and programs, which are made available to similarly situated officers of Employer.

B. Notwithstanding anything contained herein to the contrary, the Base Salary and Bonuses otherwise payable to Employee shall be reduced by any benefits paid to Employee by Employer under any disability plans made available to Employee by Employer.

C. As of the Effective Date, Employee shall be granted options to purchase 20,000 common shares of Employer under Employer’s 1998 Long Term Incentive Plan or any similar plan made available to employees of Employer. In each year of this Agreement after 2000, Employee will be granted stock options under Employer’s 1998 Long Term Incentive Plan or any similar plan made available to employees of Employer. In no event will the value of Employee’s long term incentives (including stock options) for any year after 2000, as determined by Employer’s Compensation and Benefits Committee, be less than $300,000.

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D. As of the Effective Date, Employee shall receive a restricted stock award of 15,000 common shares of Employer. Such award shall be made under Employer’s 1998 Long Term Incentive Plan on the terms set forth in Attachment A. 7. Confidentiality . Employer and its Affiliates are engaged in the outsourced customer care services industry within the U.S. and world wide. Employee acknowledges that in the course of employment with the Employer, Employee will be entrusted with or obtain access to information proprietary to the Employer and its Affiliates with respect to the following (all of which information is referred to hereinafter collectively as the “Information”): the organization and management of Employer and its Affiliates; the names, addresses, buying habits, and other special information regarding past, present and potential customers, employees and suppliers of Employer and its Affiliates; customer and supplier contracts and transactions or price lists of Employer, its Affiliates and their suppliers; products, services, programs and processes sold, licensed or developed by the Employer or its Affiliates; technical data, plans and specifications, present and/or future development projects of Employer and its Affiliates; financial and/or marketing data respecting the conduct of the present or future phases of business of Employer and its Affiliates; computer programs, systems and/or software; ideas, inventions, trademarks, business information, know-how, processes, improvements, designs, redesigns, discoveries and developments of Employer and its Affiliates; and other information considered confidential by any of the Employer, its Affiliates or customers or suppliers of Employer or its Affiliates. Employee agrees to retain the Information in absolute confidence and not to disclose the Information to any person or organization except as required in the performance of Employee’s duties for Employer, without the express written consent of Employer; provided that Employee’s obligation of confidentiality shall not extend to any Information which becomes generally available to the public other than as a result of disclosure by Employee. 8. New Developments . All ideas, inventions, discoveries, concepts, trademarks, or other developments or improvements, whether patentable or not, conceived by the Employee, alone or with others, at any time during the term of Employee’s employment, whether or not during working hours or on Employer’s premises, which are within the scope of or related to the business operations of Employer or its Affiliates (“New Developments”), shall be and remain the exclusive property of Employer. Employee shall do all things reasonably necessary to ensure ownership of such New Developments by Employer, including the execution of documents assigning and transferring to Employer, all of Employee’s rights, title and interest in and to such New Developments, and the execution of all documents required to enable Employer to file and obtain patents, trademarks, and copyrights in the United States and foreign countries on any of such New Developments. 9. Surrender of Material Upon Termination . Employee hereby agrees that upon cessation of Employee’s employment, for whatever reason and whether voluntary or involuntary, Employee will immediately surrender to Employer all of the property and other things of value in his possession or in the possession of any person or entity under Employee’s control that are the property of Employer or any of its Affiliates, including without any limitation all personal notes, drawings, manuals, documents, photographs, or the like, including copies and derivatives

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thereof, relating directly or indirectly to any confidential information or materials or New Developments, or relating directly or indirectly to the business of Employer or any of its Affiliates. 10. Remedies .

A. Employer and Employee hereby acknowledge and agree that the services rendered by Employee to Employer, the information disclosed to Employee during and by virtue of Employee’s employment, and Employee’s commitments and obligations to Employer and its Affiliates herein are of a special, unique and extraordinary character, and that the breach of any provision of this Agreement by Employee will cause Employer irreparable injury and damage, and consequently the Employer shall be entitled to, in addition to all other remedies available to it, injunctive and equitable relief to prevent a breach of Sections 7, 8, 9, 11 and 12 of this Agreement and to secure the enforcement of this Agreement.

B. Except as provided in Section 10.A., the parties agree to submit to final and binding arbitration any dispute, claim or controversy, whether for breach of this Agreement or for violation of any of Employee’s statutorily created or protected rights, arising between the parties that either party would have been otherwise entitled to file or pursue in court or before any administrative agency (herein “claim”), and waives all right to sue the other party. It is understood that this agreement to arbitrate does not limit Employer’s right to file a charge with or to assist any administrative agency, including the Equal Employment Opportunity Commission. Except for the agreement to arbitrate itself, Employee agrees that nothing in this arbitration agreement creates for Employee any right or protection in connection with Employee’s employment beyond that to which Employee is otherwise entitled by law.

(i) This agreement to arbitrate and any resulting arbitration award are enforceable under and subject to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”). If the FAA is held not to apply for any reason then Ohio Revised Code Chapter 2711 regarding the enforceability of arbitration agreements and awards will govern this Agreement and the arbitration award.

(ii) The arbitration hearing will take place in Cincinnati, Ohio.

(iii) The arbitration process will be governed by the Employment Dispute Resolution Rules of the American Arbitration Association

(“AAA”) except to the extent they are modified by this Agreement.

(iv) Employee has had an opportunity to review the AAA rules and the requirements that Employee must pay a filing fee for which the Employer has agreed to split on an equal basis. Employer will pay all of the arbitrator’s fees.

(v) The arbitrator shall be selected from a panel of arbitrators chosen by and maintained at the headquarters office of the AAA in

New York, the arbitrators from such panel being those who reside near Cincinnati, Ohio. After the filing of a Request for Arbitration Form,

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the AAA shall send simultaneously to Employer and Employee an identical list of names of five persons chosen from the panel. Employer and Employee shall have 10 days from the transmittal date in which to strike up to two names, number the remaining names in order of preference and return the list to the AAA. If the person who has been approved on both lists and selected by the AAA cannot serve promptly, a second list shall be sent out by the AAA in accordance with the above procedure and the arbitrator shall be chosen from the second panel.

(vi) Any pre-hearing disputes will be presented to the arbitrator for expeditious, final and binding resolution.

(vii) The award of the arbitrator will be in writing and will set forth each issue considered and the arbitrator’s finding of fact and

conclusions of law as to each such issue.

(viii) The remedy and relief which may be granted by the arbitrator is that which the arbitrator deems just and equitable considering what would have been available to the parties had the matter been heard in court. The arbitrator may assess to either party or split the administrative expenses and the cost of the transcript, if any, in accordance with the arbitrator’s determination of the merits of each party’s position, but each party shall bear any costs for its witnesses and proof.

(ix) Employer and Employee recognize that a primary benefit each derives from arbitration is avoiding the delay and costs normally

associated with litigation. Therefore, neither party will be entitled to conduct any discovery prior to the arbitration hearing except that: (i) Employer will furnish Employee with copies of all non-privileged documents in Employee’s personnel file; (ii) if the claim is for discharge, Employee will furnish Employer with records of earnings and benefits relating to Employee’s subsequent employment (including self-employment) and all documents relating to Employee’s efforts to obtain subsequent employment; (iii) the parties will exchange copies of all documents they intend to introduce as evidence at the arbitration hearing at least 10 days prior to such hearing; (iv) Employee will be allowed (at Employee’s expense) to take the depositions, for a period not to exceed four hours each, of two representatives of Employer, and Employer will be allowed (at its expense) to depose Employee for a period not to exceed four hours; and (v) Employer or Employee may ask the arbitrator to grant additional discovery to the extent permitted by AAA rules upon a showing that such discovery is necessary.

(x) Nothing herein will prevent either party from taking the deposition of any witness where the sole purpose for taking the

deposition is to use the deposition in lieu of the witness testifying at the hearing and the witness is, in good faith, unavailable to testify in person at the hearing due to poor health, residency and employment more than 50 miles from the hearing site, conflicting travel plans or other comparable reason.

(xi) Arbitration must be requested in writing no later than 6 months from the date of the party’s knowledge of the matter disputed

by the claim. A party’s failure to initiate arbitration within the time limits herein will be considered a waiver and release by that party with respect to any claim subject to arbitration under this Agreement.

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(xii) Employer and Employee consent that judgment upon the arbitration award may be entered in any federal or state court that has jurisdiction.

(xiii) Except as provided in Section 10.A., neither party will commence or pursue any litigation on any claim that is or was subject

to arbitration under this Agreement.

(xiv) All aspects of any arbitration procedure under this Agreement, including the hearing and the record of the proceedings, are confidential and will not be open to the public, except to the extent the parties agree otherwise in writing, or as may be appropriate in any subsequent proceedings between the parties, or as may otherwise be appropriate in response to a governmental agency or legal process.

(xv) Except for the waiver of rights provisions set forth in the introductory paragraph of this Section 10.B. and the enforcement

provisions set forth in Sections 10.B.(i) and (xii), the provisions of this Section 10.B. are severable, and if any part of it is found to be unenforceable, the remaining parts shall remain valid and enforceable. If a court decides that the waiver of rights provisions or the enforcement provisions are unenforceable and there is no right of appeal or such right has expired, any and all rights created by this Section 10.B. shall be voided retroactively, and the proceeds of any award must be returned to the party from which they originated.

11. Covenant Not to Compete . For purposes of this Section 11 only, the term “Employer” shall mean, collectively, Employer and each of its Affiliates. During the two-year period following termination of Employee’s employment with Employer for any reason (or if this period is unenforceable by law, then for such period as shall be enforceable) Employee will not engage in any business offering services related to the current business of Employer, whether as a principal, partner, joint venturer, agent, employee, salesman, consultant, director or officer, where such position would involve Employee (i) in any business activity in competition with a business of Employer as to which Employee participated, or received confidential information as defined in Section 7; (ii) in any position with any customer of Employer which involves such customer’s billing and/or billing related systems or; or (iii) in any business that provides billing and/or billing related systems to third parties engaged in the communication business (including wireless, wireline and cable communication businesses). This restriction will be limited to the geographical area where Employer is then engaged in such competing business activity or to such other geographical area as a court shall find reasonably necessary to protect the goodwill and business of the Employer.

During the two-year period following termination of Employee’s employment with Employer for any reason (or if this period is unenforceable by law, then for such period as shall be enforceable) Employee will not interfere with or adversely affect, either directly or indirectly, Employer’s relationships with any person, firm, association, corporation or other entity which is known by Employee to be, or is included on any listing to which Employee had access during the course of employment as a customer, client, supplier, consultant or employee of Employer and that Employee will not divert or change, or attempt to divert or change, any such relationship to

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the detriment of Employer or to the benefit of any other person, firm, association, corporation or other entity.

During the two-year period following termination of Employee’s employment with Employer for any reason (or if this period is unenforceable by law, then for such period as shall be enforceable) Employee shall not, without the prior written consent of Employer, accept employment, as an employee, consultant, or otherwise, with any company or entity which is a customer or supplier of Employer at any time during the final year of Employee’s employment with Employer.

Employee will not, during or at any time within three years after the termination of Employee’s employment with Employer, induce or seek to induce, any other employee of Employer to terminate his or her employment relationship with Employer. 12. Goodwill . Employee will not disparage Employer or any of its Affiliates in any way which could adversely affect the goodwill, reputation and business relationships of Employer or any of its Affiliates with the public generally, or with any of their customers, suppliers or employees. Employer will not disparage Employee. 13. Termination .

A. (i) Employer or Employee may terminate this Agreement upon Employee’s failure or inability to perform the services required hereunder because of any physical or mental infirmity for which Employee receives disability benefits under any disability benefit plans made available to Employee by Employer (the “Disability Plans”), over a period of one hundred twenty consecutive working days during any twelve consecutive month period (a “Terminating Disability”).

(ii) If Employer or Employee elects to terminate this Agreement in the event of a Terminating Disability, such termination shall be effective immediately upon the giving of written notice by the terminating party to the other.

(iii) Upon termination of this Agreement on account of Terminating Disability, Employer shall pay Employee Employee’s accrued

compensation hereunder, whether Base Salary, Bonus or otherwise (subject to offset for any amounts received pursuant to the Disability Plans), to the date of termination. For as long as such Terminating Disability may exist, Employee shall continue to be an employee of Employer for all other purposes and Employer shall provide Employee with disability benefits and all other benefits according to the provisions of the Disability Plans and any other Employer plans in which Employee is then participating.

(iv) If the parties elect not to terminate this Agreement upon an event of a Terminating Disability and Employee returns to active

employment with Employer prior to such a termination, or if such disability exists for less than one hundred twenty consecutive working days, the provisions of this Agreement shall remain in full force and effect.

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B. This Agreement terminates immediately and automatically on the death of the Employee, provided, however, that the Employee’s estate shall be paid Employee’s accrued compensation hereunder, whether Base Salary, Bonus or otherwise, to the date of death.

C. Employer may terminate this Agreement immediately, upon written notice to Employee, for Cause. For purposes of this Agreement, Employer shall have “Cause” to terminate this Agreement only if Employer’s Board of Directors determines that there has been fraud, misappropriation or embezzlement on the part of Employee.

D. Employer may terminate this Agreement immediately, upon written notice to Employee, for any reason other than those set forth in Sections 13.A., B. and C.; provided, however, that Employer shall have no right to terminate under this Section 13.D. within two years after a Change in Control. In the event of a termination by Employer under this Section 13.D., Employer shall, within five days after the termination, pay Employee an amount equal to the greater of (i) two times the sum of the annual Base Salary rate in effect at the time of termination plus the Bonus target in effect at the time of termination or (ii) if the Current Term is longer than two years, the sum of the Base Salary for the remainder of the Current Term (at the rate in effect at the time of termination) plus the Bonus targets (at the amount in effect at the time of termination) for each calendar year commencing or ending during the remainder of the Current Term (subject to proration in the case of any calendar year ending after the Current Term). For the remainder of the Current Term, Employer shall continue to provide Employee with medical, dental, vision and life insurance coverage comparable to the medical, dental, vision and life insurance coverage in effect for Employee immediately prior to the termination; and, to the extent that Employee would have been eligible for any post-retirement medical, dental, vision or life insurance benefits from Employer if Employee had continued in employment through the end of the Current Term, Employer shall provide such post-retirement benefits to Employee after the end of the Current Term. For purposes of any stock option or restricted stock grant outstanding immediately prior to the termination, Employee’s employment with Employer shall not be deemed to have terminated until the end of the Current Term. In addition, Employee shall be entitled to receive, as soon as practicable after termination, an amount equal to the sum of (i) any forfeitable benefits under any qualified or nonqualified pension, profit sharing, 401(k) or deferred compensation plan of Employer or any Affiliate which would have vested prior to the end of the Current Term if Employee’s employment had not terminated plus (ii) if Employee is participating in a qualified or nonqualified defined benefit plan of Employer or any Affiliate at the time of termination, an amount equal to the present value of the additional vested benefits which would have accrued for Employee under such plan if Employee’s employment had not terminated prior to the end of the Current Term and if Employee’s annual Base Salary and Bonus target had neither increased nor decreased after the termination. For purposes of this Section 13.D., “Current Term” means the longer of (i) the two year period beginning at the time of termination or (ii) the unexpired term of this Agreement at the time of the termination, determined as provided in Section 2 but assuming that there is no automatic extension of the Agreement term after the termination. For purposes of this Section 13.D. and Section 13.E., “Change in Control” means a change in control as defined in Employer’s 1998 Long Term Incentive Plan. Finally, to the extent that Employee is deemed to have received an excess parachute payment (within the meaning of section 4999 of the Code) from Employer or any

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Affiliate, Employer shall pay Employee an additional sum sufficient to pay (i) any taxes imposed under section 4999 of the Code plus (ii) any federal, state and local taxes applicable to any taxes imposed under section 4999 of the Code.

E. This Agreement shall terminate automatically in the event that there is a Change in Control and either (i) Employee elects to resign within 90 days after the Change in Control or (ii) Employee’s employment with Employer is actually or constructively terminated by Employer within two years after the Change in Control for any reason other than those set forth in Sections 13.A., B. and C. For purposes of the preceding sentence, a “constructive” termination of Employee’s employment shall be deemed to have occurred if, without Employee’s consent, there is a material reduction in Employee’s authority or responsibilities or if there is a reduction in Employee’s Base Salary or Bonus target from the amount in effect immediately prior to the Change in Control or if Employee is required by Employer to relocate from the city where Employee is residing immediately prior to the Change in Control. In the event of a termination under this Section 13.E., Employer shall pay Employee an amount equal to two times the sum of the annual Base Salary rate in effect at the time of termination plus the Bonus target in effect at the time of termination, all stock options shall become immediately exercisable (and Employee shall be afforded the opportunity to exercise them), the restrictions applicable to all restricted stock shall lapse and any long term awards shall be paid out at target. For the remainder of the Current Term, Employer shall continue to provide Employee with medical, dental, vision and life insurance coverage comparable to the medical, dental, vision and life insurance coverage in effect for Employee immediately prior to the termination; and, to the extent that Employee would have been eligible for any post-retirement medical, dental, vision or life insurance benefits from Employer if Employee had continued in employment through the end of the Current Term, Employer shall provide such post-retirement benefits to Employee after the end of the Current Term. Employee’s accrued benefit under any nonqualified pension or deferred compensation plan maintained by Employer or any Affiliate shall become immediately vested and nonforfeitable and Employee also shall be entitled to receive a payment equal to the sum of (i) any forfeitable benefits under any qualified pension or profit sharing or 401(k) plan maintained by Employer or any Affiliate plus (ii) if Employee is participating in a qualified or nonqualified defined benefit plan of Employer or any Affiliate at the time of termination, an amount equal to the present value of the additional benefits which would have accrued for Employee under such plan if Employee’s employment had not terminated prior to the end of the Current Term and if Employee’s annual Base Salary and Bonus target had neither increased nor decreased after the termination. Finally, to the extent that Employee is deemed to have received an excess parachute payment by reason of the Change in Control, Employer shall pay Employee an additional sum sufficient to pay (i) any taxes imposed under section 4999 of the Code plus (ii) any federal, state and local taxes applicable to any taxes imposed under section 4999 of the Code. For purposes of this Section 13.E., “Current Term” means the longer of (i) the two year period beginning at the time of termination or (ii) the unexpired term of this Agreement at the time of the termination, determined as provided in Section 2 but assuming that there is no automatic extension of the Agreement term after the termination.

F. Employee may resign upon 60 days’ prior written notice to Employer. In the event of a resignation under this Section 13.F., this Agreement shall terminate and Employee

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shall be entitled to receive Employee’s Base Salary through the date of termination, any Bonus earned but not paid at the time of termination and any other vested compensation or benefits called for under any compensation plan or program of Employer.

G. Employee may retire (a) upon six months’ prior written notice to Employer at any time after Employee has attained age 55 and completed at least ten years of service with Employer and its Affiliates or (b) on such earlier date as may be approved by the Chief Executive Officer of Employer. In the event of a retirement under this Section 13.G., this Agreement shall terminate and Employee shall be entitled to receive Employee’s Base Salary through the date of termination and any Bonus earned but not paid at the time of termination. In addition, Employee shall be entitled to receive any compensation or benefits made available to retirees under Employer’s standard policies and programs, including retiree medical and life insurance benefits, a prorated Bonus for the year of termination, and the right to exercise options after retirement.

H. Upon termination of this Agreement as a result of an event of termination described in this Section 13 and except for Employer’s payment of the required payments under this Section 13 (including any Base Salary accrued through the date of termination, any Bonus earned for the year preceding the year in which the termination occurs and any nonforfeitable amounts payable under any employee plan), all further compensation under this Agreement shall terminate.

I. The termination of this Agreement shall not amend, alter or modify the rights and obligations of the parties under Sections 7, 8, 9, 10, 11, and 12 hereof, the terms of which shall survive the termination of this Agreement. 14. Assignment . As this is an agreement for personal services involving a relation of confidence and a trust between Employer and Employee, all rights and duties of Employee arising under this Agreement, and the Agreement itself, are non-assignable by Employee. 15. Notices . Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and if delivered personally or by certified mail to Employee at Employee’s place of residence as then recorded on the books of Employer or to Employer at its principal office. 16. Waiver . No waiver or modification of this Agreement or the terms contained herein shall be valid unless in writing and duly executed by the party to be charged therewith. The waiver by any party hereto of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such party. 17. Governing Law . This agreement shall be governed by the laws of the State of Ohio. 18. Entire Agreement . This Agreement contains the entire agreement of the parties with respect to Employee’s employment by Employer. There are no other contracts, agreements or understandings, whether oral or written, existing between them except as contained or referred to in this Agreement.

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19. Severability . In case any one or more of the provisions of this Agreement is held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or other enforceability shall not affect any other provisions hereof, and this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions have never been contained herein. 20. Successors and Assigns . Subject to the requirements of Paragraph 14 above, this Agreement shall be binding upon Employee, Employer and Employer’s successors and assigns. 21. Confidentiality of Agreement Terms . The terms of this Agreement shall be held in strict confidence by Employee and shall not be disclosed by Employee to anyone other than Employee’s spouse, Employee’s legal counsel, and Employee’s other advisors, unless required by law. Further, except as provided in the preceding sentence, Employee shall not reveal the existence of this Agreement or discuss its terms with any person (including but not limited to any employee of Employer or its Affiliates) without the express authorization of the Chief Executive Officer of Employer. To the extent that the terms of this Agreement have been disclosed by Employer, in a public filing or otherwise, the confidentiality requirements of this Section 21 shall no longer apply to such terms.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

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Exhibit 10.20 to 2003 10-K

PROMISSORY NOTE

CONVERGYS CORPORATION

By: /s/ William D. Baskett III

EMPLOYEE

/s/ William H. Hawkins II

William H. Hawkins II

$55,500,000.00

November 7, 2003 Cincinnati, Ohio

Loan No. 5535

1. Promise to Pay .

FOR VALUE RECEIVED, the undersigned, ASSET OHIO FOURTH STREET LLC, an Ohio limited liability company (“Borrower”), having an address c/o Convergys Corporation, Atrium One, 19 th Floor, 201 East Fourth Street, Cincinnati, Ohio 45202, promises to pay in lawful money of the United States of America to the order of GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY, a Delaware corporation (“Lender”), at the office of 707 East Main Street, Suite 1300-A, Richmond, Virginia 23219-3310, or such other place either within or without the State of Virginia as Lender may designate in writing from time to time, the principal sum of FIFTY-FIVE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($55,500,000.00), with interest from the date hereof on the unpaid principal balance at the rate set forth below.

2. Interest .

(a) Interest shall accrue on the unpaid principal balance of this Note at an adjustable rate as follows:

(i) During the Initial Rate Period, the rate of interest shall be TWO AND THIRTY-ONE HUNDREDTHS PERCENT (2.31%) per annum. The term “ Initial Rate Period ” means the approximately three (3) month period of time beginning on the date hereof and extending through and including February 28, 2003.

(ii) On the first Rate Adjustment Date and on each succeeding Rate Adjustment Date until this Note is paid in full, the rate of

interest shall be adjusted to a rate per annum equal to the Index as of five (5) business days prior to the Rate Adjustment Date, plus ONE AND FIFTEEN HUNDREDTHS PERCENT (1.15%) per annum. The “ Index ” means the three (3) month average offered rate for United States Dollars on the Bridge Telerate, Inc. service or any successor service which displays the London Interbank Offered Rates of major banks for United States Dollar Deposits. The rate of interest, as adjusted under this subparagraph (ii), shall take effect on the date of adjustment and shall remain in effect through the day immediately preceding the next succeeding Rate Adjustment Date. For purposes hereof, March 1, 2004 shall be the first “ Rate Adjustment Date ”, and the remaining Rate Adjustment Dates shall be each succeeding June 1 st , September 1 st , and December 1 st through the Maturity Date (defined below).

(b) If the Index shall cease to be available or to be so designated and there is no successor index thereto, the Index shall be replaced by a

comparable index selected by Lender in the exercise of its reasonable business judgment.

3. Payments and Term .

(a) Principal and interest shall be due and payable as follows:

(i) A payment of all interest to accrue hereon from the Disbursement Date to and including the last day of the month during which the Disbursement Date occurs shall be due and payable on the Disbursement Date. For purposes of this Note, the “Disbursement Date” shall be the date on which disbursement of loan proceeds occurs.

(ii) Monthly payments of principal and interest in the sum of FIVE HUNDRED EIGHTEEN THOUSAND FOUR HUNDRED

SEVENTEEN AND 00/100 DOLLARS ($518,417.00) each shall be due and payable on the first day of each calendar month, commencing on the first day of the second calendar month following the Disbursement Date and continuing on the first day of each calendar month thereafter to and including the first Rate Adjustment Date.

(iii) On the first day of the first calendar month following the first Rate Adjustment Date and on the first day of each calendar

month thereafter to the Maturity Date, a monthly payment of principal and interest, determined in accordance with this paragraph, shall be due and payable. On the first Rate Adjustment Date and on each succeeding Rate Adjustment Date thereafter until this Note is paid in full, the monthly payment shall be adjusted to that amount which would be sufficient to amortize the then-remaining principal balance hereon at the interest rate (as adjusted on said Rate Adjustment Date) over the balance of the Amortization Period. The monthly payment, as so adjusted on a Rate Adjustment Date, shall be due and payable beginning with the first monthly payment due after said Rate Adjustment Date and continuing on the first day of each calendar month thereafter to and including the next succeeding Rate Adjustment Date. For purposes of this Note, the term “Amortization Period” means the ten (10) year period beginning on December, 2003.

(iv) The entire indebtedness evidenced by this Note, if not sooner paid, shall be due and payable on December 1, 2013 (the

“Maturity Date”).

(b) All payments on account of the indebtedness evidenced by this Note shall be first applied to interest, costs and prepayment fees (if any) and then to principal. Interest shall be computed on the basis of a 360-day year consisting of twelve 30-day months, except that interest for a portion of a month (such as may be required under paragraph (a) of this “Payments and Term” section) shall be computed on the basis of a 365-day year (or a 366-day year during a leap year).

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4. Prepayment .

(a) This Note may be prepaid, in whole or in part, upon thirty (30) days prior written notice to Lender, and upon payment, in addition to the principal amount prepaid (and if prepaid in whole, accrued interest and all other sums due under the terms hereof), a prepayment premium (“Premium”), equal to and calculated in accordance with the following schedule:

(b) Any partial prepayment shall be applied upon payments due hereon in the inverse order of their respective due dates.

(c) For purposes of this Note, the term “Loan Year” means each successive period of twelve (12) months, with the first such period

beginning on December 1, 2003.

Loan Year

Prepayment Premium

(Percent of Principal Prepaid)

One(l) 2.00% Two (2) 0.50% and thereafter None

5. Restrictions on Transfer and Encumbrance .

Reference is hereby made to Article 4 (Restrictions on Transfer or Encumbrance) of the Mortgage (defined in Paragraph 9 below), the terms and provisions of which are incorporated herein as if set forth in full herein.

6. Default .

(a) The occurrence of any one or more of the following shall constitute an “Event of Default” under this Note:

(i) Borrower’s failure to make any payment of principal or interest when due hereon, followed by Borrower’s failure to make such payment within ten (10) days after written notice thereof given to Borrower by Lender; provided, however, that Lender shall not be obligated to give Borrower written notice prior to exercising its remedies with respect to such default if Lender had previously given Borrower during that calendar year a notice of default for failure to make a payment of principal or interest hereon.

(ii) Borrower’s failure to perform any other obligation under this Note when required, followed by Borrower’s failure to so perform

such obligation within thirty (30) days after written notice thereof given to Borrower by Lender; provided, however, that if performance cannot be completed within such thirty (30) day period, Borrower must commence such performance within such thirty (30) day period and complete the same within ninety (90) days following the delivery of such notice.

(iii) The occurrence of any other event of default under the Mortgage referred to in the “Security; Loan Documents” section below.

(b) Time is of the essence. Upon the occurrence of an Event of Default under this Note, (i) the entire principal balance hereof and all

accrued interest shall, at the option of Lender, without notice, bear interest at a rate from time to time equal to five (5) percentage points over what would otherwise be this Note rate (or the maximum rate permitted by applicable law if that is less) from the date of the Event of Default until the Event of Default is cured and (ii) the entire principal balance hereof and all accrued interest shall, at the option of Lender, immediately become due and payable, without notice. Lender’s failure to exercise any option hereunder shall

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not constitute a waiver of the right to exercise the same in the event of any subsequent Event of Default. Borrower acknowledges that, during the period of time that any payment of principal, interest or other amount due under this Note is delinquent, Lender will incur costs, expenses and losses attributable to such things as its loss of use of the moneys due and to the adverse impact on its ability to meet its other obligations and to avail itself of other opportunities. Borrower further acknowledges that the exact amount of the costs, expenses and losses would be extremely difficult or impractical to ascertain. Borrower and Lender agree that the increased rate of interest provided for in clause (b)(i) above represents a fair and reasonable estimate of the costs, expenses and losses Lender will incur by reason of any such delinquency in payment.

(c) At Lender’s option, any written notice of default required to be given to Borrower hereunder may be given in the form of a statutory notice of default under the laws of the State of Ohio relating to non-judicial foreclosures of mortgages.

7. Late Charges .

Borrower acknowledges that, if any monthly installment payment under this Note is not made when due, Lender will as a result thereof incur costs not contemplated by this Note, the exact amount of which would be extremely difficult or impracticable to ascertain. Such costs include without limitation processing and accounting charges. Accordingly, except as may otherwise be mandated by applicable law, Borrower hereby agrees to pay to Lender with respect to each monthly installment payment which is not received by Lender within five (5) days of (and including) the date when due (four (4) days after the due date) a late charge equal to FIVE PERCENT (5%) of the amount of the payment. Borrower and Lender agree that such late charge represents a fair and reasonable estimate of the costs Lender will incur by reason of such late payment. Acceptance of such late charge by Lender shall in no event constitute a waiver of the default with respect to the overdue amount, and shall not prevent Lender from exercising any of the other rights and remedies available to Lender.

8. Collection Expenses .

If an Event of Default occurs under this Note and Lender consults an attorney regarding the enforcement of any of its rights or remedies under this Note or any of the other Loan Documents, or if this Note is placed in the hands of an attorney for collection, or if suit is brought to enforce this Note or any of the other Loan Documents, Borrower promises to pay Lender on demand for all fees, costs and expenses, including attorneys’ fees, incurred in connection therewith. Such fees, costs and expenses shall include those incurred with or without suit and those incurred at or in preparation for any trial, appeal or review or in any proceedings under any present or future federal bankruptcy act or state receivership law, and any post-judgment collection proceedings.

9. Security; Loan Documents .

This Note is secured, among other documents, by a Mortgage, Assignment of Rents and Leases, and Security Agreement (the “Mortgage”) encumbering property (the “Property”)

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located in Hamilton County, in the State of Ohio. It is also secured, in part, by an Unconditional Guaranty (the “Guaranty”) executed by Convergys Corporation (“Guarantor”). This Note, the Mortgage, the Guaranty and all other related instruments and documents are collectively referred to herein as the “Loan Documents.”

10. Waivers .

Except as expressly provided in this Note to the contrary, Borrower hereby waives presentment, protest and demand for payment, notice of protest, demand, dishonor and nonpayment of this Note.

11. Limited Recourse Debt .

Except as otherwise provided herein, the Borrower and its constituent members are hereby released from all personal liability hereunder, provided, however, that such release shall not operate to invalidate the lien of the Mortgage securing this Note. In the event of foreclosure of the Mortgage or other enforcement of the collection of the indebtedness evidenced by this Note, Lender agrees, and any holder of this Note shall be deemed by acceptance hereof to have agreed, not to take a deficiency judgment against Borrower or any of its constituent members with respect to said indebtedness. Notwithstanding the foregoing, Borrower and Guarantors, shall have full liability, jointly and severally, for any damages and/or losses due to items (i) through (viii) below and shall have full liability, jointly and severally, under this Note and the Loan Documents in the event of the occurrences under items (ix) and (x) below:

(i) waste to the property encumbered by the Mortgage (the “Property”) or any fraud or willful misrepresentation committed by Borrower;

(ii) any retention of rental income or other income of the Property after an Event of Default has occurred, to the extent that any such

retention is not applied to the operation of the Property, i.e. capital and operating expenses, and the retention of security deposits or other deposits made by tenants of the Property which are not paid to tenants when due or transferred to Lender or any other party acquiring the Property at a foreclosure sale or any transfer in lieu of foreclosure;

(iii) any property taxes or assessments accrued prior to the Lender taking title to the Property;

(iv) removal and failure to replace any personal property securing the Loan;

(v) misapplication of insurance or condemnation proceeds in violation of the terms of the Loan Documents;

(vi) Borrower’s failure to maintain insurance or liability insurance as required by the Loan Documents;

(vii) all damages, liabilities, costs and expenses, including attorneys’ fees, incurred by the Lender due to the presence of any

hazardous, toxic and dangerous wastes,

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substances and materials, including hazardous asbestos, on the Property and due to any breach of covenant, breach of warranty or misrepresentation by Borrower under the Mortgage and any other Loan Document with respect to hazardous, toxic and dangerous wastes, substances and materials and Borrower’s failure to perform any obligations under the environmental indemnity delivered to Lender in connection with the Loan; provided, however, that there will be no liability to the Borrower for such waste, substance and/or materials which are introduced to the Property subsequent to any transfer of the Property specifically permitted under Article 4 of the Mortgage or to Lender’s acquisition of title to the Property as a result of foreclosure or a deed in lieu of foreclosure (the date of any such transfer is referred to herein as the “Transfer Date”); provided further, however, that Borrower shall bear the burden of proof that the introduction and initial release of such hazardous substance (a) occurred subsequent to the Transfer Date, (b) did not occur as the result of any action of Borrower and (c) did not occur as a result of continuing migration or release of any Hazardous Substance introduced prior to the Transfer Date in, on, under or near the Property;

(viii) any fees and costs including reasonable attorneys’ fees incurred in enforcing and collecting any amounts due under this

Paragraph;

(ix) a transfer of title to the Property without Lender’s consent, except if specifically permitted under the terms of the Mortgage; and

(x) subordinate financing placed against the Property without Lender’s consent.

The foregoing limitation on personal liability is not intended and shall not be deemed to constitute a forgiveness of the indebtedness evidenced by this Note or a release of the obligation to repay said indebtedness according to the terms and provisions hereof, but shall operate solely to limit the remedies otherwise available to the holder hereof for the enforcement and collection of such indebtedness. The provisions of this paragraph shall control over any conflicting provisions of this Note, the Mortgage or any other instrument or document executed in connection with the indebtedness evidenced hereby.

12. Limitation on Interest and Loan Charges .

Interest, fees and charges collected or to be collected in connection with the indebtedness evidenced hereby shall not exceed the maximum, if any, permitted by any applicable law. If any such law is interpreted so that said interest, fees and/or charges would exceed any such maximum and Borrower is entitled to the benefit of such law, then: (A) such interest, fees and/or charges shall be reduced by the amount necessary to reduce the same to the permitted maximum; and (B) any sums already collected from Borrower which exceeded the permitted maximum will be refunded. Lender may choose to make the refund either by treating the payments, to the extent of the excess, as prepayments of principal or by making a direct payment to Borrower. No prepayment premium shall be assessed on prepayments under this paragraph. The provisions of this paragraph shall control over any inconsistent provision of this Note or the Mortgage or any other document executed in connection with the indebtedness evidenced hereby.

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13. Governing Law .

This Note shall be construed, enforced and otherwise governed by the laws of the State of Ohio.

14. Lender .

As used herein, the term “Lender” includes any subsequent holder of or participant in this Note.

15. Notices .

All notices delivered hereunder shall be delivered in accordance with the terms and conditions of the Mortgage.

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the day and year first above written.

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Exhibit 10.21 to 2003 10-K

AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT

DATED AS OF N OVEMBER 20, 2003

AMONG

CONVERGYS FUNDING CORPORATION, AS S ELLER ,

CONVERGYS CORPORATION, AS S ERVICER ,

FALCON ASSET SECURITIZATION CORPORATION,

THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO,

FIFTH THIRD BANK

AND

BANK ONE, NA,

AS THE F ALCON A GENT AND AS THE A DMINISTRATIVE A GENT

BORROWER:

ASSET OHIO FOURTH STREET LLC, an Ohio limited liability company

By: /s/ William H. Hawkins II Name: William H. Hawkins II Title: Vice President

TABLE OF CONTENTS

i

Page

ARTICLE I. PURCHASE ARRANGEMENTS

Section 1.1 Purchase Facility 5 Section 1.2 Increases 5 Section 1.3 Decreases 6 Section 1.4 Payment Requirements 6

ARTICLE II. PAYMENTS AND COLLECTIONS Section 2.1 Payments 7 Section 2.2 Collections Prior to Amortization 7 Section 2.3 Collections Following Amortization 8 Section 2.4 Application of Collections 8 Section 2.5 Payment Rescission 9 Section 2.6 Maximum Purchaser Interests 9 Section 2.7 Clean Up Call 9

ARTICLE III. CP FUNDING

Section 3.1 CP Costs 10 Section 3.2 CP Costs Payments 10 Section 3.3 Calculation of CP Costs 10

ARTICLE IV. LIQUIDITY FUNDING

Section 4.1 Liquidity Funding 10 Section 4.2 Yield Payments 10 Section 4.3 Selection and Continuation of Tranche Periods 11 Section 4.4 Liquidity Interest Discount Rates 11 Section 4.5 Suspension of the LIBO Rate 11

ARTICLE V. REPRESENTATIONS AND WARRANTIES

Section 5.1 Representations and Warranties of Seller Parties 12 Section 5.2 Financial Institution Representations and Warranties 16

ARTICLE VI. CONDITIONS OF PURCHASES

Section 6.1 Conditions Precedent to Initial Incremental Purchase 16 Section 6.2 Conditions Precedent to All Purchases and Reinvestments 16

ARTICLE VII. COVENANTS

Section 7.1 Affirmative Covenants of the Seller Parties 17 Section 7.2 Negative Covenants of the Seller Parties 25

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Page

ARTICLE VIII. ADMINISTRATION AND COLLECTION

Section 8.1 Designation of Servicer 26 Section 8.2 Duties of Servicer 26 Section 8.3 Collection Notices 28 Section 8.4 Responsibilities of Seller 28 Section 8.5 Reports 28 Section 8.6 Servicing Fees 28

ARTICLE IX. AMORTIZATION EVENTS

Section 9.1 Amortization Events 29 Section 9.2 Remedies 30

ARTICLE X. INDEMNIFICATION

Section 10.1 Indemnities by the Seller Parties 31 Section 10.2 Increased Cost and Reduced Return 34 Section 10.3 Other Costs and Expenses 34 Section 10.4 Allocations 35

ARTICLE XI. THE AGENTS

Section 11.1 Authorization and Action 35 Section 11.2 Delegation of Duties 36 Section 11.3 Exculpatory Provisions 36 Section 11.4 Reliance by Agents 36 Section 11.5 Non-Reliance on Agents and Other Purchasers 37 Section 11.6 Reimbursement and Indemnification 37 Section 11.7 Each of the Agents and Fifth Third in its Individual Capacity 38 Section 11.8 Successor Administrative Agent 38

ARTICLE XII. ASSIGNMENTS; PARTICIPATIONS

Section 12.1 Assignments 38 Section 12.2 Participations 39

ARTICLE XIII. FALCON LIQUIDITY FACILITY

Section 13.1 Transfer to Financial Institutions 40 Section 13.2 Transfer Price Reduction Yield 40 Section 13.3 Payments to Falcon 41 Section 13.4 Limitation on Commitment to Purchase from Falcon 41 Section 13.5 Defaulting Financial Institutions 41 Section 13.6 Terminating Financial Institutions 42

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Page

ARTICLE XIV. MISCELLANEOUS

Section 14.1 Waivers and Amendments 43 Section 14.2 Notices 44 Section 14.3 Ratable Payments 44 Section 14.4 Protection of Ownership Interests of the Purchasers 44 Section 14.5 Confidentiality 45 Section 14.6 Bankruptcy Petition 46 Section 14.7 Limitation of Liability 46 Section 14.8 CHOICE OF LAW 46 Section 14.9 CONSENT TO JURISDICTION 46 Section 14.10 WAIVER OF JURY TRIAL 47 Section 14.11 Integration; Binding Effect; Survival of Terms 47 Section 14.12 Counterparts; Severability; Section References 47 Section 14.13 Bank One, NA Roles 47 Section 14.14 Characterization 48

Exhibit I Definitions

Exhibit II Form of Purchase Notice

Exhibit III

Chief Executive Office and Places of Business of the Seller; Locations of Records; Federal Employer Identification Number and Organizational Identification Number

Exhibit IV Names of Collection Banks; Collection Accounts

Exhibit V Form of Compliance Certificate

Exhibit VI Form of Collection Account Agreement

Exhibit VII Form of Assignment Agreement

Exhibit VIII Credit and Collection Policy of Each Originator

Exhibit IX Form of Invoice(s)

Exhibit X Form of Monthly Report

Schedule A Commitments and Liquidity Commitments

Schedule B Documents to be Delivered to the Administrative Agent on or prior to the Initial Purchase

CONVERGYS FUNDING CORPORATION

AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT

THIS AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT dated as of November 20, 2003 is among Convergys Funding Corporation, an Ohio corporation (“ Seller ”), Convergys Corporation, an Ohio corporation (“ Convergys ”), as initial Servicer (the Servicer together with Seller, the “ Seller Parties ” and each, a “ Seller Party ”), the funding entities (other than Fifth Third) listed on Schedule A to this Agreement (together with their respective successors and assigns hereunder, the “ Financial Institutions ”), Fifth Third Bank, an Ohio banking corporation (“ Fifth Third ”), Falcon Asset Securitization Corporation (“ Falcon ”) and Bank One, NA, with its main office in Chicago, Illinois, as agent and administrator for Falcon (in such capacity, together with its successors, the “ Falcon Agent ”) and as agent for the Purchasers hereunder (together with its successors and assigns hereunder, the “ Administrative Agent ”). Unless defined elsewhere herein, capitalized terms used in this Agreement will have the meanings assigned to such terms in Exhibit I . This Agreement amends and restates in its entirety that certain Receivables Purchase Agreement dated as of September 28, 1999, as amended from time to time prior to the date hereof, by and among the parties hereto other than Fifth Third (the “ Existing Agreement ”).

PRELIMINARY STATEMENTS

Seller desires to transfer and assign Purchaser Interests to the Purchasers from time to time.

Falcon may, in its absolute and sole discretion, purchase Purchaser Interests from Seller from time to time, and Fifth Third shall purchase Purchaser Interests from Seller from time to time.

In the event that Falcon declines to make any purchase, the Financial Institutions in the Falcon Group will, at the request of Seller,

purchase from time to time Purchaser Interests that were declined by Falcon. In addition, the Financial Institutions in the Falcon Group have agreed to provide a liquidity facility to Falcon in accordance with the terms hereof.

Bank One, NA has been requested and is willing to act as Falcon Agent on behalf of Falcon and its Financial Institutions in the

Falcon Group, and as the Administrative Agent on behalf of the Falcon Agent and all of the Purchasers in accordance with the terms hereof.

NOW, THEREFORE, in accordance with the premises and the mutual covenants contained herein, and for other good and valuable

consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend and restate the Existing Agreement in its entirety as set forth herein.

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ARTICLE I. PURCHASE ARRANGEMENTS

Section 1.1 Purchase Facility .

(a) Upon the terms and subject to the conditions hereof, Seller may, at its option, sell and assign Purchaser Interests to the Falcon Agent

for the benefit of one or more of the Purchasers in Falcon’s Group and simultaneously to Fifth Third, whereupon (i) Fifth Third shall purchase, and (ii) Falcon may, at its option, instruct the Falcon Agent to purchase on Falcon’s behalf from time to time, or if Falcon will decline to purchase, the Falcon Agent will purchase, on behalf of the Financial Institutions in the Falcon Group, Purchaser Interests; provided, however, that (A) the Purchase Prices for the Purchaser Interests sold on any given Business Day shall be ratable in accordance with each Group’s respective Percentage, and (B) in no event shall the aggregate Capital outstanding hereunder from either Group exceed the lesser of (i) such Group’s Percentage of the Purchase Limit and (ii) the Commitment Availability for such Group during the period from the date hereof to but not including the Facility Termination Date. Seller hereby assigns, transfers and conveys to the Falcon Agent for the benefit of the Falcon Group and to Fifth Third, and each of the Falcon Agent and Fifth Third hereby acquires, their respective Percentages of all of Seller’s now owned and existing and hereafter arising or acquired right, title and interest in and to the Purchaser Interests.

Section 1.2 Increases . Seller will provide the Falcon Agent and Fifth Third with at least two Business Days’ prior notice in a form set forth as Exhibit II hereto of each Incremental Purchase (a “ Purchase Notice ”). Each Purchase Notice will be subject to Section 6.2 hereof and, except as set forth below, will be irrevocable and will specify the requested Purchase Price (which will not be less than $1,000,000 for the Falcon Group or less than $500,000 for the Fifth Third Group), the date of purchase and, solely in the case of an Incremental Purchase by the Falcon Group to be funded by the Financial Institutions in the Falcon Group, the requested Discount Rate and Tranche Period. Following receipt of a Purchase Notice, the Falcon Agent will determine whether Falcon agrees to make its Percentage of the purchase. If Falcon declines to make its Percentage of the proposed purchase (referred to herein as “Falcon Refusal”), Seller may cancel the Purchase Notice as to the Falcon Group or, in the absence of such a cancellation, the Incremental Purchase of the Falcon Group’s Percentage of the Purchaser Interests will be made by the Financial Institutions, and, whether or not such cancellation occurs, the Incremental Purchase of the Fifth Third Group’s Percentage of the proposed purchase will be made by Fifth Third. Notwithstanding anything herein to the contrary, with respect to each Incremental Purchase occurring after a Falcon Refusal, (unless another Falcon Refusal shall occur with respect to such Incremental Purchase) Falcon’s percentage of the proposed purchase shall be disproportionately higher for each such purchase and Fifth Third’s percentage shall be disproportionably lower until such time as Falcon’s Percentage and Fifth Third’s Percentage are the same respective Percentages in effect on the date of this Agreement or in effect on the date of any amendment or modification to the definition of Percentage. On the date of each Incremental Purchase, upon satisfaction of the applicable conditions precedent set forth in Article VI, (a) Falcon or the Financial Institutions, as applicable, will wire transfer to the Facility Account, in immediately available funds, no later than 12:00 noon (Chicago time), an amount equal to (i) in the case of Falcon, the Falcon Group’s

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Percentage of the aggregate Purchase Price of the Purchaser Interests the Falcon Group is then purchasing or (ii) in the case of a Financial Institution in the Falcon Group, such Financial Institution’s Pro Rata Share of the Falcon Group’s Percentage of aggregate Purchase Price of the Purchaser Interests the Financial Institutions in the Falcon Group are purchasing, and (b) Fifth Third will wire transfer to the Facility Account, in immediately available funds, no later than 12:00 noon (Chicago time), an amount equal to the Fifth Third Group’s Percentage of the aggregate Purchase Price of the Purchaser Interests the Fifth Third Group is then purchasing. Notwithstanding the foregoing, there may not be more than two Incremental Purchases and/or Aggregate Reductions per week per Group, and all Incremental Purchases shall be made ratably between the Group’s in accordance with their respective Percentages.

Section 1.3 Decreases . Seller will provide each of the Falcon Agent and Fifth Third with prior written notice in conformity with the Required Notice Period of any reduction from Collections requested by Seller (a “ Reduction Notice ”) of any proposed reduction of Aggregate Capital from Collections and their respective Percentages thereof. Such Reduction Notice will designate (i) the date (the “ Proposed Reduction Date ”) upon which any such reduction of Aggregate Capital will occur (which date will give effect to the applicable Required Notice Period), (ii) the amount of Aggregate Capital to be reduced which will be applied ratably to the Purchaser Interests of both Groups (the “ Aggregate Reduction ”), and (iii) each Group’s Percentage of such Aggregate Reduction. Only one (1) Reduction Notice will be outstanding at any time. Notwithstanding the foregoing, no voluntary Aggregate Reduction will be made following the occurrence of the Amortization Date without the prior written consent of the Falcon Agent and Fifth Third. All Aggregate Reductions shall be made ratably between the Groups in accordance with their respective Percentages, and all amounts paid for the benefit of the Falcon Group shall be distributed by the Falcon Agent to Falcon and the Financial Institutions in the Falcon Group ratably in accordance with their respective shares (if any) of the Capital outstanding from the Falcon Group.

Section 1.4 Payment Requirements . All amounts to be paid or deposited by any Seller Party pursuant to any provision of this Agreement will be paid or deposited in accordance with the terms hereof no later than 11:00 a.m. (Chicago time) on the day when due in immediately available funds, and if not received before 11:00 a.m. (Chicago time) will be deemed to be received on the next succeeding Business Day. If such amounts are payable to a Purchaser in the Falcon Group, they will be paid to the Falcon Agent, for the account of such Purchaser, at the Falcon Agent’s headquarters in Chicago, Illinois until otherwise notified by the Falcon Agent. If such amounts are payable to Fifth Third, they will be paid to Fifth Third at its headquarters in Cincinnati, Ohio until otherwise notified by Fifth Third. All computations of Yield, per annum fees calculated as part of any CP Costs, per annum fees hereunder and under the Fee Letters will be made on the basis of a year of 360 days for the actual number of days elapsed. If any amount hereunder will be payable on a day which is not a Business Day, such amount will be payable on the next succeeding Business Day.

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ARTICLE II. PAYMENTS AND COLLECTIONS

Section 2.1 Payments . Notwithstanding any limitation on recourse contained in this Agreement, Seller will immediately pay to the

Falcon Agent, for the benefit of the relevant Purchaser(s) in the Falcon Group, and Fifth Third, on a full recourse basis, (i) such fees as set forth in the applicable Fee Letter (which fees, in the case of the Falcon Group, will be sufficient to pay all fees owing to the Financial Institutions in the Falcon Group), (ii) all CP Costs applicable to their respective Group’s Purchaser Interests, (iii) all amounts payable as Yield to their respective Groups, (iv) their respective Group’s Percentage of all amounts payable as Deemed Collections (which will be immediately due and payable by Seller and applied to reduce outstanding Aggregate Capital hereunder in accordance with Sections 2.2 and 2.3 hereof), (v) all amounts payable to reduce the Seller Interest, if required, pursuant to Section 2.6 hereof, (vi) all amounts payable pursuant to Article X, if any, (vii) all Servicer costs and expenses, including the Servicing Fee, in connection with servicing, administering and collecting the Receivables, (viii) all Broken Funding Costs applicable to their respective Group’s Purchaser Interest and (ix) all Default Fees applicable to their respective Group’s Purchaser Interest (collectively, the “ Obligations ”). If any Person fails to pay any of the Obligations when due, such Person agrees to pay, on demand, the Default Fee in respect thereof until paid. Notwithstanding the foregoing, no provision of this Agreement or any Fee Letter will require the payment or permit the collection of any amounts hereunder in excess of the maximum permitted by applicable law. If at any time Seller receives any Collections or is deemed to receive any Collections, Seller will immediately pay such Collections or Deemed Collections to the Servicer for application in accordance with the terms and conditions hereof and, at all times prior to such payment, such Collections or Deemed Collections will be held in trust by Seller for the exclusive benefit of the Purchasers and the Agents.

Section 2.2 Collections Prior to Amortization . Prior to the Amortization Date, any Collections and/or Deemed Collections received by the Servicer will be set aside and held in trust by the Servicer for the payment of any accrued and unpaid Aggregate Unpaids or for a Reinvestment as provided in this Section 2.2. If at any time any Collections are received by the Servicer prior to the Amortization Date, (i) the Servicer will set aside the Termination Percentage (hereinafter defined) of Collections evidenced by the Purchaser Interests of each Terminating Financial Institution in the Falcon Group and (ii) Seller hereby requests and the Purchasers (other than any Terminating Financial Institutions in the Falcon Group) hereby agree to make, simultaneously with such receipt, a reinvestment (each, a “ Reinvestment ”) with that portion of the balance of each and every Collection received by the Servicer that is part of any Purchaser Interest in which such Purchaser has an interest (other than any Purchaser Interests of Terminating Financial Institutions in the Falcon Group), such that after giving effect to such Reinvestment, the amount of Capital of each such Purchaser Interest immediately after such receipt and corresponding Reinvestment will be equal to the amount of Capital immediately prior to such receipt. On each Settlement Date prior to the occurrence of the Amortization Date, the Servicer will remit to the Falcon Agent’s and Fifth Third’s respective accounts the amounts set aside for each Group during the preceding Settlement Period that have not been subject to a Reinvestment and apply such amounts (if not previously paid in accordance with Section 2.1) first, to reduce unpaid Obligations owing to such Group and second, to reduce the Capital of all

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Purchaser Interests of Terminating Financial Institutions in the Falcon Group, applied ratably to each Terminating Financial Institution in the Falcon Group according to its respective Termination Percentage. If such Obligations will be reduced to zero, any additional Collections received by the Servicer (i) if applicable, will be remitted to the Falcon Agent’s and Fifth Third’s respective accounts no later than 11:00 a.m. (Chicago time) to the extent required to fund their respective Percentages of any Aggregate Reduction on such Settlement Date and (ii) any balance remaining thereafter will be remitted from the Servicer to Seller on such Settlement Date. Each Terminating Financial Institution in the Falcon Group will be allocated a ratable portion of the Falcon Group’s Percentage of Collections from the date of any assignment by Falcon pursuant to Section 13.6 (the “ Termination Date ”) until such Terminating Financing Institution’s Capital will be paid in full. This ratable portion will be calculated on the Termination Date of each Terminating Financial Institution in the Falcon Group as a percentage equal to (i) Capital of such Terminating Financial Institution outstanding on its Termination Date, divided by (ii) the aggregate Capital outstanding from the Falcon Group on such Termination Date (the “ Termination Percentage ”). Each Terminating Financial Institution’s Termination Percentage will remain constant prior to the Amortization Date. On and after the Amortization Date, each Termination Percentage will be disregarded, and each Terminating Financial Institution’s Capital will be reduced ratably with all Financial Institutions in the Falcon Group in accordance with Section 2.3.

Section 2.3 Collections Following Amortization . On the Amortization Date and on each day thereafter, the Servicer will set aside and hold in trust, for the holder of each Purchaser Interest, all Collections received on such day in respect of such Purchaser Interest and an additional amount of Collections for the payment of any accrued and unpaid Obligations owed by Seller to such holders of Purchaser Interests and not previously paid by Seller in accordance with Section 2.1 hereof. On and after the Amortization Date, the Servicer will, within one (1) Business Day following receipt of any Collections: (i) remit to the Falcon Agent’s and Fifth Third’s respective accounts the amounts set aside for the members of their respective Groups pursuant to the preceding sentence, and (ii) apply such amounts to reduce the Capital associated with each such Purchaser Interest and any other Aggregate Unpaids owing to the holder of each such Purchaser Interest.

Section 2.4 Application of Collections .

(a) If there will be insufficient funds on deposit for the Servicer to distribute funds in payment in full of the aforementioned amounts pursuant to Section 2.2 or 2.3 (as applicable), the Servicer will distribute funds:

first , to the payment of the Servicer’s reasonable out-of-pocket costs and expenses in connection with servicing, administering and collecting the Receivables, including without limitation, the Servicing Fee, if Seller or one of its Affiliates is not then acting as the Servicer,

second , to the reimbursement of the Agents’ and the Purchasers’ costs of collection and enforcement of this Agreement,

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third , (to the extent applicable) to the ratable reduction of the Aggregate Capital (without regard to any Termination Percentage),

fourth , for the ratable payment of all other unpaid Obligations, provided that to the extent such Obligations relate to the payment of Servicer costs and expenses (including the Servicing Fee) when Seller or one of its Affiliates is acting as the Servicer, such costs and expenses will not be paid until after the payment in full of all other Obligations, and

fifth , after the Aggregate Unpaids have been indefeasibly reduced to zero, to Seller.

Collections applied to the payment of Aggregate Unpaids will be distributed in accordance with the aforementioned provisions, and, giving effect to each of the priorities set forth in Section 2.4 above, will be shared ratably (within each priority) among the Agents and the Purchasers in accordance with the amount of such Aggregate Unpaids owing to each of them in respect of each such priority.

Section 2.5 Payment Rescission . No payment of any of the Aggregate Unpaids will be considered paid or applied hereunder to the extent that, at any time, all or any portion of such payment or application is rescinded by application of law or judicial authority, or must otherwise be returned or refunded for any reason. Seller will remain obligated for the amount of any payment or application so rescinded, returned or refunded, and will promptly pay to the Falcon Agent’s and Fifth Third’s respective accounts (for application to the Person or Persons who suffered such rescission, return or refund) the full amount thereof, plus the Default Fee from the date of any such rescission, return or refunding.

Section 2.6 Maximum Purchaser Interests . Seller will ensure that the Purchaser Interests of all Purchasers will at no time exceed in the aggregate 100%. If the aggregate of the Purchaser Interests of the Purchasers exceeds 100%, Seller will pay to each of the Falcon Agent’s and Fifth Third’s respective accounts within one (1) Business Day their respective Percentage of an amount to be applied to reduce the aggregate Capital of such Group (as allocated by the Falcon Agent or Fifth Third’s as applicable), such that after giving effect to such payments, the aggregate of the Purchaser Interests equals or is less than l00%.

Section 2.7 Clean Up Call . In addition to Seller’s rights pursuant to Section 1.3, Seller will have the right (after providing written notice to the Falcon Agent and Fifth Third in accordance with the Required Notice Period), at any time following the reduction of the Aggregate Capital to a level that is less than 10.0% of the original Purchase Limit, to repurchase from the Purchasers all, but not less than all, of the then outstanding Purchaser Interests (a “ Clean-up Call ”). The aggregate purchase price in respect thereof will be an amount equal to the Aggregate Unpaids through the date of such repurchase, payable in immediately available funds. Such repurchase will be without representation, warranty or recourse of any kind by, on the part of, or against any of the Purchasers or Agents. Upon such payment in full of the Aggregate Unpaids following a Clean-up Call, this Agreement will terminate and be of no force and effect, except for provisions which expressly survive termination.

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ARTICLE III. CP FUNDING

Section 3.1 CP Costs . Seller will pay CP Costs with respect to the Capital associated with each Purchaser Interest (a) of Falcon for each

day that any Capital in respect of such Purchaser Interest is outstanding and (b) of Fifth Third for each day that any Capital in respect of such Purchaser Interest is outstanding during a CP Availability Period. Each such Purchaser Interest funded substantially with Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis, based upon the percentage share the Capital in respect of such Purchaser Interest represents in relation to all assets held by Falcon or Fountain Square, as applicable, and funded substantially with Pooled Commercial Paper.

Section 3.2 CP Costs Payments . On each applicable Settlement Date, Seller will pay to the Falcon Agent’s and Fifth Third’s respective accounts (for the benefit of Falcon in the case of the Falcon Agent) an aggregate amount equal to all accrued and unpaid CP Costs in respect of the Capital associated with all Purchaser Interests of Falcon or Fifth Third, as the case may be, for the immediately preceding Accrual Period in accordance with Article II hereof.

Section 3.3 Calculation of CP Costs . On the 3rd Business Day of each month hereafter while Falcon has any Purchaser Interest outstanding and Fifth Third has funding available from Fountain Square, the Falcon Agent will calculate the aggregate amount of CP Costs owing to Falcon for the applicable Accrual Period, and Fifth Third will calculate the aggregate amount of CP Costs owing to Fifth Third for the applicable Accrual Period, and the Falcon Agent and Fifth Third will notify Seller of such aggregate amounts for each of their respective Groups.

ARTICLE IV. LIQUIDITY FUNDING

Section 4.1 Liquidity Funding . Each Liquidity Interest will accrue Yield for each day during its Tranche Period at either the LIBO Rate

or the Base Rate in accordance with the terms and conditions hereof. Until Seller gives notice to the Falcon Agent or Fifth Third, as applicable, of another Discount Rate in accordance with Section 4.4 hereof, the initial Discount Rate for any Purchaser Interest transferred by Falcon to the Financial Institutions in the Falcon Group pursuant to the terms and conditions hereof and for any Fifth Third Liquidity Interest will be the Base Rate. If the Financial Institutions in the Falcon Group acquire by assignment from Falcon any Purchaser Interest pursuant to Article XIII, each Purchaser Interest so assigned will each be deemed to have a new Tranche Period commencing on the date of any such assignment. If the CP Availability Period ends, each Purchaser Interest of Fifth Third will be deemed to have a new Tranche Period commencing on the date the CP Availability Period ended.

Section 4.2 Yield Payments . On the Settlement Date for each Liquidity Interest, Seller will pay to the Falcon Agent (for the benefit of the Financial Institutions) or to Fifth Third, as the case may be, an aggregate amount equal to the accrued and unpaid Yield for the entire Tranche Period of each such Liquidity Interest in accordance with Article II hereof.

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Section 4.3 Selection and Continuation of Tranche Periods .

(a) With consultation from (and approval by) the Falcon Agent or Fifth Third, as applicable, Seller will from time to time request Tranche Periods for the Liquidity Interests, provided that, at any time a Liquidity Interest is outstanding from any Financial Institution in the Falcon Group or Fifth Third, Seller will always request Tranche Periods from such Purchaser such that at least one Tranche Period will end on the date specified in clause (A) of the definition of Settlement Date.

(b) Seller, on the one hand, and as applicable, the Falcon Agent or Fifth Third, on the other hand, upon notice to and consent by the other received at least three (3) Business Days prior to the end of a Tranche Period (the “ Terminating Tranche ”) for any Purchaser Interest, may, effective on the last day of the Terminating Tranche: (i) divide any such Purchaser Interest into multiple Purchaser Interests of the same Group, (ii) combine any such Purchaser Interest with one or more other Purchaser Interests of the same Group that have a Terminating Tranche ending on the same day as such Terminating Tranche or (iii) combine any such Purchaser Interest with a new Purchaser Interests of the same Group to be purchased on the day such Terminating Tranche ends, provided, that in no event may a Purchaser Interest of Falcon be combined with a Purchaser Interest of the Financial Institutions or of Fifth Third, and in no event may a Purchaser Interest of Fifth Third be combined with a Purchaser Interest of anyone in the Falcon Group.

Section 4.4 Liquidity Interest Discount Rates . Seller may select the LIBO Rate or the Base Rate for each Liquidity Interest. Seller will by 11:00 a.m. (Chicago time): (i) at least three (3) Business Days prior to the expiration of any Terminating Tranche with respect to which the LIBO Rate is being requested as a new Discount Rate and (ii) at least one (1) Business Day prior to the expiration of any Terminating Tranche with respect to which the Base Rate is being requested as a new Discount Rate, give the Falcon Agent or Fifth Third, as the case may be, irrevocable notice of the new Discount Rate for the Purchaser Interest associated with such Terminating Tranche. Until Seller gives notice to the applicable Person in accordance with the preceding sentence of another Discount Rate, the initial Discount Rate for any Purchaser Interest transferred to the Financial Institutions in the Falcon Group pursuant to the terms and conditions hereof, and of any Purchaser Interest of Fifth Third outstanding when the CP Availability Period ends, will be the Base Rate.

Section 4.5 Suspension of the LIBO Rate .

(a) If any Financial Institution in the Falcon Group or Fifth Third notifies Seller that it has determined that funding its Liquidity Interest at a LIBO Rate would violate any applicable law, rule, regulation, or directive of any governmental or regulatory authority, whether or not having the force of law, or that (i) deposits of a type and maturity appropriate to match fund its Liquidity Interests at such LIBO Rate are not available or (ii) such LIBO Rate does not accurately reflect the cost of acquiring or maintaining a Liquidity Interest at such LIBO Rate, then the members of the applicable Group will suspend the availability of such LIBO Rate and require Seller to select the Base Rate for any Liquidity Interest accruing Yield at such LIBO Rate.

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(b) If less than all of the Financial Institutions in the Falcon Group give a notice to the Falcon Agent pursuant to Section 4.5(a), each Financial Institution in the Falcon Group which gave such a notice will be obliged, at the request of Seller, Falcon or the Falcon Agent, to assign all of its rights and obligations hereunder to (i) another Financial Institution or (ii) another funding entity nominated by Seller or the Falcon Agent that is acceptable to Falcon and willing to participate in this Agreement through the Liquidity Termination Date in the place of such notifying Financial Institution; provided that (i) the notifying Financial Institution receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such notifying Financial Institution’s Pro Rata Share of the Capital and Yield owing to all of the Financial Institutions in the Falcon Group and all accrued but unpaid fees and other costs and expenses payable in respect of its Pro Rata Share of the Purchaser Interests of the Financial Institutions, and (ii) the replacement Financial Institution otherwise satisfies the requirements of Section 12.l(b).

ARTICLE V. REPRESENTATIONS AND WARRANTIES

Section 5.1 Representations and Warranties of Seller Parties . Each Seller Party hereby represents and warrants to the Agents and the

Purchasers, as to itself, as of the date hereof and as of the date of each Incremental Purchase and the date of each Reinvestment, that:

(a) Corporate Existence and Power . Such Seller Party is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, and is duly qualified to do business and is in good standing as a foreign corporation, and has and holds all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted and, in the case of the Servicer, where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect.

(b) Power and Authority; Due Authorization Execution and Delivery . The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder and, in the case of Seller, Seller’s use of the proceeds of purchases made hereunder, are within its corporate powers and authority and have been duly authorized by all necessary corporate action on its part. This Agreement and each other Transaction Document to which such Seller Party is a party has been duly executed and delivered by such Seller Party.

(c) No Conflict . The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder do not contravene or violate (i) its articles of incorporation or regulations (i.e., by-laws), (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or by which it or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on assets of such Seller Party or its Subsidiaries (except as created hereunder);

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and no transaction contemplated hereby requires compliance with any bulk sales act or similar law.

(d) Governmental Authorization . Other than the filing of the financing statements required hereunder, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereunder.

(e) Actions, Suits . There are no actions, suits or proceedings pending, or to the best of such Seller Party’s knowledge, threatened, against or affecting such Seller Party, or any of its properties, in or before any court, arbitrator or other body, that could reasonably be expected to have a Material Adverse Effect. Such Seller Party is not in default with respect to any order of any court, arbitrator or governmental body.

(f) Binding Effect . This Agreement and each other Transaction Document to which such Seller Party is a party constitute the legal, valid and binding obligations of such Seller Party enforceable against such Seller Party in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

(g) Accuracy of Information . All information heretofore furnished by such Seller Party or any of its Affiliates to any of the Agents or Purchasers for purposes of or in connection with this Agreement, any of the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by such Seller Party or any of its Affiliates to any of the Agents or Purchasers will be, true and accurate in every material respect on the date such information is stated or certified and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading.

(h) Use of Proceeds . No proceeds of any purchase hereunder will be used (i) for a purpose that violates, or would be inconsistent with, Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time or (ii) to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.

(i) Good Title . Immediately prior to each purchase hereunder, Seller will be the legal and beneficial owner of the Receivables and Related Security with respect thereto, free and clear of any Adverse Claim, except as created by the Transaction Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller’s ownership interest in each Receivable, its Collections and the Related Security.

(j) Perfection . This Agreement, together with the filing of the financing statements contemplated hereby, is effective to, and will, upon each purchase hereunder, transfer to the relevant Purchaser or Purchasers (and such Purchaser or Purchasers will acquire from

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Seller) a valid and perfected first priority undivided percentage ownership or security interest in each Receivable existing or hereafter arising and in the Related Security and Collections with respect thereto, free and clear of any Adverse Claim, except as created by the Transactions Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Administrative Agent’s (on behalf of the Falcon Agent and the Purchasers) ownership interest in the Receivables, the Related Security and the Collections.

(k) Places of Business . The principal places of business and chief executive office of Seller and the offices where it keeps all of its Records are located at the address(es) listed on Exhibit III or such other locations of which the Administrative Agent has been notified in accordance with Section 7.2(a ) in jurisdictions where all action required by Section 14.4 (a) has been taken and completed. Seller’s Federal Employer Identification Number and Organizational Identification Number are correctly set forth on Exhibit III .

(l) Collections . The conditions and requirements set forth in Section 7.1(j) and Section 8.2 have at all times been satisfied and duly performed. The names and addresses of all Collection Banks, together with the account numbers of the Collection Accounts of Seller at each Collection Bank and the post office box number of each Lock-Box, are listed on Exhibit IV . Seller has not granted any Person, other than the Falcon Agent and Fifth Third as contemplated by this Agreement, dominion and control of any Lock-Box or Collection Account, or the right to take dominion and control of any such account at a future time or upon the occurrence of a future event.

(m) Material Adverse Effect . (i) The initial Servicer represents and warrants that since December 31, 2002, no event has occurred that would have a material adverse effect on the financial condition or operations of the initial Servicer and its Subsidiaries or on the ability of the initial Servicer to perform its obligations under this Agreement; and (ii) Seller represents and warrants that since the date of this Agreement, no event has occurred that would have a material adverse effect on (A) the financial condition or operations of Seller, (B) on the ability of Seller to perform its obligations under the Transaction Documents to which it is a party, or (C) the collectibility of the Receivables generally or of any material portion of the Receivables.

(n) Names . In the past five (5) years, Seller has not used any corporate names, trade names or assumed names other than the name in which it has executed this Agreement.

(o) Ownership of Seller . Convergys owns, directly or indirectly, 100% of the issued and outstanding capital stock of Seller, free and clear of any Adverse Claim. Such capital stock is validly issued, fully paid and nonassessable, and there are no options, warrants or other rights to acquire securities of Seller.

(p) Not a Holding Company or an Investment Company . Such Seller Party is not a “ holding company ” or a “ subsidiary holding company ” of a “ holding company ” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any successor

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statute. Such Seller Party is not an “ investment company ” within the meaning of the Investment Company Act of 1940, as amended, or any successor statute.

(q) Compliance with Law . Such Seller Party has complied in all material respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject. Each Receivable, together with the Contract(s) and Invoice(s) related thereto, does not contravene any material laws, rules or regulations applicable thereto ( including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy).

(r) Compliance with Credit and Collection Policy . Such Seller Party has complied in all material respects with the applicable Credit and Collection Policy with regard to each Receivable and the related Contract(s) and Invoice(s), and has not made any change to such Credit and Collection Policy, except such material change as to which the Falcon Agent and Fifth Third have been notified in accordance with Section 7.1(a)(vii) .

(s) Payments to Convergys . With respect to each Receivable transferred to Seller under the Receivables Sale Agreement, Seller has given reasonably equivalent value to Convergys, in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by Convergys under the Receivables Sale Agreement, is or may be voidable under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. §§ 101 et seq. ), as amended.

(t) Enforceability of Invoices . Each Invoice with respect to each Receivable is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

(u) Eligible Receivables . Each Receivable included in the Net Receivables Balance as an Eligible Receivable on the date of its purchase under the Receivables Sale Agreement was an Eligible Receivable on such purchase date.

(v) Net Receivables Balance . Seller has determined that, immediately after giving effect to each purchase hereunder, the Net Receivables Balance is at least equal to the sum of (i) the aggregate Capital of all the Purchaser Interests, plus (ii) the Aggregate Reserves.

(w) [Intentionally Omitted] .

(x) Accounting . The manner in which such Seller Party accounts for the transactions contemplated by this Agreement and the Receivables Sale Agreement does not jeopardize the true sale analysis.

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Section 5.2 Financial Institution Representations and Warranties . Each Financial Institution in the Falcon Group hereby represents and warrants to the Agents and Falcon that:

(a) Existence and Power . Such Financial Institution is a corporation or a banking association duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, and has all corporate power to perform its obligations hereunder.

(b) No Conflict . The execution and delivery by such Financial Institution of this Agreement and the performance of its obligations hereunder are within its corporate powers, have been duly authorized by all necessary corporate action, do not contravene or violate (i) its certificate or articles of incorporation or association or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on its assets. This Agreement has been duly authorized, executed and delivered by such Financial Institution.

(c) Governmental Authorization . No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Financial Institution of this Agreement and the performance of its obligations hereunder.

(d) Binding Effect . This Agreement constitutes the legal, valid and binding obligation of such Financial Institution enforceable against such Financial Institution in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law).

ARTICLE VI. CONDITIONS OF PURCHASES

Section 6.1 Conditions Precedent to Initial Incremental Purchase . The initial Incremental Purchase of a Purchaser Interest under this

Agreement is subject to the conditions precedent that (a) the Administrative Agent will have received on or before the date of such purchase those documents listed on Schedule B and (b) the Agents and Fifth Third will have received all fees and expenses required to be paid on such date pursuant to the terms of this Agreement and the applicable Fee Letter.

Section 6.2 Conditions Precedent to All Purchases and Reinvestments . Each purchase of a Purchaser Interest (other than pursuant to Section 13.1 ) and each Reinvestment will be subject to the further conditions precedent that (a) in the case of each such purchase or Reinvestment: (1) the Servicer will have delivered to the Falcon Agent and Fifth Third on or prior to the date of such purchase, in form and substance satisfactory to both the Falcon Agent and Fifth Third, all Monthly Reports as and when due under Section 8.5 and (2) upon the Falcon

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Agent’s or Fifth Third’s request, the Servicer will have delivered to the Falcon Agent and Fifth Third at least three (3) days prior to such purchase or Reinvestment an interim report showing the amount of then Eligible Receivables; (b) the Facility Termination Date will not have occurred; (c) the Falcon Agent and Fifth Third will have received such other approvals, opinions or documents as the Falcon Agent or Fifth Third may reasonably request; and (d) on the date of each such Incremental Purchase or Reinvestment, the following statements will be true (and acceptance of the proceeds of such Incremental Purchase or Reinvestment will be deemed a representation and warranty by Seller that such statements are then true):

(i) the representations and warranties set forth in Section 5.1 are true and correct on and as of the date of such Incremental Purchase or Reinvestment as though made on and as of such date;

(ii) no event has occurred, or would result from such Incremental Purchase or Reinvestment, that will constitute an Amortization

Event, and no event has occurred and is continuing, or would result from such Incremental Purchase or Reinvestment, that would constitute a Potential Amortization Event; and

(iii) the Aggregate Capital does not exceed the Purchase Limit and the aggregate Purchaser Interests do not exceed 100%.

It is expressly understood that each Reinvestment will, unless otherwise directed by any Agent or Purchaser, occur automatically on each day that the Servicer will receive any Collections without the requirement that any further action be taken on the part of any Person and notwithstanding the failure of Seller to satisfy any of the foregoing conditions precedent in respect of such Reinvestment. The failure of Seller to satisfy any of the foregoing conditions precedent in respect of any Reinvestment will give rise to a right of the Falcon Agent and Fifth Third, which right may be exercised at any time on demand of the Falcon Agent or Fifth Third, to rescind the related purchase and direct Seller to pay to the Falcon Agent (for the benefit of the Purchasers in the Falcon Group, and to Fifth Third their respective Percentages of the Collections prior to the Amortization Date that will have been applied to the affected Reinvestment.

ARTICLE VII. COVENANTS

Section 7.1 Affirmative Covenants of the Seller Parties . Until the date on which the Aggregate Unpaids have been indefeasibly paid in

full and this Agreement terminates in accordance with its terms, each Seller Party hereby covenants, as to itself, as set forth below:

(a) Financial Reporting . Such Seller Party will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish or cause to be furnished to the Falcon Agent and Fifth Third:

(i) Annual Reporting . Within 105 days after the close of each of its respective fiscal years, audited, unqualified financial statements (which will include balance sheets, statements of income and retained earnings and a statement of cash flows) for Convergys for such fiscal year certified in a manner acceptable to the Falcon Agent

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and Fifth Third by independent public accountants of nationally recognized standing or otherwise acceptable to the Falcon Agent and Fifth Third.

(ii) Quarterly Reporting . Within 60 days after the close of the first three (3) quarterly periods of each of its respective fiscal years,

balance sheets of Convergys as at the close of each such period and related consolidated statements of income, retained earnings and cash flows for Convergys for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer or any Authorized Officer.

(iii) Compliance Certificate . Together with the financial statements required hereunder, a compliance certificate in substantially the

form of Exhibit V signed by an Authorized Officer of Convergys and dated the date of such annual financial statement or such quarterly financial statement, as the case may be.

(iv) Shareholders Statements and Reports . Promptly upon the furnishing thereof to the shareholders of such Seller Party copies of

all financial statements, reports and proxy statements so furnished.

(v) S.E.C. Filings . Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which such Seller Party or any of its Subsidiaries files with the Securities and Exchange Commission.

(vi) Copies of Notices . Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or

other communication under or in connection with any Transaction Document from any Person other than any of the Agents or Purchasers, copies of the same.

(vii) Change in Credit and Collection Policy . At least fifteen (15) days prior to the effectiveness of any material change in, or

material amendment to, either Credit and Collection Policy, a copy of such Credit and Collection Policy as then in effect together with a notice (A) indicating such change or amendment, and (B) if such proposed change or amendment would be reasonably likely to adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables, requesting the Falcon Agent’s and Fifth Third’s consent thereto.

(viii) Other Information . Promptly, from time to time, such other information, documents, records or reports relating to the

Receivables (other than confidential or proprietary information with respect to the Obligors thereon that has no direct bearing on the collectibility of the Receivables) or the condition or operations, financial or otherwise, of such Seller Party as the Falcon Agent or Fifth Third may from time to time reasonably request in order to protect the interests of the Purchasers under or as contemplated by this Agreement.

(b) Notices . Such Seller Party will notify the Falcon Agent and Fifth Third in writing signed by an Authorized Officer of such Seller

Party of the occurrence of any of the

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following promptly upon learning thereof, describing the same and, if applicable, the steps being taken with respect thereto:

(i) Amortization Events or Potential Amortization Events . The occurrence of each Amortization Event and each Potential Amortization Event.

(ii) Judgment and Proceeding . (A) The entry of any judgment or decree against the Servicer or any of its Subsidiaries (other than

Seller) if the aggregate amount of all judgments and decrees then outstanding against the Servicer and its Subsidiaries exceeds $15,000,000, (B) the entry of any judgment or decree against Seller, (C) the institution of any litigation, arbitration proceeding or governmental proceeding against the Servicer or any of its Subsidiaries (other than Seller) if the amount of damages claimed exceeds $15,000,000, or (D) the institution of any litigation, arbitration proceeding or governmental proceeding against Seller.

(iii) Material Adverse Effect . The occurrence of any event or condition that has had, or could reasonably be expected to have, a

Material Adverse Effect.

(iv) Amortization Date . The occurrence of the “ Amortization Date ” under the Receivables Sale Agreement or the First-Step Receivables Purchase Agreement.

(v) Defaults Under Other Agreements . The occurrence of a default or an event of default under any other financing arrangement

pursuant to which such Seller Party is a debtor or an obligor.

(vi) Downgrade of Convergys or either of the Originators . Any downgrade in the rating of any Indebtedness of Convergys or either of the Originators by Standard and Poor’s Ratings Group, Moody’s Investors Service, Inc. or any other nationally recognized rating agency, setting forth the Indebtedness affected and the nature of such change.

(vii) Amendments to Credit Agreement . Any amendment to, or any waiver, restatement or replacement of, the Credit Agreement,

enclosing a copy of such amendment, waiver, restatement or replacement agreement.

(c) Compliance with Laws and Preservation of Corporate Existence . Such Seller Party will comply in all material respects with all material applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject. Such Seller Party will preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where its business is conducted, except, in the case of the Servicer, where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect.

(d) Audits . Such Seller Party will furnish to the Falcon Agent and Fifth Third from time to time such information with respect to it and the Receivables as either of them may reasonably request. Such Seller Party will, from time to time during regular business hours as requested by the Administrative Agent upon reasonable notice and at the sole cost of such Seller

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Party, permit a respective agent or representative of a third party auditor mutually acceptable to the Falcon Agent and Fifth Third: (i) to examine and make copies of and abstracts from all Records in the possession or under the control of such Person relating to the Receivables and the Related Security, including, without limitation, the related Contracts and Invoices, and (ii) to visit the offices and properties of such Person for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to such Person’s financial condition or the Receivables and the Related Security or any Person’s performance under any of the Transaction Documents or any Person’s performance under the Contracts and Invoices and, in each case, with any of the officers or employees of Seller or the Servicer having knowledge of such matters (each, an “ Audit ”). Notwithstanding the foregoing, prior to the occurrence of an Amortization Event, only two (2) Audits per Seller Party or Originator will be effected by the any such agreed upon agents or representatives during any 12-month period.

(e) Keeping and Marking of Records and Books .

(i) The Servicer will maintain and implement administrative and operating procedures ( including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables ( including, without limitation, records adequate to permit the immediate identification of each new Receivable and all Collections of and adjustments to each existing Receivable). The Servicer will give the Falcon Agent and Fifth Third notice of any material change in the administrative and operating procedures referred to in the previous sentence.

(ii) Such Seller Party will (A) mark its master data processing records and other books and records relating to the Purchaser

Interests with a legend, acceptable to the Administrative Agent, describing the Purchaser Interests, and (B) upon request of any of the Agents or Fifth Third after the occurrence of an Amortization Event and during the continuance thereof: (x) mark each Invoice with a legend describing the Purchaser Interests and (y) deliver to the Administrative Agent all Invoices relating to the Receivables.

(f) Compliance with Contracts, Invoices and Credit and Collection Policy . Such Seller Party will timely and fully (i) perform and comply

with all provisions, covenants and other promises required to be observed by it under the Contracts and Invoices related to the Receivables, and (ii) comply in all respects with the applicable Credit and Collection Policy in regard to each Receivable and the related Contract and Invoice(s).

(g) Performance and Enforcement of the Receivables Sale Agreement . Seller will, and will require Convergys to, perform their respective obligations and undertakings under and pursuant to the Receivables Sale Agreement. Seller will purchase Receivables under the Receivables Sale Agreement in strict compliance with the terms thereof and will vigorously enforce the rights and remedies accorded to Seller under the Receivables Sale Agreement. Seller will take all actions to perfect and enforce its rights and interests (and the rights and interests of the Agents and the Purchasers as assignees of Seller) under the Receivables Sale Agreement as

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any Agent may from time to time reasonably request, including, without limitation, making claims to which it may be entitled under any indemnity, reimbursement or similar provision contained in the Receivables Sale Agreement.

(h) Ownership . Seller will take all necessary action to (i) vest legal and equitable title to the Receivables, the Related Security and the Collections purchased under the Receivables Sale Agreement irrevocably in Seller, free and clear of any Adverse Claims other than Adverse Claims in favor of the Administrative Agent for the benefit of the Falcon Agent and the Purchasers ( including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller’s interest in such Receivables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of Seller therein as any Agent may reasonably request), and (ii) establish and maintain, in favor of the Administrative Agent, for the benefit of the Falcon Agent and the Purchasers, a valid and perfected first priority undivided percentage ownership interest (and/or a valid and perfected first priority security interest) in all Receivables, Related Security and Collections to the full extent contemplated herein, free and clear of any Adverse Claims other than Adverse Claims in favor of the Administrative Agent for the benefit of the Falcon Agent and the Purchasers ( including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Administrative Agent (for the benefit of the Falcon Agent and the Purchasers) interest in such Receivables, Related Security and Collections and such other action to perfect, protect or more fully evidence the interest of the Administrative Agent for the benefit of the Falcon Agent and the Purchasers as the Administrative Agent may reasonably request).

(i) Purchasers’ Reliance . Seller acknowledges that the Purchasers are entering into the transactions contemplated by this Agreement in reliance upon Seller’s identity as a legal entity that is separate from Convergys and each of the Originators. Therefore, from and after the date of execution and delivery of this Agreement, Seller will take all reasonable steps, including, without limitation, all steps that the Falcon Agent or any Purchaser may from time to time reasonably request, to maintain Seller’s identity as a separate legal entity and to make it manifest to third parties that Seller is an entity with assets and liabilities distinct from those of Convergys and each of the Originators and any Affiliates thereof and not just a division of Convergys or either of the Originators. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, Seller will:

(A) conduct its own business in its own name and require that all full-time employees of Seller, if any, identify themselves as such and not as employees of Convergys or either of the Originators ( including, without limitation, by means of providing appropriate employees with business or identification cards identifying such employees as Seller’s employees);

(B) compensate all employees, consultants and agents directly, from Seller’s own funds, for services provided to Seller by such

employees, consultants and agents and, to the extent any employee, consultant or agent of Seller is also an employee, consultant or agent of Convergys or either of the Originators, allocate

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the compensation of such employee, consultant or agent between Seller, Convergys and each of the Originators on a basis that reflects the services rendered to Seller, Convergys and such Originator;

(C) clearly identify its offices (by signage or otherwise) as its offices and, if such office is located in the offices of Convergys and

each of the Originators, Seller will lease such office at a fair market rent;

(D) have a separate telephone number, which will be answered only in its name and separate stationery in its own name, and, if applicable, invoices and checks in its own name;

(E) conduct all transactions with Convergys and each of the Originators and the Servicer ( including, without limitation, any

delegation of its obligations hereunder as Servicer) strictly on an arm’s-length basis, allocate all overhead expenses ( including, without limitation, telephone and other utility charges) for items shared between Seller, Convergys and each of the Originators on the basis of actual use to the extent practicable and, to the extent such allocation is not practicable, on a basis reasonably related to actual use;

(F) at all times have a Board of Directors consisting of three members, at least one member of which is an Independent Director;

(G) observe all corporate formalities as a distinct entity, and ensure that all corporate actions relating to (A) the selection,

maintenance or replacement of the Independent Director, (B) the dissolution or liquidation of Seller or (C) the initiation or, participation in, acquiescence in or consent to any bankruptcy, insolvency, reorganization or similar proceeding involving Seller, are duly authorized by unanimous vote of its Board of Directors (including the Independent Director);

(H) maintain Seller’s books and records separate from those of Convergys and each of the Originators and otherwise readily

identifiable as its own assets rather than assets of Convergys or either Originator;

(I) prepare its financial statements separately from those of Convergys and the Originators and insure that any consolidated financial statements of Convergys or any Affiliate thereof that include Seller and that are filed with the Securities and Exchange Commission or any other governmental agency have notes clearly stating that Seller is a separate corporate entity and that its assets will be available first and foremost to satisfy the claims of the creditors of Seller;

(J) except as herein specifically otherwise provided, maintain the funds or other assets of Seller separate from, and not commingled

with, those of Convergys and the Originators and only maintain bank accounts or other depository accounts to which Seller alone is the account party, into which Seller

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alone makes deposits and from which Seller alone (or the Administrative Agent, the Falcon Agent and Fifth Third hereunder) has the power to make withdrawals;

(K) pay all of Seller’s operating expenses from Seller’s own assets (except for certain payments by Convergys and the Originators

or other Persons pursuant to allocation arrangements that comply with the requirements of this Section 7.1(i) );

(L) operate its business and activities such that it does not engage in any business or activity of any kind, or enter into any transaction or indenture, mortgage, instrument, agreement, contract, lease or other undertaking, other than the transactions contemplated and authorized by this Agreement and the Receivables Sale Agreement; and does not create, incur, guarantee, assume or suffer to exist any indebtedness or other liabilities, whether direct or contingent, other than (1) as a result of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (2) the incurrence of obligations under this Agreement, (3) the incurrence of obligations, as expressly contemplated in the Receivables Sale Agreement, to make payment to Convergys for the purchase of Receivables from such Person under the Receivables Sale Agreement, and (4) the incurrence of operating expenses in the ordinary course of business of the type otherwise contemplated by this Agreement;

(M) maintain its corporate charter in conformity with this Agreement, such that it does not amend, restate, supplement or otherwise

modify its Articles of incorporation or Regulations (i.e., by-laws) in any respect that would impair its ability to comply with the terms or provisions of any of the Transaction Documents, including, without limitation, Section 7.1 of this Agreement;

(N) maintain the effectiveness of, and continue to perform under the Receivables Sale Agreement, such that it does not amend,

restate, supplement, cancel, terminate or otherwise modify the Receivables Sale Agreement, or give any consent, waiver, directive or approval thereunder or waive any default, action, omission or breach under the Receivables Sale Agreement or otherwise grant any indulgence thereunder, without (in each case) the prior written consent of the Falcon Agent and Fifth Third;

(O) maintain its corporate separateness such that it does not merge or consolidate with or into, or convey, transfer, lease or

otherwise dispose of (whether in one transaction or in a series of transactions, and except as otherwise contemplated herein) all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets of, any Person, nor at any time create, have, acquire, maintain or hold any interest in any Subsidiary;

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(P) maintain at all times the Required Capital Amount (as defined in the Receivables Sale Agreement) and refrain from making any dividend, distribution, redemption of capital stock or payment of any subordinated indebtedness which would cause the Required Capital Amount to cease to be so maintained; and

(Q) take such other actions as are necessary on its part to ensure that the facts and assumptions set forth in the opinion issued by

Frost & Jacobs LLP, as counsel for Seller, in connection with the closing or initial Incremental Purchase under this Agreement and relating to substantive consolidation issues, and in the certificates accompanying such opinion, remain true and correct in all material respects at all times.

(j) Collections . Such Seller Party will cause (1) all proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into a

Collection Account and (2) each Lock-Box and Collection Account to be subject at all times to a Collection Account Agreement that is in full force and effect. In the event any payments relating to Receivables are remitted directly to Seller or any Affiliate of Seller, Seller will remit (or will cause all such payments to be remitted) directly to a Collection Bank and deposited into a Collection Account within two (2) Business Days following receipt thereof prior to the Amortization Date, and within one (1) Business Day following receipt thereof on and after the Amortization Date, and, at all times prior to such remittance, Seller will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of the Agents and the Purchasers. Seller will maintain exclusive ownership, dominion and control (subject to the terms of this Agreement) of each Lock-Box and Collection Account and will not grant the right to take dominion and control of any Lock-Box or Collection Account at a future time or upon the occurrence of a future event to any Person, except to the Administrative Agent, the Falcon Agent and Fifth Third as contemplated by this Agreement.

(k) Taxes . Such Seller Party will file all tax returns and reports required by law to be filed by it and will promptly pay all taxes and governmental charges at any time owing. Seller will pay when due any taxes payable in connection with the Receivables, exclusive of taxes on or measured by the income or gross receipts of any Purchaser or any Agent.

(l) Insurance . Seller will maintain in effect, or cause to be maintained in effect, at Seller’s own expense, such casualty and liability insurance as Seller will deem appropriate in its good faith business judgment.

(m) Payment to Originator . With respect to any receivable purchase by Seller from Convergys, such sale will be effected under, and in strict compliance with the terms of, the Receivables Sale Agreement, including, without limitation, the terms relating to the amount and timing of payments to be made to Convergys in respect thereof. With respect to any receivable purchase by Convergys from any other Originator, such sale will be effected under, and in strict compliance with the terms of, the First Step Receivables Purchase Agreement, including, without limitation, the terms relating to the amount and timing of payments to be made to such Originator in respect thereof.

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Section 7.2 Negative Covenants of the Seller Parties . Until the date on which the Aggregate Unpaids have been indefeasibly paid in full and this Agreement terminates in accordance with its terms, each Seller Party hereby covenants, as to itself, that:

(a) Name Change, Offices and Records . Such Seller Party will not change its name or legal structure or relocate any office where Records are kept unless it will have: (i) given the Administrative Agent at least forty-five (45) days’ prior written notice thereof and (ii) delivered to the Administrative Agent all financing statements, instruments and other documents requested by any Agent or Fifth Third in connection with such change or relocation.

(b) Change in Payment Instructions to Obligors . Except as may be required by any Agent pursuant to Section 8.2(b), such Seller Party will not add or terminate any bank as a Collection Bank, or make any change in the instructions to Obligors regarding payments to be made to any Lock-Box or Collection Account, unless the Administrative Agent will have received, at least ten (10) days before the proposed effective date therefor, (i) written notice of such addition, termination or change and (ii) with respect to the addition of a Collection Bank or a Collection Account or Lock-Box, an executed Collection Account Agreement with respect to the new Collection Account or Lock-Box; provided , however , that the Servicer may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to make payments to another existing Collection Account.

(c) Modifications to Invoices and Credit and Collection Policy . Such Seller Party will not, and will not permit any Originator to, make any change to either Credit and Collection Policy that could adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables. Except as provided in Section 8.2(d) , the Servicer will not, and will not permit any Originator to, extend, amend or otherwise modify the terms of any Receivable or any Invoice related thereto other than in accordance with the applicable Credit and Collection Policy.

(d) Sales, Liens . Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any Adverse Claim upon ( including, without limitation, the filing of any financing statement) or with respect to, any Receivable, Related Security or Collections, or upon or with respect to any Invoice under which any Receivable arises, or any Lock-Box or Collection Account, or assign any right to receive income with respect thereto (other than, in each case, the creation of the interests therein in favor of the Administrative Agent for the benefit of the Falcon Agent and the Purchasers provided for herein), and Seller will defend the right, title and interest of the Administrative Agent, the Falcon Agent and the Purchasers in, to and under any of the foregoing property, against all claims of third parties claiming through or under Seller.

(e) Net Receivables Balance . At no time prior to the Amortization Date will Seller permit the Net Receivables Balance to be less than an amount equal to the sum of (i) the aggregate Capital of all the Purchaser Interests plus (ii) the Aggregate Reserves.

(f) Amortization Date Determination . Seller will not designate an Amortization Date under the Receivables Sale Agreement, or send any written notice to

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Convergys in respect thereof, without the prior written consent of the Falcon Agent and Fifth Third, except with respect to the occurrence of an Amortization Date arising pursuant to Section 5.1(d) of the Receivables Sale Agreement.

ARTICLE VIII. ADMINISTRATION AND COLLECTION

Section 8.1 Designation of Servicer .

(a) The servicing, administration and collection of the Receivables will be conducted by such Person (the “ Servicer ”) so designated from

time to time in accordance with this Section 8.1 . Convergys is hereby designated as, and hereby agrees to perform the duties and obligations of the Servicer pursuant to the terms of this Agreement. The Administrative Agent may and shall, upon the direction of the Falcon Agent and Fifth Third, at any time after the occurrence of an Amortization Event designate as Servicer any Person to succeed Convergys or any successor Servicer.

(b) Without the prior written consent of Fifth Third, the Falcon Agent and the Required Financial Institutions in the Falcon Group, Convergys will not be permitted to delegate any of its duties or responsibilities as Servicer to any Person other than (i) Seller, (ii) the Originators and (iii) with respect to certain Charged-Off Receivables, outside collection agencies in accordance with its customary practices. Seller will not be permitted to further delegate to any other Person any of the duties or responsibilities of the Servicer delegated to it by Convergys. If at any time the Falcon Agent and Fifth Third will designate as Servicer any Person other than Convergys, all duties and responsibilities theretofore delegated by Convergys to Seller or to either of the Originators may, at the discretion of any of the Falcon Agent or Fifth Third, be terminated forthwith on notice given by the Falcon Agent or Fifth Third, as applicable, to the other parties to this Agreement.

(c) Notwithstanding the foregoing subsection (b), (i) Convergys will be and remain primarily liable to the Agents and the Purchasers for the full and prompt performance of all duties and responsibilities of the Servicer hereunder and (ii) the Agents and the Purchasers will be entitled to deal exclusively with Convergys in matters relating to the discharge by the Servicer of its duties and responsibilities hereunder. The Agents and the Purchasers will not be required to give notice, demand or other communication to any Person other than Convergys in order for communication to the Servicer and its sub-servicer or other delegate with respect thereto to be accomplished. Convergys, at all times that it is the Servicer, will be responsible for providing any sub-servicer or other delegate of the Servicer with any notice given to the Servicer under this Agreement.

Section 8.2 Duties of Servicer .

(a) The Servicer will take or cause to be taken all such actions as may be necessary or advisable to collect each Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the applicable Credit and Collection Policy.

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(b) The Servicer will instruct all Obligors to pay all Collections directly to a Lock-Box or Collection Account. The Servicer will effect a Collection Account Agreement substantially in the form of Exhibit VI with each bank party to a Collection Account at any time. In the case of any remittances received in any Lock-Box or Collection Account that will have been identified, to the satisfaction of the Servicer, to not constitute Collections or other proceeds of the Receivables or the Related Security, the Servicer will promptly remit such items to the Person identified to it as being the owner of such remittances. From and after the date the Administrative Agent delivers to any Collection Bank a Collection Notice pursuant to Section 8.3 , the Administrative Agent may request that the Servicer, and the Servicer thereupon promptly will instruct all Obligors with respect to the Receivables, to remit all payments thereon to a new depositary account specified by the Administrative Agent and, at all times thereafter. Seller and the Servicer will not deposit or otherwise credit, and will not permit any other Person to deposit or otherwise credit to such new depositary account any cash or payment item other than Collections.

(c) The Servicer will administer the Collections in accordance with the procedures described herein and in Article II . The Servicer will set aside and hold in trust for the account of Seller and the Purchasers their respective shares of the Collections of Receivables in accordance with Article II . The Servicer will, upon the request of any Agent, segregate, in a manner acceptable to the Administrative Agent, all cash, checks and other instruments received by it from time to time constituting Collections from the general funds of the Servicer or Seller prior to the remittance thereof in accordance with Article II . If the Servicer will be required to segregate Collections pursuant to the preceding sentence, the Servicer will segregate and deposit with a bank designated by the Administrative Agent such allocable share of Collections of Receivables set aside for the Purchasers on the first Business Day following receipt by the Servicer of such Collections, duly endorsed or with duly executed instruments of transfer.

(d) The Servicer may, in accordance with the applicable Credit and Collection Policy, extend the maturity of any Receivable or adjust the Outstanding Balance of any Receivable as the Servicer determines to be appropriate to maximize Collections thereof; provided , however , that such extension or adjustment will not alter the status of such Receivable as a Delinquent Receivable, Defaulted Receivable or Charged-Off Receivable or limit the rights of the Agents or the Purchasers under this Agreement. Notwithstanding anything to the contrary contained herein, the Administrative Agent will have the absolute and unlimited right to direct the Servicer to commence or settle any legal action with respect to any Receivable or to foreclose upon or repossess any Related Security.

(e) The Servicer will hold in trust for Seller and the Purchasers all Records that (i) evidence or relate to the Receivables, the related Invoices and Related Security or (ii) are otherwise necessary or desirable to collect the Receivables and will, as soon as practicable upon demand of the Falcon Agent or Fifth Third, deliver or make available to the Administrative Agent all such Records, at a place selected by the Administrative Agent. The Servicer will, as soon as practicable following receipt thereof turn over to Seller any cash collections or other cash proceeds received with respect to Indebtedness not constituting Receivables. The Servicer will, from time to time at the request of any Purchaser, furnish to the Purchasers (promptly after any such request) a calculation of the amounts set aside for the Purchasers pursuant to Article II .

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(f) Any payment by an Obligor in respect of any indebtedness owed by it to Convergys or either of the Originators or Seller will, except as otherwise specified by such Obligor or otherwise required by contract or law and unless otherwise instructed by the Administrative Agent, be applied as a Collection of any Receivable of such Obligor (starting with the oldest such Receivable) to the extent of any amounts then due and payable thereunder before being applied to any other receivable or other obligation of such Obligor.

Section 8.3 Collection Notices . The Administrative Agent is authorized at any time to date and to deliver to the Collection Banks the Collection Notices. Seller hereby transfers to the Administrative Agent for the benefit of the Falcon Agent and the Purchasers, effective when the Administrative Agent delivers such notice, the exclusive ownership and control of each Lock-Box and the Collection Accounts. In case any authorized signatory of Seller whose signature appears on a Collection Account Agreement will cease to have such authority before the delivery of such notice, such Collection Notice will nevertheless be valid as if such authority had remained in force. Seller hereby authorizes the Administrative Agent, and agrees that the Administrative Agent will be entitled to (i) endorse Seller’s name on checks and other instruments representing Collections, (ii) enforce the Receivables, the related Invoices and the Related Security and (iii) take such action as will be necessary or desirable to cause all cash, checks and other instruments constituting Collections of Receivables to come into the possession of the Administrative Agent rather than Seller.

Section 8.4 Responsibilities of Seller . Anything herein to the contrary notwithstanding, the exercise by the Agents and the Purchasers of their rights hereunder will not release the Servicer, Convergys, either of the Originators or Seller from any of their duties or obligations with respect to any Receivables or under the related Contracts or Invoices. The Purchasers will have no obligation or liability with respect to any Receivables or related Contracts or Invoices, nor will any of them be obligated to perform the obligations of Seller or either of the Originators.

Section 8.5 Reports . The Servicer will prepare and forward to the Falcon Agent and Fifth Third on the 17th day of each month and at such other times as any Agent or Fifth Third may request, a Monthly Report, and (ii) at such times as the any Agent or Fifth Third will request, a listing by Obligor of all Receivables together with an aging of such Receivables; provided , however , that if the 17th day of any month is not a Business Day, then the Monthly Report for such month will be due on the subsequent Business Day.

Section 8.6 Servicing Fees . In consideration of Convergys’ agreement to act as Servicer hereunder, the Purchasers hereby agree that, so long as Convergys will continue to perform as Servicer hereunder, Seller will pay over to Convergys a fee (the “ Servicing Fee ”) equal to 1.0% per annum of the aggregate amount of outstanding Capital as compensation for its servicing activities, which fee will be payable in accordance with the terms of Article III .

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ARTICLE IX. AMORTIZATION EVENTS

Section 9.1 Amortization Events . The occurrence of any one or more of the following events will constitute an Amortization Event:

(a) Any Seller Party will fail (i) to make any payment or deposit required hereunder when due, or (ii) to perform or observe any term,

covenant or agreement hereunder (other than as referred to in clause (i) of this paragraph (a)) and such failure will continue for five (5) consecutive Business Days.

(b) Any representation, warranty, certification or statement made by any Seller Party in this Agreement, any other Transaction Document or in any other document delivered pursuant hereto or thereto will prove to have been incorrect in any material respect when made or deemed made.

(c) Failure of Seller to pay any Indebtedness when due, or failure of the Servicer or any of its Subsidiaries (other than Seller) to pay any Indebtedness in excess of $15,000,000 when due; the occurrence of any “Event of Default” (under and as defined in the Credit Agreement) that has not been cured within any applicable grace period, regardless of whether the same is subsequently waived; or the default by any Seller Party in the performance of any term, provision or condition contained in any agreement under which any such Indebtedness was created or is governed, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any such Indebtedness of any Seller Party will be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the date of maturity thereof.

(d) (i) Any Seller Party or any of its Subsidiaries will generally not pay its debts as such debts become due or will admit in writing its inability to pay its debts generally or will make a general assignment for the benefit of creditors; or

(ii) any proceeding will be instituted by or against any Seller Party or any of its Subsidiaries seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property and, in the case of such a proceeding instituted against a Seller Party, such proceedings will not be dismissed for a period of sixty (60) consecutive days; or

(iii) any Seller Party or any of its Subsidiaries will take any corporate action to authorize any of the actions set forth in clause (i) or

(ii) above in this subsection (d).

(e) Seller shall fail to comply with the terms of Section 2.6 hereof.

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(f) As at the end of any calendar month:

(i) the average of the Dilution Ratios for the three months then most recently ended will exceed 3.0%;

(ii) the average of the Default Ratios for the three months then most recently ended will exceed 4.15%; or

(iii) the average of the Delinquency Ratios for the three months then most recently ended will exceed 8.00%.

(g) A Change of Control will occur.

(h) One or more final judgments for the payment of money shall be entered against Seller on claims not covered by insurance or as to which the insurance carrier has denied its responsibility, and such judgment will continue unsatisfied and in effect for fifteen (15) consecutive days without a stay of execution; or one or more final judgments for the payment of money in excess of $15,000,000 in the aggregate shall be entered against the Servicer or any of its Subsidiaries (other than Seller) on claims not covered by insurance or as to which the insurance carrier has denied its responsibility, and such judgment will continue unsatisfied and in effect for thirty (30) consecutive days without a stay of execution.

(i) The “Amortization Date” shall occur under the Receivables Sale Agreement or the First-Step Receivables Purchase Agreement, either of the Originators will for any reason cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to Convergys under the First-Step Receivables Purchase Agreement, or Convergys will for any reason cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to Seller under the Receivables Sale Agreement.

(j) This Agreement will terminate in whole or in part (except in accordance with its terms), or will cease to be effective or to be the legally valid, binding and enforceable obligation of Seller, or any Obligor will directly or indirectly contest in any manner such effectiveness, validity, binding nature or enforceability, or the Administrative Agent for the benefit of the Falcon Agent and the Purchasers will cease to have a valid and perfected first priority security interest in the Receivables, the Related Security, the Collections with respect thereto and the Collection Accounts.

(k) The ratio of Convergys’ Consolidated EBITDA to Consolidated Interest Expense, in each case, for any period of four consecutive fiscal quarters, shall be less than 4.0 to 1.0.

(l) The ratio of Convergys’ Consolidated Total Debt to Consolidated Total Capitalization shall be greater than 0.60 to 1.0 at any time.

Section 9.2 Remedies . Upon the occurrence and during the continuation of an Amortization Event, the Administrative Agent may, or upon the direction of the Falcon Agent or the Purchasers, will, take any of the following actions: (i) replace the Person then acting as Servicer, (ii) declare the Amortization Date to have occurred, whereupon the Amortization Date

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will forthwith occur, without demand, protest or further notice of any kind, all of which are hereby expressly waived by each Seller Party; provided , however , that upon the occurrence of Amortization Event described in Section 9.1(d), or of an actual or deemed entry of an order for relief with respect to any Seller Party under the Federal Bankruptcy Code, the Amortization Date will automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by each Seller Party, (iii) to the fullest extent permitted by applicable law, declare that the Default Fee will accrue with respect to any of the Aggregate Unpaids outstanding at such time, (iv) deliver the Collection Notices to the Collection Banks (if it has not previously done so), and (v) notify Obligors of the Purchasers’ interest in the Receivables. The aforementioned rights and remedies shall be without limitation of, and shall be in addition to all other rights and remedies of the Agents and the Purchasers otherwise available under any other provision of this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the UCC, all of which rights shall be cumulative.

ARTICLE X. INDEMNIFICATION

Section 10.1 Indemnities by the Seller Parties . Without limiting any other rights that any Agent or any Purchaser may have hereunder or

under applicable law, (A) Seller hereby agrees to indemnify (and pay upon demand to) each Agent and each Purchaser and their respective assigns, officers, directors, agents and employees (each, an “ Indemnified Party ”) from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for all other amounts payable, including reasonable attorneys’ fees (which attorneys may be employees of such Agent or such Purchaser) and disbursements (all of the foregoing being collectively referred to as “ Indemnified Amounts” ) awarded against or incurred by any of them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by a Purchaser of an interest in the Receivables, and (B) the Servicer hereby agrees to indemnify (and pay upon demand to) each Indemnified Party for Indemnified Amounts awarded against or incurred by any of them arising out of the Servicer’s activities as Servicer hereunder, excluding, however, in all of the foregoing instances under the preceding clauses (A) and (B):

(a) Indemnified Amounts to the extent a final judgment of a court of competent jurisdiction holds that such Indemnified Amounts resulted from gross negligence or willful misconduct on the part of the Indemnified Party seeking indemnification;

(b) Indemnified Amounts to the extent the same includes losses in respect of Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or

(c) taxes imposed by the jurisdiction in which such Indemnified Party’s principal executive office is located, on or measured by the overall net income of such Indemnified Party to the extent that the computation of such taxes is consistent with the Intended Characterization;

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provided , however , that nothing contained in this sentence will limit the liability of any Seller Party or limit the recourse of the Purchasers to any Seller Party for amounts otherwise specifically provided to be paid by such Seller Party under the terms of this Agreement. Without limiting the generality of the foregoing indemnification, Seller will indemnify the Agents and the Purchasers for Indemnified Amounts ( including, without limitation, losses in respect of uncollectible receivables, regardless of whether reimbursement therefor would constitute recourse to Seller or the Servicer) relating to or resulting from:

(i) any representation or warranty made by any Seller Party, Convergys or either of the Originators (or any officers of any such Person) under or in connection with this Agreement, any other Transaction Document or any other information or report delivered by any such Person pursuant hereto or thereto, which will have been false or incorrect when made or deemed made;

(ii) the failure by any Seller, the Servicer, Convergys or either of the Originators to comply with any applicable law, rule or

regulation with respect to any Receivable or any Contract or Invoice related thereto, or the nonconformity of any Receivable or Invoice with any such applicable law, rule or regulation or any failure of the applicable Originator to keep or perform any of its obligations, express or implied, with respect to any Contract or Invoice, including, without limitation, any anti-assignment or confidentiality clause contained therein;

(iii) any failure of Seller, the Servicer, Convergys or any of the Originators to perform its duties, covenants or other obligations in

accordance with the provisions of the Transaction Documents to which it is a party;

(iv) any products liability, personal injury or damage suit, or other similar claim arising out of or in connection with any merchandise, insurance or services that are the subject of any Contract, Invoice or Receivable;

(v) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any

Receivable ( including, without limitation, a defense based on such Receivable or the related Contract or Invoice not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or services related to such Receivable or the furnishing or failure to furnish such merchandise or services;

(vi) the commingling of Collections of Receivables at any time with other funds;

(vii) any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the

transactions contemplated hereby, the use of the proceeds of any Incremental Purchase or Reinvestment, the ownership of the Purchaser Interests or any other investigation, litigation or proceeding relating to Seller, the Servicer, Convergys or either of the Originators in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby;

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(viii) any inability to litigate any claim against any Obligor in respect of any Receivable as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding;

(ix) any Amortization Event described in Section 9.1(d) ;

(x) (A) any failure of Convergys to acquire legal and equitable title to, and ownership of any Receivable and the Related Security

and Collections with respect thereto from the applicable Originator, free and clear of any Adverse Claim (other than as created hereunder), or any failure of Convergys to give reasonably equivalent value to such Originator under the First-Step Receivables Purchase Agreement in consideration of the transfer by such Originator of any Receivable, or any attempt by any Person to void such transfer under statutory provisions or common law or equitable action, or (B) any failure of Seller to acquire and maintain legal and equitable title to, and ownership of any Receivable and the Related Security and Collections with respect thereto from Convergys, free and clear of any Adverse Claim (other than as created hereunder); or any failure of Seller to give reasonably equivalent value to Convergys under the Receivables Sale Agreement in consideration of the transfer by Convergys of any Receivable, or any attempt by any Person to void such transfer under statutory provisions or common law or equitable action;

(xi) any failure to vest and maintain vested in Fifth Third and the Falcon Agent (or the Administrative Agent on their behalf), or to

transfer to Fifth Third and the Falcon Agent (or the Administrative Agent on their behalf), legal and equitable title to, and ownership of, a first priority perfected undivided percentage ownership interest (to the extent of the Purchaser Interests contemplated hereunder) or security interest in the Receivables, the Related Security and the Collections, free and clear of any Adverse Claim;

(xii) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC

of any applicable jurisdiction or other applicable laws with respect to any Receivable, the Related Security and Collections with respect thereto, and the proceeds of any thereof, whether at the time of any Incremental Purchase or Reinvestment or at any subsequent time;

(xiii) any action or omission by any Seller Party which reduces or impairs the rights of the Agents or the Purchasers with respect to

any Receivable or the value of any such Receivable;

(xiv) any attempt by any Person to void any Incremental Purchase or Reinvestment hereunder under statutory provisions or common law or equitable action; and

(xv) the failure of any Receivable included in the calculation of the Net Receivables Balance as an Eligible Receivable to be an

Eligible Receivable at the time so included.

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Section 10.2 Increased Cost and Reduced Return . If after the date hereof, any Funding Source shall be charged any fee, expense or increased cost on account of the adoption of any applicable law, rule or regulation (including any applicable law, rule or regulation regarding capital adequacy), any accounting principles or any change in any of the foregoing, or any change in the interpretation or administration thereof by the Financial Accounting Standards Board ( “FASB” ), any governmental authority, any central bank or any comparable agency charged with the interpretation or administration thereof, or compliance with any request or directive (whether or not having the force of law) of any such authority or agency (a “Regulatory Change” ): (i) that subjects any Funding Source to any charge or withholding on or with respect to any Funding Agreement or a Funding Source’s obligations under a Funding Agreement, or on or with respect to the Receivables, or changes the basis of taxation of payments to any Funding Source of any amounts payable under any Funding Agreement (except for changes in the rate of tax on the overall net income of a Funding Source or taxes excluded by Section 10.1) or (ii) that imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of a Funding Source, or credit extended by a Funding Source pursuant to a Funding Agreement or (iii) that imposes any other condition the result of which is to increase the cost to a Funding Source of performing its obligations under a Funding Agreement, or to reduce the rate of return on a Funding Source’s capital as a consequence of its obligations under a Funding Agreement, or to reduce the amount of any sum received or receivable by a Funding Source under a Funding Agreement or to require any payment calculated by reference to the amount of interests or loans held or interest received by it, then, upon demand by any Agent or Fifth Third, as applicable, Seller shall pay to such Person, for the benefit of the relevant Funding Source, such amounts charged to such Funding Source or such amounts to otherwise compensate such Funding Source for such increased cost or such reduction. For the avoidance of doubt, if the issuance of FASB Interpretation No. 46, or any other change in accounting standards or the issuance of any other pronouncement, release or interpretation, causes or requires the consolidation of all or a portion of the assets and liabilities of Company or Seller with the assets and liabilities of any Agent, any Financial Institution in the Falcon Group or any other Funding Source, such event shall constitute a circumstance on which such Funding Source may base a claim for reimbursement under this Section.

Section 10.3 Other Costs and Expenses . Seller will pay to the Agents and the Purchasers on demand all costs and out-of-pocket expenses in connection with the preparation, execution, delivery and administration of this Agreement, the transactions contemplated hereby and the other documents to be delivered hereunder, including without limitation, the cost of Administrative Agent’s auditors auditing the books, records and procedures of Seller, reasonable fees and out-of-pocket expenses of legal counsel for the Purchasers and the Agents (which such counsel may be employees of a Purchaser or an Agent) with respect thereto and with respect to advising the Purchasers and the Agents as to their respective rights and remedies under this Agreement. Seller will pay to the Falcon Agent and Fifth Third on demand any and all costs and expenses of the Agents and the Purchasers, if any, including reasonable counsel fees and expenses in connection with the enforcement of this Agreement and the other documents delivered hereunder and in connection with any restructuring or workout of this Agreement or such documents, or the administration of this Agreement following an Amortization Event. In addition, Seller will reimburse Falcon on demand for all other costs and expenses incurred by Falcon (“ Other Costs ”), including, without limitation, the cost of auditing Falcon’s books by

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certified public accountants, the cost of rating the Commercial Paper by independent financial rating agencies, and the reasonable fees and out-of-pocket expenses of counsel for Falcon or any counsel for any shareholder of Falcon with respect to advising Falcon or such shareholder as to matters relating to Falcon’s operations.

Section 10.4 Allocations . Falcon will allocate the liability for Other Costs among Seller and other Persons with whom Falcon has entered into agreements to purchase interests in receivables (“ Other Sellers ”). If any Other Costs are attributable to Seller and not attributable to any Other Seller, Seller shall be solely liable for such Other Costs. However, if Other Costs are attributable to Other Sellers and not attributable to Seller, such Other Sellers shall be solely liable for such Other Costs. All allocations to be made pursuant to the foregoing provisions of this Article X shall be made by Falcon in its sole discretion and shall be binding on Seller and the Servicer.

ARTICLE XI. THE AGENTS

Section 11.1 Authorization and Action .

(a) Each Purchaser hereby designates and appoints Bank One, NA to act as its “Administrative Agent” hereunder and under each other

Transaction Document, and authorizes the Administrative Agent to take such actions as agent and to exercise such powers as are delegated to the Administrative Agent by the terms of this Agreement and the other Transaction Documents together with such powers as are reasonably incidental thereto. The Administrative Agent will not have any duties or responsibilities, except those expressly set forth herein or in any other Transaction Document, or any fiduciary relationship with any Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Administrative Agent shall be read into this Agreement or any other Transaction Document or otherwise exist for the Administrative Agent. In performing its functions and duties hereunder and under the other Transaction Documents, the Administrative Agent will act solely as Administrative Agent for the Falcon Agent and the Purchasers and does not assume nor will be deemed to have assumed any obligation or relationship of trust or agency with or for any Seller Party or any of such Seller Party’s successors or assigns. The Administrative Agent will not be required to take any action that exposes the Administrative Agent to personal liability or that is contrary to this Agreement, any other Transaction Document or applicable law. The appointment and authority of the Administrative Agent hereunder will terminate upon the indefeasible payment in full of all Aggregate Unpaids and termination of the Commitments. Each Purchaser and the Falcon Agent hereby authorizes the Administrative Agent to execute (if required) and file each of the Uniform Commercial Code financing statements on behalf of the Falcon Agent and such Purchaser (the terms of which shall be binding on the Falcon Agent and such Purchaser).

(b) Each member of the Falcon Group hereby designates and appoints Bank One, NA to act as the “Falcon Agent” hereunder and under each other Transaction Document, and authorizes the Falcon Agent to take such actions as agent on its behalf and to exercise such powers as are delegated to the Falcon Agent by the terms of this Agreement and the other

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Transaction Documents together with such powers as are reasonably incidental thereto. The Falcon Agent will not have any duties or responsibilities, except those expressly set forth herein or in any other Transaction Document, or any fiduciary relationship with any Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Falcon Agent shall be read into this Agreement or any other Transaction Document or otherwise exist for the Falcon Agent. In performing its functions and duties hereunder and under the other Transaction Documents, the Falcon Agent will act solely as agent for the members of the Falcon Group and does not assume nor will be deemed to have assumed any obligation or relationship of trust or agency with or for any Seller Party or any of such Seller Party’s successors or assigns. The Falcon Agent will not be required to take any action that exposes the Falcon Agent to personal liability or that is contrary to this Agreement, any other Transaction Document or applicable law. The appointment and authority of the Falcon Agent hereunder will terminate upon the indefeasible payment in full of all Aggregate Unpaids and termination of the Financial Institutions’ Liquidity Commitments.

Section 11.2 Delegation of Duties . Each of the Agents may execute any of its duties under this Agreement and each other Transaction Document by or through agents or attorneys-in-fact and will be entitled to advice of counsel concerning all matters pertaining to such duties. Neither of the Agents will be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

Section 11.3 Exculpatory Provisions . None of the Administrative Agent, the Falcon Agent, Fifth Third or any of their respective directors, officers, agents or employees will be (i) liable for any action lawfully taken or omitted to be taken by it or them under or in connection with this Agreement or any other Transaction Document (except for its, their or such Person’s own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Purchasers for any recitals, statements, representations or warranties made by any Seller Party contained in this Agreement, any other Transaction Document or any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement, or any other Transaction Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, or any other Transaction Document or any other document furnished in connection herewith or therewith, or for any failure of any Seller Party to perform its obligations hereunder or thereunder, or for the satisfaction of any condition specified in Article VI , or for the perfection, priority, condition, value or sufficiency of any collateral pledged in connection herewith. The Falcon Agent will not be under any obligation to any Purchaser to ascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, this Agreement or any other Transaction Document, or to inspect the properties, books or records of the Seller Parties. The Falcon Agent will not be deemed to have knowledge of any Amortization Event or Potential Amortization Event unless the Falcon Agent has received notice from a Seller Party, a Purchaser or the Administrative Agent.

Section 11.4 Reliance by Agents . The Agents will in all cases be entitled to rely, and will be fully protected in relying, upon any document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel ( including, without limitation, counsel to

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Seller), independent accountants and other experts selected by the Administrative Agent. Each of the Agents will in all cases be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document unless it will first receive such advice or concurrence of in the case of the Falcon Agent, Falcon or the Required Financial Institutions in the Falcon Group, and in the case of the Administrative Agent, Fifth Third and the Falcon Agent, as it deems appropriate and it will first be indemnified to its satisfaction by the Purchasers, provided that unless and until any Agent and Fifth Third will have received such advice, such Agent and Fifth Third may take or refrain from taking any action, as such Agent and Fifth Third will deem advisable and in the best interests of, in the case of the Administrative Agent, the other Agent and the Purchasers, in the case of the Falcon Agent, Falcon and the Financial Institutions in the Falcon Group, and in the case of Fifth Third, Fifth Third. The Agents will in all cases be fully protected in acting, or in refraining from acting, in accordance with a request of Falcon or the Required Financial Institutions of the Falcon Group (in the case of the Falcon Agent) or the Falcon Agent or all of the Purchasers (in the case of the Administrative Agent), and such request and any action taken or failure to act pursuant thereto will be binding upon all the Purchasers.

Section 11.5 Non-Reliance on Agents and Other Purchasers . Each Purchaser expressly acknowledges that neither of the Agents nor Fifth Third, nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by any Agent or Fifth Third hereafter taken, including, without limitation, any review of the affairs of any Seller Party, will be deemed to constitute any representation or warranty by such Agent and/or Fifth Third. Each Purchaser represents and warrants to the Agents and Fifth Third that it has and will, independently and without reliance upon any Agent or Fifth Third or any other Purchaser and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of Seller and made its own decision to enter into this Agreement, the other Transaction Documents and all other documents related hereto or thereto.

Section 11.6 Reimbursement and Indemnification .

(a) The Financial Institutions in the Falcon Group agree to reimburse and indemnify the Falcon Agent and its officers, directors, employees, representatives and agents ratably according to their Pro Rata Shares, to the extent not paid or reimbursed by the Seller Parties (i) for any amounts for which the Falcon Agent, acting in its capacity as such Agent, is entitled to reimbursement by the Seller Parties hereunder and (ii) for any other expenses incurred by the Falcon Agent, in its capacity as such and acting on behalf of the Purchasers, in connection with the administration and enforcement of this Agreement and the other Transaction Documents.

(b) Each of the Financial Institutions in the Falcon Group and Fifth Third agree to reimburse and indemnify the Administrative Agent and its officers, directors, employees, representatives and agents ratably according to their respective Commitments or Liquidity Commitments as applicable, to the extent not paid or reimbursed by the Seller Parties (i) for any amounts for which the Administrative Agent, acting in its capacity as such, is entitled to reimbursement by the Seller Parties hereunder and (ii) for any other expenses incurred by the

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Administrative Agent, in its capacity as such and acting on behalf of the Purchasers, in connection with the administration and enforcement of this Agreement and the other Transaction Documents.

Section 11.7 Each of the Agents and Fifth Third in its Individual Capacity . Each of the Agents, Fifth Third and their respective Affiliates may make loans to, accept deposits from and generally engage in any kind of business with Seller or any Affiliate of Seller as though it were not an Agent or a Purchaser hereunder. With respect to the acquisition of Purchaser Interests pursuant to this Agreement, the Falcon Agent will have the same rights and powers under this Agreement in its individual capacity as any Purchaser and may exercise the same as though it were not the Falcon Agent, and the terms “ Financial Institution ” and “ Financial Institutions ” will include Bank One and the terms “ Purchaser ” and “ Purchasers ” will include Bank One and Fifth Third.

Section 11.8 Successor Administrative Agent . The Administrative Agent may, upon five days notice to Seller and the Purchasers, and the Administrative Agent will, upon the direction of all of the Purchasers (other than Bank One) resign as Administrative Agent hereunder. If the Administrative Agent will resign, then the Required Financial Institutions and Fifth Third during such five-day period will appoint from among the Purchasers a successor agent. If for any reason no successor Administrative Agent is appointed by the Required Financial Institutions during such five-day period, then effective upon the termination of such five day period, the Purchasers will perform all of the duties of the Administrative Agent hereunder and under the other Transaction Documents and Seller and the Servicer (as applicable) will make all payments in respect of the Aggregate Unpaids directly to the applicable Purchasers and for all purposes will deal directly with the Purchasers after the effectiveness of any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the retiring Administrative Agent will be discharged from its duties and obligations hereunder and under the other Transaction Documents and the provisions of this Article XI and Article X will continue in effect for its benefit with respect to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and under the other Transaction Documents. The Falcon Agent may not resign as Falcon Agent without the prior written consent of Falcon and all of the Financial Institutions in the Falcon Group.

ARTICLE XII. ASSIGNMENTS; PARTICIPATIONS

Section 12.1 Assignments .

(a) Fifth Third, Seller and each Financial Institution in the Falcon Group hereby agree and consent to the complete or partial assignment

by Falcon of all or any portion of its rights under, interest in, title to and obligations under this Agreement to the Financial Institutions in the Falcon Group pursuant to Section 13.1 or to any other Person, and upon such assignment, Falcon will be released from its obligations so assigned. Further, Fifth Third, Seller and each Financial Institution in the Falcon Group hereby agree that any assignee of Falcon of this Agreement or all or any of the Purchaser Interests of Falcon will have all of the rights and benefits under this Agreement as if the term “ Falcon ” explicitly referred to such party, and no

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such assignment will in any way impair the rights and benefits of Falcon hereunder. Seller and each member of the Falcon Group hereby agree and consent to the complete or partial assignment by Fifth Third of all or any portion of its rights under, interest in, title to and obligations under this Agreement to Fountain Square. Neither Seller nor the Servicer will have the right to assign its rights or obligations under this Agreement.

(b) Any Financial Institution of the Falcon Group may at any time and from time to time assign to one or more Persons (“ Purchasing Financial Institutions ”) all or any part of its rights and obligations under this Agreement pursuant to an assignment agreement, substantially in the form set forth in Exhibit VII hereto (the “ Assignment Agreement ”) executed by such Purchasing Financial Institution and such selling Financial Institution. The consent of Falcon will be required prior to the effectiveness of any such assignment. Each assignee of a Financial Institution must have a short-term debt rating of A-1 or better by Standard & Poor’s Ratings Group and P-1 by Moody’s Investor Service. Inc. and must agree to deliver to the Falcon Agent, promptly following any request therefor by the Falcon Agent or Falcon, an enforceability opinion in form and substance satisfactory to the Falcon Agent and Falcon. Upon delivery of the executed Assignment Agreement to the Administrative Agent and the Falcon Agent, such selling Financial Institution will be released from its obligations hereunder to the extent of such assignment. Thereafter the Purchasing Financial Institution will for all purposes be a Financial Institution party to this Agreement and will have all the rights and obligations of a Financial Institution under this Agreement to the same extent as if it were an original party hereto and no further consent or action by Seller, the Purchasers, the Administrative Agent, Falcon Agent or Fifth Third will be required.

(c) Each of the Financial Institutions in the Falcon Group agrees that in the event that it will cease to have a short-term debt rating of A-1 or better by Standard & Poor’s Ratings Group and P-l by Moody’s Investor Service, Inc. (an “ Affected Financial Institution ”), such Affected Financial Institution will be obliged, at the request of Falcon or the Falcon Agent, to assign all of its rights and obligations hereunder to (x) another Financial Institution or (y) another funding entity nominated by the Falcon Agent and acceptable to Falcon, and willing to participate in this Agreement through the Liquidity Termination Date in the place of such Affected Financial Institution; provided that the Affected Financial Institution receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such Financial Institution’s Pro Rata Share of the Aggregate Capital and Yield owing to the Financial Institutions and all accrued but unpaid fees and other costs and expenses payable in respect of its Pro Rata Share of the Purchaser Interests of the Financial Institutions.

Section 12.2 Participations .

(a) Any Financial Institution in the Falcon Group may, in the ordinary course of its business at any time sell to one or more Persons (each, a “ Participant ”) participating interests in its Pro Rata Share of the Purchaser Interests of the Financial Institutions in the Falcon Group, its obligation to pay Falcon its Acquisition Amounts or any other interest of such Financial Institution hereunder. Notwithstanding any such sale by a Financial Institution of a participating interest to a Participant, such Financial Institution’s rights and obligations under this Agreement will remain unchanged, such Financial Institution will remain solely responsible

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for the performance of its obligations hereunder, and Seller, Falcon, the Administrative Agent and the Falcon Agent and Fifth Third will continue to deal solely and directly with such Financial Institution in connection with such Financial Institution’s rights and obligations under this Agreement. Each Financial Institution in the Falcon Group agrees that any agreement between such Financial Institution and any such Participant in respect of such participating interest will not restrict such Financial Institution’s right to agree to any amendment, supplement, waiver or modification to this Agreement, except for any amendment, supplement, waiver or modification described in Section 14.l(b)(i) .

(b) Fifth Third may, in the ordinary course of its business at any time sell to one or more Participants, including without limitation Fountain Square, participating interests in its Purchaser Interests or any other interest of Fifth Third hereunder. Notwithstanding any such sale by Fifth Third of a participating interest to a Participant, Fifth Third’s rights and obligations under this Agreement will remain unchanged, Fifth Third will remain solely responsible for the performance of its obligations hereunder, and Seller, the Agents and the other Purchasers will continue to deal solely and directly with Fifth Third in connection with Fifth Third’s rights and obligations under this Agreement. Fifth Third agrees that any agreement between Fifth Third and any such Participant in respect of such participating interest will not restrict Fifth Third’s right to agree to any amendment, supplement, waiver or modification to this Agreement, except for any amendment, supplement, waiver or modification described in Section 14.l(b)(i) .

ARTICLE XIII. FALCON LIQUIDITY FACILITY

Section 13.1 Transfer to Financial Institutions . Each Financial Institution in the Falcon Group hereby agrees, subject to Section 13.4 ,

that immediately upon written notice from Falcon delivered on or prior to the Liquidity Termination Date, it will acquire by assignment from Falcon, without recourse or warranty, its Pro Rata Share of one or more of the Purchaser Interests of Falcon as specified by Falcon. Each such assignment by Falcon will be made pro rata among all of the Financial Institutions except for pro rata assignments to one or more Terminating Financial Institutions pursuant to Section 13.6. Each such Financial Institution will, no later than 1:00 p.m. (Chicago time) on the date of such assignment, pay in immediately available funds (unless payment is otherwise agreed between Falcon and any Financial Institution) to the Falcon Agent at an account designated by the Falcon Agent, for the benefit of Falcon, its Acquisition Amount. Unless a Financial Institution has notified the Falcon Agent that it does not intend to pay its Acquisition Amount, the Falcon Agent may assume that such payment has been made and may, but will not be obligated to, make the amount of such payment available to Falcon in reliance upon such assumption. Falcon hereby sells and assigns to the Falcon Agent for the ratable benefit of the Financial Institutions in the Falcon Group, and the Falcon Agent hereby purchases and assumes from Falcon, effective upon the receipt by Falcon of the Falcon Transfer Price, the Purchaser Interests of Falcon which are the subject of any transfer pursuant to this Article XIII .

Section 13.2 Transfer Price Reduction Yield . If the Adjusted Liquidity Price is included in the calculation of the Falcon Transfer Price for any Purchaser Interest, each Financial

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Institution in the Falcon Group agrees that the Falcon Agent will pay to Falcon the Reduction Percentage of any Yield received by the Falcon Agent with respect to such Purchaser Interest.

Section 13.3 Payments to Falcon . In consideration for the reduction of the Falcon Transfer Prices by the Falcon Transfer Price Reductions, effective only at such time as the aggregate amount of the Capital of the Purchaser Interests of the Financial Institutions in the Falcon Group equals the Falcon Residual, each Financial Institution in the Falcon Group hereby agrees that the Falcon Agent will not distribute to the Financial Institutions in the Falcon Group and will immediately remit to Falcon any Yield, Collections or other payments received by it to be applied pursuant to the terms hereof or otherwise to reduce the Capital of the Purchaser Interests of the Financial Institutions in the Falcon Group.

Section 13.4 Limitation on Commitment to Purchase from Falcon . Notwithstanding anything to the contrary in this Agreement, no Financial Institution in the Falcon Group will have any obligation to purchase any Purchaser Interest from Falcon, pursuant to Section 13.1 or otherwise, if:

(i) Falcon will have voluntarily commenced any proceeding or filed any petition under any bankruptcy, insolvency or similar law seeking the dissolution, liquidation or reorganization of Falcon or taken any corporate action for the purpose of effectuating any of the foregoing; or

(ii) involuntary proceedings or an involuntary petition will have been commenced or filed against Falcon by any Person under any

bankruptcy, insolvency or similar law seeking the dissolution, liquidation or reorganization of Falcon and such proceeding or petition will have not been dismissed.

Section 13.5 Defaulting Financial Institutions . If one or more Financial Institutions defaults in its obligation to pay its Acquisition

Amount pursuant to Section 13.1 (each such Financial Institution will be called a “ Defaulting Financial Institution ” and the aggregate amount of such defaulted obligations being herein called the “ Falcon Transfer Price Deficit ”), then upon notice from the Falcon Agent, each Financial Institution other than the Defaulting Financial Institutions (a “ Non-Defaulting Financial Institution ”) will promptly pay to the Falcon Agent, in immediately available funds, an amount equal to the lesser of (x) such Non-Defaulting Financial Institution’s proportionate share (based upon the relative Liquidity Commitments of the Non-Defaulting Financial Institutions) of the Falcon Transfer Price Deficit and (y) the unused portion of such Non-Defaulting Financial Institution’s Liquidity Commitment. A Defaulting Financial Institution will forthwith upon demand pay to the Falcon Agent for the account of the Non-Defaulting Financial Institutions all amounts paid by each Non-Defaulting Financial Institution on behalf of such Defaulting Financial Institution, together with interest thereon, for each day from the date a payment was made by a Non-Defaulting Financial Institution until the date such Non-Defaulting Financial Institution has been paid such amounts in full, at a rate per annum equal to the Federal Funds Effective Rate plus two percent (2%). In addition, without prejudice to any other rights that Falcon may have under applicable law, each Defaulting Financial Institution will pay to Falcon forthwith upon demand, the difference between such Defaulting Financial Institution’s unpaid Acquisition Amount and the

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amount paid with respect thereto by the Non-Defaulting Financial Institutions, together with interest thereon, for each day from the date of the Falcon Agent’s request for such Defaulting Financial Institution’s Acquisition Amount pursuant to Section 13.1 until the date the requisite amount is paid to Falcon in full, at a rate per annum equal to the Federal Funds Effective Rate plus two percent (2%).

Section 13.6 Terminating Financial Institutions . (a) Each Financial Institution hereby agrees to deliver written notice to the Falcon Agent not more than 30 Business Days and not less than 5 Business Days prior to the Liquidity Termination Date indicating whether such Financial Institution intends to renew its Liquidity Commitment hereunder. If any Financial Institution fails to deliver such notice on or prior to the date that is 5 Business Days prior to the Liquidity Termination Date, such Financial Institution will be deemed to have declined to renew its Liquidity Commitment (each Financial Institution which has declined or has been deemed to have declined to renew its Liquidity Commitment hereunder, a “ Non-Renewing Financial Institution ”). The Falcon Agent shall promptly notify Falcon of each Non-Renewing Financial Institution and Falcon, in its sole discretion, may (A) to the extent of Commitment Availability, declare that such Non-Renewing Financial Institution’s Liquidity Commitment shall, to such extent, automatically terminate on a date specified by Falcon on or before the Liquidity Termination Date or (B) upon one (1) Business Days’ notice to such Non-Renewing Financial Institution assign to such Non-Renewing Financial Institution on a date specified by Falcon its Pro Rata Share of the aggregate Purchaser Interests then held by Falcon, subject to, and in accordance with, Section 13.1. In addition, Falcon may, in its sole discretion, at any time (x) to the extent of Commitment Availability, declare that any Affected Financial Institution’s Liquidity Commitment shall automatically terminate on a date specified by Falcon or (y) assign to any Affected Financial Institution on a date specified by Falcon its Pro Rata Share of the aggregate Purchaser Interests then held by Falcon, subject to, and in accordance with, Section 13.1 (each Affected Financial Institution or each Non-Renewing Financial Institution is hereinafter referred to as a “ Terminating Financial Institution ”). The parties hereto expressly acknowledge that any declaration of the termination of any Liquidity Commitment, any assignment pursuant to this Section 13.6 and the order of priority of any such termination or assignment among Terminating Financial Institutions shall be made by Falcon in its sole and absolute discretion.

(b) Upon any assignment to a Terminating Financial Institution as provided in this Section 13.6, any remaining Liquidity Commitment of such Terminating Financial Institution shall automatically terminate. Upon reduction to zero of the Capital of all of the Purchaser Interests of a Terminating Financial Institution (after application of Collections thereto pursuant to Sections 2.2 and 2.3) all rights and obligations of such Terminating Financial Institution hereunder shall be terminated and such Terminating Financial Institution shall no longer be a “Financial Institution” hereunder; provided , however , that the provisions of Article X shall continue in effect for its benefit with respect to Purchaser Interests held by such Terminating Financial Institution prior to its termination as a Financial Institution.

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ARTICLE XIV. MISCELLANEOUS

Section 14.1 Waivers and Amendments .

(a) No failure or delay on the part of the Administrative Agent, the Falcon Agent and Fifth Third or any Purchaser in exercising any

power, right or remedy under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided will be cumulative and nonexclusive of any rights or remedies provided by law. Any waiver of this Agreement will be effective only in the specific instance and for the specific purpose for which given.

(b) No provision of this Agreement may be amended, supplemented, modified or waived except in writing in accordance with the provisions of this Section 14.1(b) . Falcon, Seller, the Falcon Agent, Fifth Third and the Administrative Agent, at the direction of the Required Financial Institutions, may enter into written modifications or waivers of any provisions of this Agreement, provided , however , that no such modification or waiver will:

(i) (A) without the consent of Falcon and each affected Financial Institution, extend the Liquidity Termination Date or the date of any payment or deposit of Collections by Seller or the Servicer, (B) without the consent of each affected Purchaser, reduce the rate or extend the time of payment of Yield or CP Costs (or any component of Yield or CP Costs), (C) without the consent of each affected Agent or Purchaser, reduce any fee payable to or for the benefit of any of the Agents or Purchasers, (D) without the consent of each affected Purchaser, except pursuant to Article XII hereof, change the amount of the Capital of any Purchaser, any Financial Institution’s Pro Rata Share (except pursuant to Sections 13.1 or 13.5) or any Financial Institution’s Liquidity Commitment or Fifth Third’s Commitment, (E) without the consent of Falcon and each Financial Institution, amend, modify or waive any provision of the definition of Required Financial Institutions, (F) without the consent of the Agents and Fifth Third, amend, modify or waive any provision of this Section 14.1(b) , (G) without the consent of each Agent and Fifth Third, consent to or permit the assignment or transfer by Seller of any of its rights and obligations under this Agreement, (H) without the consent of Seller, each Agent and Fifth Third, change the definition of “ Eligible Receivable ,” “ Loss Reserve ,” “ Servicing and Yield Reserve ” or “ Dilution Reserve ,” or (I) without the consent of the relevant parties specified in clauses (A) through (H) above, amend or modify any defined term (or any defined term used directly or indirectly in such defined term) used in clauses (A) through (H) above in a manner that would circumvent the intention of the restrictions set forth in such clauses; or

(ii) without the written consent of the then Administrative Agent, Fifth Third or Falcon Agent, as applicable, amend, modify or

waive any provision of this Agreement if the effect thereof is to affect the rights or duties of such Agent or Fifth Third.

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Notwithstanding the foregoing, (i) without the consent of the Financial Institutions or Fifth Third but with the consent of Seller, the Falcon Agent may amend this Agreement solely to add additional Persons as Financial Institutions hereunder, (ii) the Administrative Agent, the Falcon Agent, the Required Financial Institutions and Falcon may enter into amendments to modify any of the terms or provisions of Article XI or Section 14.13 , and (iii) the Agents, Falcon and Fifth Third may enter into amendments to modify any of the terms of Article XII except those provisions requiring Seller’s consent by their terms. Any modification or waiver made in accordance with this Section 14.1 will apply to each of the Agents and Purchasers equally and will be binding upon Seller Parties, the Purchasers and the Agents.

Section 14.2 Notices . Except as provided in this Section 14.2, all communications and notices provided for hereunder will be in writing (including bank wire, telecopy or electronic facsimile transmission or similar writing) and will be given to the other parties hereto at their respective addresses or telecopy numbers set forth on the signature pages hereof or at such other address or telecopy number as such Person may hereafter specify for the purpose of notice to each of the other parties hereto. Each such notice or other communication will be effective (i) if given by telecopy, upon the receipt thereof, (ii) if given by mail, five (5) Business Days after the time such communication is deposited in the mail with first class postage prepaid or (iii) if given by any other means, when received at the address specified in this Section 14.2 . Seller hereby authorizes the Falcon Agent and Fifth Third to effect purchases and Tranche Period and Discount Rate selections based on telephonic notices made by any Person whom the Falcon Agent or Fifth Third, as the case may be, in good faith believes to be acting on behalf of Seller. Seller agrees to deliver promptly to the Falcon Agent and Fifth Third a written confirmation of each telephonic notice given to such Person, signed by an Authorized Officer of Seller; provided , however , the absence of such confirmation will not affect the validity of such notice. If the written confirmation differs from the action taken by the Falcon Agent or Fifth Third, as the case may be, the records of the Falcon Agent or Fifth Third, as applicable, will govern absent manifest error.

Section 14.3 Ratable Payments . If any Purchaser, whether by setoff or otherwise, has payment made to it with respect to any portion of the Aggregate Unpaids owing to such Purchaser (other than payments received pursuant to Section 10.2 or 10.3 ) in a greater proportion than that received by any other Purchaser entitled to receive a ratable share of such Aggregate Unpaids, such Purchaser agrees, promptly upon demand, to purchase for cash without recourse or warranty a portion of such Aggregate Unpaids held by the other Purchasers so that after such purchase each Purchaser will hold its ratable proportion of such Aggregate Unpaids; provided that if all or any portion of such excess amount is thereafter recovered from such Purchaser, such purchase will be rescinded and the purchase price restored to the extent of such recovery, but without interest.

Section 14.4 Protection of Ownership Interests of the Purchasers .

(a) Seller agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents, and take all actions, that may be necessary or desirable, or that any Agent or Fifth Third may request, to perfect, protect or more fully evidence the Purchaser Interests, or to enable the Agents or the Purchasers to exercise and enforce their

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rights and remedies hereunder. At any time after the occurrence of an Amortization Event and during the continuance thereof, the Administrative Agent may, or the Administrative Agent may direct Seller or the Servicer to, notify the Obligors of Receivables, at Seller’s expense, of the ownership or security interests of the Agents and the Purchasers under this Agreement and may also direct that payments of all amounts due or that become due under any or all Receivables be made directly to the Administrative Agent or its designee(s). Seller or the Servicer (as applicable) will, at any Purchaser’s request, withhold the identity of such Purchaser in any such notification.

(b) If any Seller Party fails to perform any of its obligations hereunder, any Agent or Purchaser may (but will not be required to) perform, or cause performance of, such obligation, and such Agent’s or such Purchaser’s costs and expenses incurred in connection therewith will be payable by Seller as provided in Section 10.3 . Each Seller Party irrevocably authorizes the Administrative Agent at any time and from time to time in the sole discretion of the Administrative Agent, and appoints the Administrative Agent as its attorney-in-fact, to act on behalf of such Seller Party (i) to execute on behalf of Seller as debtor (if legally required) and to file financing statements necessary or desirable in the Administrative Agent’s sole discretion to perfect and to maintain the perfection and priority of the interest of the Purchasers in the Receivables and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Receivables as a financing statement in such offices as the Administrative Agent in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of the interests of the Purchasers in the Receivables. This appointment is coupled with an interest and is irrevocable.

Section 14.5 Confidentiality .

(a) Each Seller Party, Agent and Purchaser will maintain and will cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confidential proprietary information with respect to each of the Agents and Purchasers and Falcon and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein, except that such Seller Party, Agent and/or Purchaser and its officers and employees may disclose such information to such Seller Party’s, such Agent’s and such Purchaser’s external accountants and attorneys and as required by any applicable law or order of any judicial or administrative proceeding.

(b) Anything herein to the contrary notwithstanding, each Seller Party hereby consents to the disclosure of any nonpublic information with respect to it (i) to the Agents and the Purchasers by each other, (ii) by the Agents or the Purchasers to any prospective or actual assignee or participant of any to them, and (iii) by the Agents or Fifth Third to any rating agency, Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to Falcon, Fifth Third or Fountain Square or any entity organized for the purpose of purchasing, or making loans secured by, financial assets for which Bank One, NA or Fifth Third or any of their respective affiliates acts as the Falcon Agent and Fifth Third or administrator and to any officers, directors, employees, outside accountants and attorneys of any of the foregoing. In addition, the Purchasers and the Agents may disclose any such nonpublic information pursuant to any law,

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rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law).

(c) Notwithstanding any other express or implied agreement to the contrary, the parties hereto agree that each of them and each of their employees, representatives, and other agents may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to any of them relating to such tax treatment and tax structure, except where confidentiality is reasonably necessary to comply with U.S. federal or state securities laws. For purposes of this paragraph, the terms “tax treatment” and “tax structure” have the meanings specified in Treasury Regulation section 1.6011-4(c).

Section 14.6 Bankruptcy Petition . Seller, the Servicer, Fifth Third, the Agents and each Financial Institution in the Falcon Group hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of Falcon, it will not institute against, or join any other Person instituting against, Falcon any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.

Section 14.7 Limitation of Liability . Except with respect to any claim arising out of the willful misconduct or gross negligence of any Purchaser or any Agent, no claim may be made by any Seller Party or any other Person against any Purchaser or any Agent or their respective Affiliates, directors, officers, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith, and each Seller Party hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

Section 14.8 CHOICE OF LAW . THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF OHIO.

Section 14.9 CONSENT TO JURISDICTION . EACH SELLER PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS OR OHIO STATE COURT SITTING IN CHICAGO, ILLINOIS OR CINCINNATI, OHIO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT AND EACH SELLER PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF ANY AGENT OR ANY PURCHASER TO BRING PROCEEDINGS AGAINST ANY SELLER

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PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY SELLER PARTY AGAINST ANY AGENT OR ANY PURCHASER OR ANY AFFILIATE OF ANY AGENT OR ANY PURCHASER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH SELLER PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS, OR CINCINNATI, OHIO.

Section 14.10 WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY SELLER PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

Section 14.11 Integration; Binding Effect; Survival of Terms .

(a) This Agreement and each other Transaction Document contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and will constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings.

(b) This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy). This Agreement will create and constitute the continuing obligations of the parties hereto in accordance with its terms and will remain in full force and effect until terminated in accordance with its terms; provided , however , that the rights and remedies with respect to (i) any breach of any representation and warranty made by any Seller Party pursuant to Article V , (ii) the indemnification and payment provisions of Article X , and Sections 14.5 and 14.6 will be continuing and will survive any termination of this Agreement.

Section 14.12 Counterparts; Severability; Section References . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed will be deemed to be an original and all of which when taken together will constitute one and the same Agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise expressly indicated, all references herein to “Article,” “Section,” “Schedule” or “Exhibit” will mean articles and sections of, and schedules and exhibits to, this Agreement.

Section 14.13 Bank One, NA Roles . Each of the Financial Institutions in the Falcon Group acknowledges that Bank One, NA acts, or may in the future act, (i) as Administrative Agent for the other Agent and the Purchasers and as Falcon Agent for Falcon or

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any Financial Institution, (ii) as issuing and paying agent for the Commercial Paper, (iii) to provide credit or liquidity enhancement for the timely payment for the Commercial Paper and (iv) to provide other services from time to time for Falcon or any Financial Institution (collectively, the “ Bank One, NA Roles ”). Without limiting the generality of this Section 14.13 , each Financial Institution hereby acknowledges and consents to any and all Bank One Roles and agrees that in connection with any Bank One, NA Role, Bank One, NA may take, or refrain from taking, any action that it, in its discretion, deems appropriate, including, without limitation, in its role as Falcon Agent for Falcon, and the giving of notice to the Falcon Agent of a mandatory purchase pursuant to Section 13.1 .

Section 14.14 Characterization .

(a) It is the intention of the parties hereto that each purchase hereunder will constitute and be treated for financial accounting purposes as an absolute and irrevocable sale, which purchase will provide the applicable Purchaser with the full benefits of ownership of the applicable Purchaser Interest. Except as specifically provided in this Agreement, each sale of a Purchaser Interest hereunder is made without recourse to Seller; provided, however, that (i) Seller will be liable to each Purchaser and Agent for all representations, warranties, covenants and indemnities made by Seller pursuant to the terms of this Agreement, and (ii) such sale does not constitute and is not intended to result in an assumption by any Purchaser or Agent or any assignee thereof of any obligation of Seller, Convergys or either of the Originators or any other Person arising in connection with the Receivables, the Related Security, or the related Contracts, or any other obligations of Seller, Convergys or such Originator.

(b) If the conveyance by Seller to the Administrative Agent of interests in Receivables hereunder will be characterized as a secured loan and not a sale, it is the intention of the parties hereto that this Agreement will constitute a security agreement under applicable law. In furtherance of the foregoing, Seller hereby grants to the Administrative Agent for the ratable benefit of the Falcon Agent and the Purchasers a valid and perfected security interest in all of Seller’s right, title and interest in, to and under all Receivables, the Collections, each Lock-Box and Collection Account, all Related Security, all other rights and payments relating to any and all Receivables, and all proceeds of any thereof prior to all other liens on and security interests therein to secure the prompt and complete payment of the Aggregate Unpaids. After an Amortization Event, the Agents and the Purchasers will have, in addition to the rights and remedies that they may have under this Agreement, all other rights and remedies provided to a secured creditor after default under the UCC and other applicable law, which rights and remedies will be cumulative.

[SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date hereof.

[Signature Page to the Amended and Restated Receivables Purchase Agreement]

CONVERGYS FUNDING CORPORATION

By: /s/ William R. Coleman Name: William R. Coleman Title: Vice President and Treasurer

Address: 201 E. Fourth Street P.O. Box 1638 Cincinnati, Ohio 45201 Attention: Vice President and Treasurer Fax: (513) 723-7510

CONVERGYS CORPORATION, as initial Servicer

By: /s/ William R. Coleman Name: William R. Coleman Title: Vice President and Treasurer

Address: 201 E. Fourth Street P.O. Box 1638 Cincinnati, Ohio 45201 Attention: Vice President and Treasurer Fax: (513) 723-7510

[Signature Page to the Amended and Restated Receivables Purchase Agreement]

FALCON ASSET SECURITIZATION CORPORATION

By: /s/ Sherri Gerner Sherri Gerner Authorized Signer

Address: c/o Bank One, NA, as Falcon Agent Asset Backed Finance 1 Bank One Plaza Mail Suite IL1-0079 Chicago, Illinois 60670-0079 Attention: Falcon Funding Manager Fax: (312) 732-1844

BANK ONE, NA, individually, as Falcon Agent and as the Administrative Agent

By: /s/ Sherri Gerner Name: Sheri Gerner Title: Director, Capital Markets

Address: Bank One, NA Asset Backed Finance 1 Bank One Plaza Mail Suite IL1-0594 Chicago, Illinois 60670-0594 Attention: Transaction Management Fax: (312) 732-2245

[Signature Page to the Amended and Restated Receivables Purchase Agreement]

FIFTH THIRD BANK

By: /s/ Robert O. Finley Name: Robert O. Finley Title: Vice President

Address: Fifth Third Bank 38 Fountain Square Plaza MD 109047 Cincinnati, OH 45263 Attention: Judy Huls Fax: (513) 534-0875

EXHIBIT I

DEFINITIONS

As used in this Agreement, the following terms will have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“ Account ” has the meaning specified in Section 9-102 of the Ohio UCC.

“ Accrual Period ” means each calendar month, provided that the initial Accrual Period hereunder means the period from (and including) the date of the initial purchase hereunder to (and including) the last day of the calendar month thereafter.

“ Acquisition Amount ” means, on the date of any purchase from Falcon of Purchaser Interests pursuant to Section 13.1 , (i) with respect to any Financial Institution other than Bank One (but including Bank One if it is at any time a Terminating Financial Institution), the lesser of (a) such Financial Institution’s Pro Rata Share of the Falcon Transfer Price and (b) such Financial Institution’s unused Liquidity Commitment and (ii) with respect to Bank One solely in the instance of a purchase from Falcon of a Purchaser Interest by all of the Financial Institutions, the difference between (a) the Falcon Transfer Price and (b) the aggregate amount payable by all other Financial Institutions on such date pursuant to clause (i) above.

“ Adjusted Liquidity Price ” means, in determining the Falcon Transfer Price for any Purchaser Interest, an amount equal to

where:

Each of the foregoing will be determined from the most recent Monthly Report received from the Servicer.

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RI [ (i) DC + (ii) [ NDR

] ]

1+ (0.50 x LP)

RI = the undivided percentage interest evidenced by such Purchaser Interest.

DC = the Deemed Collections.

NDR

=

the Outstanding Balance of all Receivables as to which any payment, or part thereof, has not remained unpaid for 91 days or more from the original due date for such payment.

LP = the percentage set forth in clause (i) of the definition of Loss Reserve.

“ Administrative Agent ” has the meaning set forth in the preamble to this Agreement.

“ Adverse Claim ” means a lien, security interest, charge or encumbrance, or other right or claim in, of or on any Person’s assets or properties in favor of any other Person.

“ Affected Financial Institution ” has the meaning specified in Section 12.1(c) hereof.

“ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such Person or any Subsidiary of such Person. A Person will be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.

“ Agents ” means, collectively, the Falcon Agent and the Administrative Agent.

“ Aggregate Capital ” means, on any date of determination, the aggregate amount of Capital of all Purchaser Interests outstanding on such date.

“ Aggregate Commitment ” means the sum of the Falcon Group’s Commitment and Fifth Third’s Commitment.

“ Aggregate Reduction ” has the meaning specified in Section 1.3 hereof.

“ Aggregate Reserves ” means, on any date of determination, the greater of (i) $42,000,000 and (ii) the sum of the Loss Reserve, the Servicing and Yield Reserve and the Dilution Reserve.

“ Aggregate Unpaids ” means, at any time, an amount equal to the sum of all Aggregate Capital and all other unpaid Obligations (whether due or accrued) at such time.

“ Agreement ” means this Amended and Restated Receivables Purchase Agreement, as it may be further amended, restated or otherwise modified and in effect from time to time.

“ Amortization Date ” means the earliest to occur of (i) the day on which any of the conditions precedent set forth in Section 6.2 are not satisfied, (ii) the Business Day immediately prior to the occurrence of an Amortization Event set forth in Section 9.1(d)(ii) , (iii) the Business Day specified in a written notice from the Administrative Agent following the occurrence of any other Amortization Event, and (iv) the date which is 15 Business Days after the Falcon Agent and Fifth Third’s receipt of written notice from Seller that it wishes to terminate the facility evidenced by this Agreement.

“ Amortization Event ” has the meaning specified in Article IX .

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“ Assignment Agreement ” has the meaning set forth in Section 12.1(b) .

“ Authorized Officer ” means, with respect to any Seller Party, its President, its Treasurer or any of its Senior Vice Presidents, Vice Presidents or Assistant Treasurers.

“ Bank One ” means Bank One, NA and its successors.

“ Base Rate ” means a rate per annum equal to the corporate base rate, prime rate or base rate of interest, as applicable, announced by the Reference Bank from time to time, changing when and as such rate changes.

“ Bonus Credit ” means any credit offered to a customer by an Originator as an inducement to extend or renew, or as a reward for extending or renewing, a Contract.

“ Broken Funding Costs ” means for any Purchaser Interest which: (i) has its Capital reduced without compliance by Seller with the notice requirements hereunder or (ii) does not become subject to an Aggregate Reduction following the delivery of any Reduction Notice or (iii) is assigned under Article XIII or terminated prior to the date on which it was originally scheduled to end an amount equal to the excess, if any, of (A) the CP Costs or Yield (as applicable) that would have accrued during the remainder of the Tranche Periods or the tranche periods for Commercial Paper determined by the Falcon Agent and Fifth Third to relate to such Purchaser Interest (as applicable) subsequent to the date of such reduction, assignment or termination (or in respect of clause (ii) above, the date such Aggregate Reduction was designated to occur pursuant to the Reduction Notice) of the Capital of such Purchaser Interest if such reduction, assignment or termination had not occurred or such Reduction Notice had not been delivered, over (B) the sum of (x) to the extent all or a portion of such Capital is allocated to another Purchaser Interest, the amount of CP Costs or Yield actually accrued during the remainder of such period on such Capital for the new Purchaser Interest, and (y) to the extent such Capital is not allocated to another Purchaser Interest, the income, if any, actually received during the remainder of such period by the holder of such Purchaser Interest from investing the portion of such Capital not so allocated. In the event that the amount referred to in clause (B) exceeds the amount referred to in clause (A), the relevant Purchaser or Purchasers agree to pay to Seller the amount of such excess. All Broken Funding Costs will be due and payable hereunder upon demand.

“ Business Day ” means any day on which banks are not authorized or required to close in Cincinnati, Ohio, New York, New York or Chicago, Illinois and The Depository Trust Company of New York is open for business, and, if the applicable Business Day relates to any computation or payment to be made with respect to the LIBO Rate, any day on which dealings in dollar deposits are carried on in the London interbank market.

“ Capital ” of any Purchaser Interest means, at any time, (A) the Purchase Price of such Purchaser Interest, minus (B) the sum of the aggregate amount of Collections and other payments received by the Administrative Agent, the Falcon Agent or Fifth Third, as applicable, which in each case are applied to reduce such Capital in accordance with the terms and conditions of this Agreement; provided that such Capital will be restored (in accordance with Section 2.5 hereof) in the amount of any Collections or other payments so received and applied if

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at any time the distribution of such Collections or payments are rescinded, returned or refunded for any reason.

“ Change of Control ” means the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 25% or more of the outstanding shares of voting stock of any Seller Party.

“ Charged-Off Receivable ” means a Receivable: (i) as to which the Obligor thereof has taken any action, or suffered any event to occur, of the type described in Section 9.1(d) (as if references to Seller Party therein refer to such Obligor); (ii) as to which the Obligor thereof, if natural person, is deceased, (iii) which, consistent with the applicable Credit and Collection Policy, would be written off Seller’s books as uncollectible, (iv) which has been identified by Seller as uncollectible or (v) as to which any payment, or part thereof, remains unpaid for 91 days or more from the original due date for such payment.

“ Collection Account ” means each concentration account, depositary account, lock-box account or similar account in which any Collections are collected or deposited and which is listed on Exhibit IV .

“ Collection Account Agreement ” means an agreement substantially in the form of Exhibit VI among an Originator, Seller, the Administrative Agent and a Collection Bank.

“ Collection Bank ” means, at any time, any of the banks holding one or more Collection Accounts.

“ Collection Notice ” means a notice, in substantially the form of Annex A to Exhibit VI , from the Administrative Agent to a Collection Bank.

“ Collections ” means, with respect to any Receivable, all cash collections, recoveries and other cash proceeds in respect of such Receivable, including, without limitation, all yield, Finance Charges or other related amounts accruing in respect thereof and all cash proceeds of Related Security with respect to such Receivable.

“ Commercial Paper ” means promissory notes of Falcon or Fountain Square issued in the commercial paper market.

“ Commitment ” means (a) for each Financial Institution, the commitment of such Financial Institution to purchase Purchaser Interests from Seller, in an amount not to exceed: (i) in the aggregate, the amount set forth opposite such Financial Institution’s name on Schedule A to this Agreement, as such amount may be modified in accordance with the terms hereof and (ii) with respect to any individual purchase hereunder, its Pro Rata Share of the Purchase Price therefor, and (b) for Fifth Third, its commitment to purchase Purchaser Interests from Seller, in an amount not to exceed: (i) in the aggregate, the amount set forth opposite Fifth Third’s name on Schedule A to this Agreement, as such amount may be modified in accordance with the terms hereof and (ii) with respect to any individual purchase hereunder, the Purchase Price therefor.

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“ Commitment Availability ” means, at any time, the positive difference (if any) between (a) the sum of (i) the Financial Institutions’ Liquidity Commitments minus an amount equal to 2% of such aggregate Liquidity Commitments at such time (the “ Falcon Group’s Commitment Availability ”), plus (ii) Fifth Third’s Commitment at such time (the “ Fifth Third Group’s Commitment Availability ”), minus (b) the Aggregate Capital at such time.

“ Concentration Limit ” means, at any time:

(i) for the State of Florida and all governmental subdivisions and agencies thereof, an aggregate of 6.0% of Eligible Receivables; and

(ii) for all governmental subdivisions and agencies of the United States of America, an aggregate of 4.0% of Eligible Receivables;

and

(iii) for any other Obligor and its Affiliates, considered as if they were one and the same Obligor, 4.2% of Eligible Receivables, or such other amount (a “ Special Concentration Limit ”) for such Obligor and its Affiliates as may be designated by the Falcon Agent and Fifth Third from time to time; provided that any Agent, the Required Financial Institutions or Fifth Third may, upon not less than three Business Days’ notice to Seller, cancel any Special Concentration Limit.

“ Consolidated EBITDA ” means, for any fiscal period, with respect to Convergys and its Consolidated Subsidiaries, Consolidated Net

Income for such period plus, to the extent deducted in computing such Consolidated Net Income, without duplication, the sum of (a) income tax expense, (b) interest expense, (c) depreciation and amortization expense, (d) any extraordinary or non-recurring losses and (e) other noncash items (other than accruals) reducing Consolidated Net Income, minus, to the extent added in computing such Consolidated Net Income, without duplication, the sum of (i) interest income, (ii) any extraordinary or non-recurring gains and (iii) other noncash items increasing Consolidated Net Income, all as determined on a consolidated basis in accordance with GAAP.

“ Consolidated Interest Expense ” means, for any fiscal period, the aggregate of all payments by Convergys and its Consolidated Subsidiaries for such period that, in accordance with GAAP, are or should be included in “interest paid, net of amounts capitalized” and “capital lease interest paid” reflected in the statement of cash flows for Convergys and its Consolidated Subsidiaries, less the amount of capital lease interest paid to Convergys or any Consolidated Subsidiary for such period that is not reflected in Consolidated EBITDA for such period, all as determined on a consolidated basis in accordance with GAAP, plus, for any fiscal period, the aggregate yield (express in dollars) obtained by the purchasers under any Receivables Purchase Facilities on their investments in accounts receivable of Convergys and its Subsidiaries during such period, determined in accordance with generally accepted financial practice and the terms of such Receivables Purchase Facilities.

“ Consolidated Net Income ” means, for any fiscal period, net income of Convergys and its Consolidated Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

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“ Consolidated Subsidiaries ” means any Subsidiary that should be consolidated with Convergys for financial reporting purposes in accordance with GAAP.

“ Consolidated Total Capitalization ” means, on any date, the sum of (a) Consolidated Total Debt at such date and (b) stockholders’ equity of Convergys and its Consolidated Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP.

“ Consolidated Total Debt ” means, at any date, all Indebtedness of Convergys and its Consolidated Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP, plus the aggregate amount paid by the purchasers under any Receivables Purchase Facilities for interests in accounts receivable of Convergys and its Consolidated Subsidiaries that has not yet been recovered from collections on accounts receivable or otherwise paid by Convergys.

“ Contingent Obligation ” of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or application for a letter of credit.

“ Contract ” means, with respect to any Receivable, any and all writings pursuant to which such Receivable arises other than an Invoice.

“ Convergys ” has the meaning provided in the preamble to this Agreement.

“ CP Costs ” means, for each day, the sum of (i) discount or yield accrued on Pooled Commercial Paper on such day, plus (ii) any and all accrued commissions in respect of placement agents and Commercial Paper dealers, and issuing and paying agent fees incurred, in respect of such Pooled Commercial Paper for such day, plus (iii) other costs associated with funding small or odd-lot amounts with respect to all receivable purchase facilities which are funded by Pooled Commercial Paper for such day, minus (iv) any accrual of income net of expenses received on such day from investment of collections received under all receivable purchase facilities funded substantially with Pooled Commercial Paper, minus (v) any payment received on such day net of expenses in respect of Broken Funding Costs related to the prepayment of any Purchaser Interest of Falcon or Fifth Third pursuant to the terms of any receivable purchase facilities funded substantially with Pooled Commercial Paper. In addition to the foregoing costs, if Seller will request any Incremental Purchase during any period of time determined by the Falcon Agent or Fifth Third in its sole discretion to result in incrementally higher CP Costs applicable to such Incremental Purchase, the Capital associated with any such Incremental Purchase will, during such period, be deemed to be funded by Falcon or Fifth Third, as the case may be, in a special pool (which may include capital associated with other receivable purchase facilities) for purposes of determining such additional CP Costs applicable only to such special pool and charged each day during such period against such Capital.

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“ CP Availability Period ” means each day on which Fountain Square is providing funding to Fifth Third through the issuance of Fountain Square’s Commercial Paper.

“ Credit and Collection Policy ” means each Originator’s credit and collection policies and practices relating to Receivables and Invoices existing on the date hereof and summarized in Exhibit VIII hereto, as modified from time to time in accordance with this Agreement.

“ Deemed Collections ” means the aggregate of all amounts Seller will have been deemed to have received as a Collection of a Receivable. Seller will be deemed to have received a Collection in full of a Receivable if at any time (i) the Outstanding Balance of any such Receivable is either (x) reduced as a result of any defective or rejected goods or services, any discount or any adjustment or otherwise by Seller (other than cash Collections on account of the Receivables) or (y) reduced or canceled as a result of a setoff in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction) or (ii) any of the representations or warranties in Article V are no longer true with respect to any Receivable.

“ Default Fee ” means with respect to any amount due and payable by Seller in respect of any Aggregate Unpaids, an amount equal to the greater of (i) $1000 and (ii) interest on any such unpaid Aggregate Unpaids at a rate per annum equal to 2% above the Base Rate.

“ Default Ratio ” means, on any date of determination, (i) the aggregate amount of Receivables which were Defaulted Receivables on the last day of the month then most recently ended, divided by (ii) the aggregate sales of the Originators during the 4th month prior to the date of determination.

“ Defaulted Receivable ” means a Receivable (i) which has been written off Seller’s books as uncollectible in the month of determination prior to becoming 121 days past the original due date therefor, or (ii) as to which any payment, or part thereof, remains unpaid for 91-120 days from the original due date for such payment.

“ Defaulting Financial Institution ” has the meaning set forth in Section 13.5.

“ Delinquency Ratio ” means, at any time, a percentage equal to (i) the aggregate Outstanding Balance of all Receivables that were Delinquent Receivables at such time, divided by (ii) the aggregate Outstanding Balance of all Receivables at such time.

“ Delinquent Receivable ” means a Receivable (other than a Receivable which has been charged-off) as to which any payment, or part thereof, remains unpaid for 61 days or more from the original due date for such payment.

“ Dilution Horizon Ratio ” means (i) cumulative sales of the Originators during the 3 months most recently ended divided by (ii) the Net Receivables Balance as of the last day of the month most recently ended.

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“ Dilution Ratio ” means, on any date of determination, a percentage equal to (i) the aggregate amount of Dilutions which occurred during the calendar month then most recently ended, divided by (ii) sales during the 4th calendar month prior to the date of determination; provided , however , that there shall be excluded from the numerator of this computation the aggregate amount of Bonus Credits actually awarded in any month (regardless of when such Bonus Credits are eligible to be offset against Receivables).

“ Dilution Reserve ” means, on any date, the greater of (i) 5% of the Net Receivables Balance, and (ii) the amount determined pursuant to the following formula:

{ (2 x ED) + [ (DS - ED) x (DS/ED) ] x DHR } x NRB

where:

“ Dilution Spike ” means the highest Dilution Ratio during the 12 months most recently ended.

“ Dilutions ” means, at any time before or after the date of the Agreement, the sum (without duplication) of (a) the aggregate amount of

reductions or cancellations described in clause (i) of the definition of “ Deemed Collections ”, plus (b) the positive difference, if any, between the total credits taken against the accrual accounts during the current month and the balance of the accrual accounts at the beginning of the current month pursuant to clause (C) or (D) of the definition of “ Eligible Receivables ,” plus (c) any credits that are granted for Receivables originated prior to an increase to the accrual accounts referenced in clause (C) and (D) of the definition of Eligible Receivables.

“ Discount Rate ” means, the LIBO Rate or the Base Rate, as applicable, with respect to each Liquidity Interest.

“ Domestic Account ” means an Account payable in United States dollars in the United States of America, the Obligor of which if a natural person, is a resident of the United States or, if a corporation or other business organization, is organized under the laws of the United States or any political subdivision thereof and has its chief executive office in the United States.

“ Domestic Payment Intangible ” means a Payment Intangible payable in United States dollars in the United States of America, the Obligor of which if a natural person, is a resident of the United States or, if a corporation or other business organization, is organized

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ED = the Expected Dilution;

DS = the Dilution Spike;

DR = the Dilution Ratio;

DHR = the Dilution Horizon Ratio; and

NRB = the Net Receivables Balance.

under the laws of the United States or any political subdivision thereof and has its chief executive office in the United States.

“ Eligible Receivable ” means, at any time, a Receivable:

(i) the Obligor of which (A) is not an Affiliate of any of the parties hereto, and (B) is not a government or a governmental subdivision or agency other than one described in clause (i) or (ii) of the definition of “ Concentration Limit ”,

(ii) the Obligor of which is not the Obligor of (A) any Charged-Off Receivable (other than as described in clause (v) of the

definition of Charge-Off Receivable) or (B) Receivables more than 25% of which are Delinquent Receivables; provided , however , that there will be excluded from Delinquent Receivables for purposes of this clause (ii) Receivables owing from the 4 largest Obligors which are more than 60 days past the original Invoice date therefor solely because of a bona fide dispute, as determined by the Servicer with the consent of the Falcon Agent and Fifth Third,

(iii) which is not a Charged-Off Receivable, a Defaulted Receivable or a Delinquent Receivable,

(iv) which by its terms is due and payable within 60 days of the original billing date therefor and has not had its payment terms

extended,

(v) which is either evidenced by an Invoice in substantially the form of one of the form contracts set forth on Exhibit IX hereto or otherwise approved by the Falcon Agent and Fifth Third in writing, or if such Receivables an Unbilled Receivable, has not been booked as an asset of the applicable Originator (without giving effect to any sale under the Transaction Documents) for more than 30 days,

(vi) which arises under a Contract: (A) which by its terms or by virtue of Section 9-404, 9-405 or 9-406 of the UCC, does not

require the Obligor under such Contract to consent to the transfer, sale or assignment of the rights to payment thereunder, (B) which, in the case of Contracts with the five largest Obligors of either Originator, does not contain a confidentiality provision that purports to restrict the ability of any Purchaser to exercise its rights under this Agreement, including, without limitation, its right to review the applicable Invoice and the billing provisions of such Contract unless such confidentiality provision has been waived, and (C) which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the related Obligor enforceable against such Obligor in accordance with its terms,

(vii) which arises under a Contract and, unless such Receivable is an Unbilled Receivable, under an Invoice, that contains an

obligation to pay a specified sum of money, contingent only upon the sale of goods or the provision of services by the applicable Originator,

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(viii) which, together with each Contract and Invoice related thereto, does not contravene any law, rule or regulation applicable thereto (including, without limitation, any law, rule and regulation relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy),

(ix) which satisfies all applicable requirements of the applicable Credit and Collection Policy and was generated in the ordinary

course of the applicable Originator’s business,

(x) which, if such Receivable is an Installment Receivable, relates to services which have been fully performed and, if applicable, to goods which have been sold and fully shipped,

(xi) which arises solely from the sale of goods, the license of proprietary software or the provision of services to the related Obligor

by an Originator, and not by any other Person (in whole or in part),

(xii) as to which the Falcon Agent or Fifth Third has not notified Seller that the Falcon Agent or Fifth Third has determined that such Receivable or class of Receivables is not acceptable as an Eligible Receivable, including, without limitation, because such Receivable arises under a Contract or an Invoice that is not acceptable to the Falcon Agent or Fifth Third, and

(xiii) which is not subject to any right of rescission or offset, any counterclaim or other defense (including defenses arising out of

violations of usury laws) of the applicable Obligor against the applicable Originator, or any other Adverse Claim, and the Obligor thereon holds no right as against such Originator to cause such Originator to repurchase goods the sale of which gave rise to such receivable (except with respect to sale discounts effected pursuant to the Contract or Invoice, or defective goods returned in accordance with the terms of the Contract); provided , however , that amounts owed to AT&T for telephone, internet and related services shall not be deemed an impermissible right of offset for purposes of this clause (xiii);

provided, however, that there shall be excluded from “Eligible Receivables” (A) that portion of any Receivable as to which a reserve has been taken or a contra account has been established or a Bonus Credit awarded (other than as specifically listed in clause (C) and (D) of this proviso), (B) an amount equal to payments received from Obligors which have not yet been identified to particular Invoices, (C) an amount equal to the greater of (i) the balance in the general ledger account no. 105202 (i.e., the contract pricing accrual contra account) at such time and (ii) $5,000,000, and (D) an amount equal to the greater of (i) the balance in the general ledger account no. 206124 (i.e., the errors and omissions accrual contra account) at such time, and (ii) $2,000,000; provided , further, however , that if the balance described in clause (C)(i) or (D)(i) is greater than the amount specified in (C)(ii) or (D)(ii), as applicable, for any month, such greater balance shall be applied in computing Eligible Receivables for such month and the two succeeding months.

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“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ Expected Dilution ” means the rolling 12-month average of the Dilution Ratio.

“ Facility Account ” means Seller’s Account No. 4003143937 at PNC Bank, National Association, 201 E. Fifth St., Cincinnati, Ohio 45201, ABA No. 042000398.

“ Facility Termination Date ” means the earlier to occur of (i) the Liquidity Termination Date, or (ii) the Amortization Date.

“ Falcon ” has the meaning set forth in the preamble to this Agreement.

“ Falcon Agent ” has the meaning set forth in the preamble to this Agreement.

“ Falcon Fee Letter ” means that certain amended and restated letter agreement dated as November 20, 2003 among Seller and the Falcon Agent, as it may be further amended or modified and in effect from time to time.

“ Falcon Group ” means Falcon and the Financial Institutions, collectively.

“ Falcon Residual ” means the sum of the Falcon Transfer Price Reductions.

“ Falcon Transfer Price ” means, with respect to the assignment by Falcon of one or more Purchaser Interests to the Falcon Agent for the benefit of the Financial Institutions in the Falcon Group pursuant to Section 13.1, the sum of (i) the lesser of (a) the Capital of each Purchaser Interest and (b) the Adjusted Liquidity Price of each Purchaser Interest and (ii) all accrued and unpaid Yield for such Purchaser Interest.

“ Falcon Transfer Price Reduction ” means in connection with the assignment of a Purchaser Interest by Falcon to the Falcon Agent for the benefit of the Financial Institutions, the positive difference between (i) the Capital of such Purchaser Interest and (ii) the Adjusted Liquidity Price for such Purchaser Interest.

“ Federal Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy,” as amended from time to time, and any successor statute.

“ Federal Funds Effective Rate ” means, for any period, a fluctuating interest rate per annum equal for each day during such period equal to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the preceding Business Day) by the Federal Reserve Bank of New York in the Composite Closing Quotations for U.S. Government Securities: or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:30 a.m. (Chicago time) for such day on such transactions received by the Reference Bank from three federal funds brokers of recognized standing selected by it.

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“ Fee Letters ” means, collectively, the Falcon Fee Letter and the Fifth Third Fee Letter.

“ Fifth Third Fee Letter ” means that letter agreement dated as November 20, 2003 among Seller and Fifth Third, as it may be further amended or modified and in effect from time to time.

“ Fifth Third Group ” means Fifth Third and its successors and assigns (if any), collectively.

“ Fifth Third Liquidity Interest ” means any Purchaser Interest of Fifth Third on any day outside the CP Availability Period.

“ Finance Charges ” means, with respect to any Contract or Invoice issued pursuant thereto, any finance, interest, late payment charges or similar charges owing by an Obligor pursuant to such Contract or Invoice.

“ Financial Institutions ” has the meaning set forth in the preamble in this Agreement.

“ First-Step Receivables Purchase Agreement ” means that certain First-Step Receivables Purchase Agreement, dated as of the date hereof, between Convergys, as purchaser, and the Originators, as sellers, as the same may be amended, restated or otherwise modified from time to time.

“ Fountain Square ” means Fountain Square Commercial Funding Corp., a Delaware corporation; provided, however, that in the event that purchases or Reinvestments by Fifth Third are funded by a conduit other than Fountain Square, all references herein to “Fountain Square” or its Commercial Paper shall automatically be deemed to be references to such other conduit and its commercial paper.

“ Funding Agreement ” means this Agreement and any agreement or instrument executed by any Funding Source with or for the benefit of Falcon or Fifth Third.

“ Funding Source ” means (a) with respect to Falcon, (i) any Financial Institution or (ii) any insurance company, bank or other funding entity providing liquidity, credit enhancement or back-up purchase support or facilities to Falcon, and (b) with respect to Fifth Third, (i) Fountain Square, and (ii) any insurance company, bank or other funding entity providing liquidity, credit enhancement or back-up purchase support or facilities to Fifth Third for purposes of this Agreement or to Fountain Square’s Commercial Paper which is allocated to this Agreement

“ GAAP ” means generally accepted accounting principles in the United States of America.

“ Group ” means either the Falcon Group or the Fifth Third Group, and “ Groups ” means the Falcon Group and the Fifth Third Group, collectively.

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“ Incremental Purchase ” means a purchase of Purchaser Interests from each of the Groups simultaneously which increases the total outstanding Aggregate Capital hereunder.

“ Indebtedness ” of a Person means such Person’s (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property or services (other than accounts payable arising in the ordinary course of such Person’s business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) capitalized lease obligations, (vi) net liabilities under interest rate swap, exchange or cap agreements, (vii) Contingent Obligations and (viii) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA.

“ Independent Director ” means a member of the Board of Directors of Seller who is not at such time, and has not been at any time during the preceding five (5) years: (A) a director, officer, employee or affiliate of Seller, Convergys, either of the Originators, or any of their respective Subsidiaries or Affiliates, or (B) the beneficial owner (at the time of such individual’s appointment as an Independent Director or at any time thereafter while serving as an Independent Director) of any of the outstanding common shares of Seller, either of the Originators, or any of their respective Subsidiaries or Affiliates, or more than 1% of the outstanding common shares of Convergys or any of its Affiliates, having general voting rights.

“ Installment Receivable ” means a Receivable arising under a Contract that requires billing to be made in multiple installments after a certain aspect or percentage of the services contracted for has been completed or otherwise calls for “progress payments.”

“ Invoice ” means, with respect to any Receivable, any invoice, bill or statement of account evidencing the amount owed by the applicable Obligor to the applicable Originator (without giving effect to the transfer of such Receivable pursuant hereto).

“ LIBO Rate ” means the rate per annum equal to the sum of (i) (a) the rate at which deposits in U.S. Dollars are offered by the Reference Bank to first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of the relevant Tranche Period, such deposits being in the approximate amount of the Capital of the Liquidity Interest to be funded or maintained, divided by (b) one minus the maximum aggregate reserve requirement (including all basic, supplemental, marginal or other reserves) which is imposed against the Reference Bank in respect of Eurocurrency liabilities, as defined in Regulation D of the Board of Governors of the Federal Reserve System as in effect from time to time (expressed as a decimal), applicable to such Tranche Period plus (ii) 0.875% per annum. The LIBO Rate will be rounded, if necessary, to the next higher 1/16 of 1%.

“ Liquidity Commitment ” means, for each Financial Institution, the commitment of such Financial Institution to purchase Purchaser Interests from Falcon in an amount not to exceed (i) in the aggregate, the amount set forth opposite such Financial Institution’s name on Schedule A to this Agreement under Liquidity Commitments, as such amount may be modified in accordance with the terms hereof (including, without limitation, any termination of Liquidity

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Commitments pursuant to Section 13.6 hereof) and (ii) with respect to any individual purchase hereunder, its Pro Rata Share of the Purchase Price therefor.

“ Liquidity Interest ” means a Purchaser Interest of a Financial Institution or a Fifth Third Liquidity Interest.

“ Liquidity Termination Date ” means September 21, 2004.

“ Lock-Box ” means each locked postal box with respect to which a bank who has executed a Collection Account Agreement has been granted exclusive access for the purpose of retrieving and processing payments made on the Receivables and which is listed on Exhibit IV .

“ Loss Horizon Ratio ” means, on any date of determination, a percentage equal to the quotient of (i) cumulative sales of the Originators during the 3 full months then most recently ended, divided by (ii) the aggregate Outstanding Balance of the Net Receivables Balance as of the last day of the month then most recently ended.

“ Loss Ratio ” means, on any date of determination, the highest three-month rolling average Default Ratio over the 6-month period then most recently ended.

“ Loss Reserve ” means, on any date, an amount equal to the greater of (i) 12.5% of the Net Receivables Balance, and (ii) the amount determined pursuant to the following formula:

2 x LR x LHR x NRB

where:

“ Material Adverse Effect ” means a material adverse effect on (i) the financial condition or operations of any Seller Party and its

Subsidiaries, (ii) the ability of any Seller Party to perform its obligations under this Agreement, (iii) the legality, validity or enforceability of this Agreement or any other Transaction Document, (iv) any Purchaser’s interest in the Receivables generally or in any significant portion of the Receivables, the Related Security or the Collections with respect thereto, or (v) the collectibility of the Receivables generally or of any material portion of the Receivables.

“ Monthly Report ” means a report, in substantially the form of Exhibit X hereto (appropriately completed), furnished by the Servicer to the Falcon Agent and Fifth Third pursuant to Section 8.5 .

“ Net Receivables Balance ” means, at any time, the aggregate Outstanding Balance of all Eligible Receivables at such time reduced by the aggregate amount by which the

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LR = the Loss Ratio;

LHR = the Loss Horizon Ratio; and

NRB = the Net Receivable Balance as of the last day of the month then most recently ended.

Outstanding Balance of all Eligible Receivables of each Obligor and its Affiliates exceeds the Concentration Limit for such Obligor.

“ Non-Defaulting Financial Institution ” has the meaning set forth in Section 13.5.

“ Non-Renewing Financial Institution ” has the meaning set forth in Section 13.6(a).

“ Obligations ” will have the meaning set forth in Section 2.1.

“ Obligor ” means a Person obligated to make payments pursuant to a Contract.

“ Originator ” means each of each of Convergys Customer Management Group Inc., an Ohio corporation, and Convergys Information Management Group Inc., an Ohio corporation, in its capacity as a seller under the First-Step Receivables Purchase Agreement.

“ Outstanding Balance ” of any Receivable at any time means the then outstanding principal balance thereof.

“ Payment Intangible ” means a “general intangible for money due or to become due” as such term is used in Article 9 of the UCC.

“ Percentage ” means a fraction, expressed as a percentage, (i) at any time no Capital is outstanding (a) with respect to the Fifth Third Group, the numerator of which is Fifth Third’s Commitment and the denominator of which is the Aggregate Commitment, and (b) with respect to the Falcon Group, the numerator of which is the Falcon Group’s Commitment and the denominator of which is the Aggregate Commitment and (ii) at any time any Capital is outstanding (a) with respect to the Fifth Third Group, the numerator of which is the Fifth Third Group’s Capital outstanding and the denominator of which is the Aggregate Capital and (b) with respect to the Falcon Group, the numerator of which is the Falcon Group’s Capital outstanding and the denominator of which is the Aggregate Capital. As of the date hereof, the Percentage of the Fifth Third Group is 25% and the Percentage of the Falcon Group is 75%.

“ Person ” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.

“ Pooled Commercial Paper ” means Commercial Paper notes of Falcon or Fountain Square subject to any particular pooling arrangement by Falcon or Fountain Square, but excluding Commercial Paper issued by Falcon or Fountain Square, as the case may be, for a tenor and in an amount specifically requested by any Person in connection with any agreement effected by Falcon or Fountain Square, as applicable.

“ Potential Amortization Event ” means an event which, with the passage of time or the giving of notice, or both, would constitute an Amortization Event.

“ Proposed Reduction Date ” has the meaning set forth in Section 1.3.

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“ Pro Rata Share ” means, for each Financial Institution in the Falcon Group, a percentage equal to (i) the Liquidity Commitment of such Financial Institution, divided by (ii) the aggregate amount of all Liquidity Commitments of all Financial Institutions hereunder, adjusted as necessary to give effect to the application of the terms of Section 13.1, 13.5 or 13.6.

“ Purchase Limit ” means $200,000,000, of which $50,000,000 represents the Fifth Third Group’s share and $150,000,000 represents the Falcon Group’s share.

“ Purchase Notice ” has the meaning set forth in Section 1.2.

“ Purchase Price ” means, with respect to any Incremental Purchase of a Purchaser Interest, the amount paid to Seller for such Purchaser Interest which will not exceed the least of (i) the amount requested by Seller in the applicable Purchase Notice, (ii) the unused portion of the Commitments for the applicable Group on the applicable purchase date and (iii) the applicable Group’s Percentage of the excess, if any, of the Net Receivables Balance less the Aggregate Reserves on the applicable purchase date over the aggregate outstanding amount of Aggregate Capital determined as of the date of the most recent Monthly Report, adjusted on a pro forma basis to give effect to any proposed Incremental Purchase.

“ Purchasing Financial Institution ” has the meaning set forth in Section 12.1(b).

“ Purchaser ” means Fifth Third, Falcon or a Financial Institution, as applicable.

“ Purchaser Interest ” means, at any time, an undivided percentage ownership interest (computed as set forth below) associated with a designated amount of Capital, selected pursuant to the terms and conditions hereof in (i) all Receivables arising prior to the time of the most recent computation or recomputation of such undivided interest, (ii) all Related Security with respect to such Receivables, and (iii) all Collections with respect to, and other proceeds of, such Receivables. Each such undivided percentage interest will equal:

C NRB - AR

where:

Such undivided percentage ownership interest will be initially computed on its date of purchase. Thereafter, until its Amortization Date, each Purchaser Interest will be automatically recomputed (or deemed to be recomputed) on each day prior to its Amortization Date. The variable percentage represented by any Purchaser Interest as computed (or deemed recomputed) as of the close of the business day immediately preceding its Amortization Date will remain constant at all times after such Liquidation Day.

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C = the Capital of such Purchaser Interest.

AR = the Aggregate Reserves.

NRB = the Net Receivables Balance.

“ Receivable ” means all existing and hereafter arising Domestic Accounts and Domestic Payment Intangibles of either Originator (without giving effect to any transfer or conveyance under the First-Step Receivables Purchase Agreement, the Receivables Sale Agreement or hereunder), including, without limitation, the obligation to pay any Finance Charges with respect thereto. Each account evidenced by a separate Invoice will constitute a Receivable separate from a Receivable evidenced by a separate Invoice, regardless of whether such accounts arose under a common Contract; provided , however , that any indebtedness, rights or obligations referred to in the immediately preceding sentence shall be a Receivable regardless of whether the Obligor or Seller treats such indebtedness, rights or obligations as a separate payment obligation.

“ Receivables Purchase Facility ” means one or more facilities established by Convergys under which Convergys and its Subsidiaries may sell accounts receivable, on a non-recourse basis, to one of more financial institutions or special purpose entities.

“ Receivables Sale Agreement ” means that certain Receivables Sale Agreement, dated as of the date hereof, between Convergys and Seller, as the same may be amended, restated or otherwise modified from time to time.

“ Records ” means, with respect to any Receivable, all Invoices and other documents, books, records and other information ( including, without limitation, computer programs, tapes, disks, punch cards, data processing software and related property and rights) relating to such Receivable, any Related Security therefor and the related Obligor ( but excluding, specifically, any Contract related to any of the foregoing).

“ Reduction Notice ” has the meaning set forth in Section 1.3.

“ Reduction Percentage ” means, for any Purchaser Interest acquired by the Financial Institutions from Falcon for less than the Capital of such Purchaser Interest, a percentage equal to a fraction the numerator of which is the Falcon Transfer Price Reduction for such Purchaser Interest and the denominator of which is the Capital of such Purchaser Interest.

“ Reference Bank ” means Bank One or such other bank as the Administrative Agent will designate with the consent of Seller and Fifth Third.

“ Regulatory Change ” has the meaning set forth in Section 10.2.

“ Reinvestment ” has the meaning set forth in Section 2.2.

“ Related Security ” means, with respect to any Receivable:

(i) all of Seller’s interest, if any, in the software, inventory or other goods (including returned or repossessed inventory or goods), if any, the sale or license of which by either of the Originators gave rise to such Receivable, and all insurance contracts and warranty claims with respect thereto,

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(ii) all other security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, together with all financing statements and security agreements describing any collateral securing such Receivable,

(iii) all guaranties, insurance and other agreements or arrangements of whatever character from time to time supporting or securing

payment of such Receivable,

(iv) all instruments and chattel paper hereafter evidencing such Receivable or any portion thereof,

(v) all Invoices and other Records related to such Receivable,

(vi) all of Seller’s right, title and interest in, to and under the First-Step Receivables Purchase Agreement and the Receivables Sale Agreement, in respect of such Receivable, and

(vii) all proceeds of any of the foregoing.

“ Required Financial Institutions ” means, at any time, Financial Institutions with commitments in excess of 66-2/3% of the Purchase

Limit.

“ Required Notice Period ” means the number of days required notice set forth below applicable to the Aggregate Reduction indicated below:

“ Seller ” has the meaning set forth in the preamble to this Agreement.

“ Seller Interest ” means, at any time, an undivided percentage ownership interest of Seller in the Receivables, Related Security and all

Collections with respect thereto equal to (i) one, minus (ii) the aggregate of the Purchaser Interests.

“ Seller Parties ” has the meaning set forth in the preamble to this Agreement.

“ Servicer ” means at any time the Person (which may be the Administrative Agent) then authorized pursuant to Article VIII to service, administer and collect Receivables.

“ Servicing Fee ” has the meaning set forth in Section 8.6.

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Aggregate Reduction

Required Notice Period

< $100,000,000 for the Falcon Group and < $10,000,000 for the Fifth Third Group two Business Days

> $100,000,000 for the Falcon Group and > $10,000,000 for the Fifth Third Group five Business Days

“ Servicing and Yield Reserve ” means, on any date, an amount equal to 1.5% multiplied by the Outstanding Balance of the Net Receivables Balance as of the close of business of the Servicer on such date.

“ Settlement Date ” means (A) the 22nd day of each month (or, if such day is not a Business Day, the next succeeding Business Day), and (B) the last day of the relevant Tranche Period in respect of each Liquidity Interest.

“ Settlement Period ” means (A) in respect of each Purchaser Interest of Falcon and each Purchaser Interest of Fifth Third during the CP Availability Period, the immediately preceding Accrual Period, and (B) in respect of each Liquidity Interest, the entire Tranche Period of such Liquidity Interest.

“ Subsidiary ” of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which will at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which will at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of Seller.

“ Termination Date ” has the meaning set forth in Section 2.2.

“ Termination Percentage ” has the meaning set forth in Section 2.2.

“ Terminating Financial Institution ” has the meaning set forth in Section 13.6(a).

“ Terminating Tranche ” has the meaning set forth in Section 4.3(b).

“ Tranche Period ” means, with respect to any Purchaser Interest held by a Financial Institution:

(a) if Yield for such Purchaser Interest is calculated on the basis of the LIBO Rate, a period of one, two, three or six months, or such other period as may be mutually agreeable to the Falcon Agent and Seller, commencing on a Business Day selected by Seller or the Falcon Agent pursuant to this Agreement. Such Tranche Period will end on the day in the applicable succeeding calendar month which corresponds numerically to the beginning day of such Tranche Period, provided, however, that if there is no such numerically corresponding day in such succeeding month, such Tranche Period will end on the last Business Day of such succeeding month; or

(b) if Yield for such Purchaser Interest is calculated on the basis of the Base Rate, a period commencing on a Business Day selected

by Seller and agreed to by the Falcon Agent, provided no such period will exceed 1 month. If any Tranche Period would end on a day which is not a Business Day, such Tranche Period will end on the next succeeding Business Day, provided , however , that in the case of Tranche Periods

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corresponding to the LIBO Rate, if such next succeeding Business Day falls in a new month, such Tranche Period will end on the immediately preceding Business Day. In the case of any Tranche Period for any Purchaser Interest of which commences before the Amortization Date and would otherwise end on a date occurring after the Amortization Date, such Tranche Period will end on the Amortization Date. The duration of each Tranche Period which commences after the Amortization Date will be of such duration as selected by the Falcon Agent.

“ Transaction Documents ” means, collectively, this Agreement, each Purchase Notice, the Receivables Sale Agreement, each Collection Account Agreement, the Fee Letters, the Subordinated Note (as defined in the Receivables Sale Agreement) and all other instruments, documents and agreements executed and delivered by Seller in connection herewith.

“ UCC ” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.

“ Unbilled Receivable ” means a Receivable as to which (a) the underlying goods or services sold have been shipped or rendered, (b) no Invoice has been issued as of any date of determination, and (c) the applicable Originator has, nonetheless, booked such Receivable as an asset prior to its sale under the Transaction Documents.

“ Yield ” means for each respective Tranche Period relating to any Liquidity Interest, an amount equal to the product of the applicable Discount Rate for each Purchaser Interest multiplied by the Capital of such Liquidity Interest for each day elapsed during such Tranche Period, annualized on a 360 day basis.

All accounting terms not specifically defined herein will be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of Ohio, and not specifically defined herein, are used herein as defined in such Article 9.

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EXHIBIT II

FORM OF PURCHASE NOTICE

[Date] Bank One, NA, as Falcon Agent 1 Bank One Plaza, IL1-0079 Chicago, Illinois 60670-0079

Attention: Asset Backed Finance

and Fifth Third Bank 38 Fountain Square Plaza MD 10903B Cincinnati, OH 45263

Attention: Bob Finley

Ladies and Gentlemen:

The undersigned refers to the Amended and Restated Receivables Purchase Agreement, dated as of November 20, 2003 (the “ Receivables Purchase Agreement ,” the terms defined therein being used herein as therein defined), among the undersigned, as Seller and Convergys Corporation, as initial Servicer, Falcon Asset Securitization Corporation (“ Falcon ” ), Fifth Third Bank (“ Fifth Third ”), certain Financial Institutions parties thereto and Bank One, NA, as Falcon Agent and Falcon Agent and Fifth Third, and hereby gives you notice, irrevocably, pursuant to Section 1.2 of the Receivables Purchase Agreement that the undersigned hereby requests Incremental Purchases under the Receivables Purchase Agreement, and in that connection sets forth below the information relating to such Incremental Purchases (each, a “ Proposed Purchase ” ) as required by Section 1.2 of the Receivables Purchase Agreement:

(i) The Business Day of the Proposed Purchases is [ insert purchase date ] , which date is at least two (2) Business Days after the date hereof.

(ii) The requested Purchase Price in respect of the Proposed Purchase from the Falcon Group is $ , and the requested Purchase Price in respect of the Proposed Purchase from Fifth Third is $ . Such Purchase Prices are in proportion with the Groups’ respective Percentages.

(iii) We prefer that Falcon and Fifth Third be the Purchasers for the Proposed Purchases. If, however, the Proposed Purchase by the Falcon Group is to be funded by the

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Re: PURCHASE NOTICE

Financial Institutions, the requested Discount Rate is and the requested Tranche Period is .

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Purchases (before and after giving effect to the Proposed Purchases):

(i) the representations and warranties set forth in Section 5.1 are true and correct on and as of the date of such Proposed Purchase as though made on and as of such date;

(ii) no event has occurred and is continuing, or would result from such Proposed Purchase, that will constitute an Amortization Event or a Potential Amortization Event; and

(iii) the Facility Termination Date will not have occurred, the aggregate Capital of all Purchaser Interests will not exceed the Purchase Limit and the aggregate Receivable Interests will not exceed 100%.

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Very truly yours,

CONVERGYS FUNDING CORPORATION

By:

Name: Title:

EXHIBIT III

CHIEF EXECUTIVE OFFICE AND PLACES OF BUSINESS OF SELLER; LOCATIONS OF RECORDS;

FEDERAL EMPLOYER IDENTIFICATION NUMBER AND ORGANIZA TIONAL IDENTIFICATION NUMBER

Chief Executive Office of Seller:

Convergys Funding Corporation P.O. Box 1638 201 E. Fourth Street Cincinnati, OH 45201

Principal Place(s) of Business of Seller:

Convergys Funding Corporation P.O. Box 1638 201 E. Fourth Street Cincinnati, OH 45201

Locations of Records:

Convergys Funding Corporation P.O. Box 1638 201 E. Fourth Street Cincinnati, OH 45201

Federal Employer Identification Number of Seller: 31-1667427 Organizational Identification Number of Seller:

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EXHIBIT IV

LOCK-BOXES; COLLECTION ACCOUNTS; COLLECTION BANKS Lockbox Information:

Convergys Information Management Group 1460 Solutions Center Chicago, IL 60677-1004

Convergys Customer Management Group 1450 Solutions Center Chicago, IL 60677-1004

Collection Accounts:

Convergys Information Management Group PNC Bank, NA ABA: 043000096 Account Number 1004387876

Convergys Customer Management Group PNC Bank, NA ABA: 043000096 Account Number 1004387876

Collection Banks:

PNC Bank, NA 1 PNC Plaza Pittsburgh, PA 15222

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EXHIBIT V

FORM OF COMPLIANCE CERTIFICATE To: Bank One, NA, as Administrative Agent and Falcon Agent

and

Fifth Third Bank

This Compliance Certificate is furnished pursuant to that certain Amended and Restated Receivables Purchase Agreement dated as of November 20, 2003 among Convergys Funding Corporation (the “ Seller ”), Convergys Corporation (the “ Servicer ”), the Purchasers party thereto and Bank One, NA, as Administrative Agent and Falcon Agent and Fifth Third for such Purchasers (the “ Agreement ”). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

1. I am the duly elected of Seller.

2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of Seller and its Subsidiaries during the accounting period covered by the attached financial statements.

3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of the existence of any condition or event which constitutes an Amortization Event or Potential Amortization Event, as each such term is defined under the Agreement, during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth in paragraph 5 below.

4. Schedule I attached hereto sets forth financial data and computations evidencing the compliance with certain covenants of the Purchase Agreement, all of which data and computations are true, complete and correct.

5. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which Seller has taken, is taking, or proposes to take with respect to each such condition or event:

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The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this day of , 20 .

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SCHEDULE I TO COMPLIANCE REPORT

This schedule relates to the month ended:

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A. Schedule of Compliance as of , 20 with Section 9.1(f) of the Agreement. Unless otherwise defined herein, the terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement.

EXHIBIT VI

FORM OF COLLECTION ACCOUNT AGREEMENT

COLLECTION ACCOUNT AGREEMENT

[Date] [Collection Bank Name and Address]

Dear :

You (hereinafter, “Bank” or “You”) have exclusive control of [lockbox address] (the “Lock-Box”) for the purpose of receiving mail and processing payments therefrom pursuant to that certain [lock-box services agreement] (the “Agreement”) dated between you and [Originator Name] (the “Customer”). You hereby confirm your agreement to perform the services described therein. Among the services you have agreed to perform therein is to endorse all checks and other evidences of payment, and credit such payments to checking account no. maintained with you in the name of the Customer (the “Existing Account”).

Customer hereby transfers and assigns all of its right, title and interest in and to, and exclusive ownership and control over the items in the Lock-Box to Convergys Funding Corporation (“SPC”). Customer and SPC hereby request that from and after [insert date]/[the date hereof], the Existing Account name be changed to “Convergys Customer Management Group Inc., as sub-servicer” (as so re-titled, the “Lock-Box Account”) for the purposes of that certain Amended and Restated Receivables Purchase Agreement (the “Receivables Purchase Agreement”) dated as of November 20, 2003 among SPC, as seller, Convergys Corporation, as servicer, Falcon Asset Securitization Corporation, the financial institutions from time to time a party thereto, Fifth Third Bank and Bank One, NA, as Administrative Agent and Falcon Agent (the “Administrative Agent”).

SPC hereby irrevocably instructs you, and you hereby agree, that upon receiving notice from the Administrative Agent in the form attached hereto as Annex A and allowing for a reasonable period of time for you to implement the changes as a result of such notice: (i) the name of the Lock-Box Account will be changed to “Bank One, NA, as Administrative Agent” (or any designee of the Administrative Agent), and the Administrative Agent will have exclusive ownership of and access to such Lock-Box Account, and neither Customer, SPC nor any of their respective affiliates will have any control of such Lock-Box Account or any access thereto, (ii) you will either continue to send the funds from the Lock-Box to the Lock-Box Account, or will redirect the funds as the Administrative Agent may otherwise request, (iii) you will transfer

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Re: [Originator Name]

collected funds on deposit in the Lock-Box Account, at any time, as directed by the Administrative Agent, (iv) all services to be performed by you under the Agreement will be performed on behalf of the Administrative Agent, and (v) all correspondence or other mail which you have agreed to send to either Customer or SPC will be sent to the Administrative Agent at the following address:

Bank One, NA, as Administrative Agent Mail Code IL1-0079 1 Bank One Plaza Chicago, Illinois 60670-0079 Attention: Asset-Backed Finance Division

Moreover, we advise you that upon such notice, the Administrative Agent will have all rights and remedies given to Customer or SPC

under the Agreement. Each of Customer and SPC agrees, however, to continue to pay all fees and other assessments due thereunder at any time.

You hereby acknowledge that monies deposited in the Lock-Box Account or any other account established with you by the Administrative Agent for the purpose of receiving funds from the Lock-Box are subject to the liens of the Administrative Agent for itself and as agent under the Receivables Purchase Agreement, and will not be subject to deduction, set-off, banker’s lien or any other right you or any other party may have against Customer or SPC, except that you may debit the Lock-Box Account for any items deposited therein that are credited in error or are returned or otherwise not collected and for all charges, fees, commissions and expenses incurred by you in providing services hereunder, all in accordance with your customary practices for the charge back of returned items and expenses. If there are insufficient funds in the Lock-Box Account and You has not been fully reimbursed, the Administrative Agent shall return such amount to You on demand.

You will follow its customary procedures for determining whether or not to honor any checks, drafts or other payment requests drawn on or with respect to the Lock-Box Account.

You may rely, and shall be protected in acting or refraining from acting, upon any notice (including but not limited to electronically confirmed facsimiles of such notice) believed by You to be genuine and to have been given by the proper party or parties.

The Customer and SPC agree to indemnify, defend and hold harmless You and its affiliates, directors, officers, employees, agents, successors and assigns (each an “Indemnitee”) from and against any and all liabilities, losses, claims, damages, demands, costs and expenses of every kind (including but not limited to costs incurred as a result of items being deposited in the Lock-Box Account and being unpaid for any reason, reasonable attorney’s fees and the reasonable charges of your in-house counsel) incurred or sustained by any Indemnitee arising out of Your performance of the services contemplated by this letter agreement, except to the extent such liabilities, losses, claims, damages, demands, costs and expenses are the direct result of Your gross negligence or willful misconduct. Substantial compliance by You with its standard procedures for the services provided hereunder shall be deemed to be the exercise of ordinary

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care by You. You shall have no obligation to review or confirm that any actions taken pursuant to this letter agreement comply with the Receivables Purchase Agreement or any other agreement or document. The provisions of this paragraph shall survive termination of this letter agreement.

You will not be liable to the Customer, SPC or the Administrative Agent for any expense, claim, loss, damage or cost (“Damages”) arising out of or relating to its performance under this letter agreement other than Damages which result directly from its acts or omissions constituting gross negligence, willful misconduct or breach of contract. In no event will You be liable for any punitive, special, indirect, or consequential damages, including but not limited to lost profits, even if advised of the possibility or likelihood of such damages.

This letter agreement and the rights and obligations of the parties hereunder will be governed by and construed and interpreted in accordance with the laws of the State of Illinois. This letter agreement may be executed in any number of counterparts and all of such counterparts taken together will be deemed to constitute one and the same instrument.

This letter agreement contains the entire agreement between the parties, and may not be altered, modified, terminated or amended in any respect, nor may any right, power or privilege of any party hereunder be waived or released or discharged, except upon execution by all parties hereto of a written instrument so providing. In the event that any provision in this letter agreement is in conflict with, or inconsistent with, any provision of the Agreement, this letter agreement will exclusively govern and control. Each party agrees to take all actions reasonably requested by any other party to carry out the purposes of this letter agreement or to preserve and protect the rights of each party hereunder.

Please indicate your agreement to the terms of this letter agreement by signing in the space provided below. This letter agreement will become effective immediately upon execution of a counterpart of this letter agreement by all parties hereto.

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Very truly yours,

[ORIGINATOR NAME]

By:

Name: Title:

CONVERGYS FUNDING CORPORATION

By:

Name: Title:

Acknowledged and agreed to this day of :

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[COLLECTION BANK]

By:

Name: Title:

BANK ONE, NA, AS ADMINISTRATIVE AGENT

By:

Name: Title:

ANNEX A FORM OF COLLECTION NOTICE

[On letterhead of the Administrative Agent]

[Date] [Collection Bank Name and Address]

Ladies and Gentlemen:

We hereby notify you that we are exercising our rights pursuant to that certain letter agreement among [Originator Name], Convergys Funding Corporation, you and us, to have the name of, and to have exclusive ownership and control of, account number (the “Lock-Box Account”) maintained with you, transferred to “Bank One, NA, as Administrative Agent.” [The Lock-Box Account will henceforth be a zero-balance account, and collected funds deposited in the Lock-Box Account should be sent at the end of each day to ]. You have further agreed to perform all other services you are performing under that certain agreement dated between you and [Originator Name] on our behalf.

We appreciate your cooperation in this matter.

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Re: Convergys Funding Corporation and [Originator Name]

Very truly yours,

Bank One, NA, as Administrative Agent

By:

Name: Title:

EXHIBIT VII

FORM OF ASSIGNMENT AGREEMENT

ASSIGNMENT AGREEMENT

THIS ASSIGNMENT AGREEMENT (this “Assignment” ) is made as of [ date ] , by and between (the “Assignor” ) and (the “Assignee” ), with respect to that certain Amended and Restated Receivables Purchase Agreement dated as of November 20, 2003, by and among Convergys Funding Corporation, an Ohio corporation, various Financial Institutions (as therein defined), Falcon Asset Securitization Corporation, Fifth Third Bank and Bank One, NA, as Falcon Agent and Administrative Agent (the “RPA” ). Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the RPA.

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the Assignor and the Assignee hereby agree as follows:

1. Assignment and Assumption . The Assignor hereby absolutely and unconditionally sells, assigns and conveys to the Assignee, without representation, warranty or recourse of any kind except as expressly set forth in Section 3 of this Assignment, an undivided [ % ] interest in the Assignor’s Liquidity Commitment and the Assignor’s outstanding Capital (the “Assigned Interest” ), and the Assignee hereby absolutely and unconditionally purchases, accepts and assumes the Assigned Interest and agrees to perform the Assignor’s obligations under the RPA to the extent of the Assigned Interest. The assignment and assumption set forth in the preceding sentence will become effective as of the Effective Date (as defined in Section 2 below). As of the Effective Date, immediately prior to giving effect to this Assignment, the Assignor’s Liquidity Commitment was $ , its Pro Rata Share was % and its outstanding Capital was $ . After giving effect to this Assignment, the Assignor’s and the Assignee’s respective Commitments, Pro Rata Shares and Capital will be as follows:

From and after the Effective Date, the Assignee will be a Financial Institution for all purposes under the RPA.

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Financial Institution Liquidity Commitment

Pro Rata Share

Outstanding Capital

Assignor:

Assignee:

Others:

Total:

2. Effective Date . This Assignment will become effective upon the latest to occur of the following (such latest date, the “Effective Date” ): (a) the date of this Assignment; (b) receipt by the Assignor and the Assignee of a faxed counterpart of this Assignment consented to by Falcon as provided on the signature page hereof; and (c) payment by the Assignee of the amounts, if any, due to the Assignor pursuant to Section 6 hereof.

3. Assignor Representations and Warranties . The Assignor hereby represents and warrants to the Assignee that:

(a) Absence of Adverse Claim . Immediately prior to giving effect to this Assignment, the Assignor was the legal and beneficial owner of the Assigned Interest, free and clear of any Adverse Claim created by the Assignor.

(b) Absence of Amortization Event . As of the date hereof, the Assignor is not aware of the existence and continuance of any Amortization Event or Potential Amortization Event.

4. Assignee Representations, Warranties and Covenants . The Assignee hereby represents and warrants to the Assignor, the Falcon Agent and Falcon that:

(a) Existence and Power . The Assignee is a corporation or a banking association duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, and has all requisite corporate power to perform its obligations hereunder and under the RPA.

(b) No Conflict . The execution, delivery and performance by the Assignee of this Assignment and of the RPA are within its corporate powers, have been duly authorized by all necessary corporate action, do not contravene or violate (i) its certificate or articles of incorporation or association or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on its assets. This Assignment has been duly authorized, executed and delivered by the Assignee.

(c) Governmental Authorization . No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Assignee of this Assignment or the RPA.

(d) Binding Effect . This Assignment constitutes, and after giving effect hereto, the RPA will constitute, the legal, valid and binding obligation of the Assignee enforceable against the Assignee in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally.

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(e) Ratings . As of the date hereof, the Assignee has a short-term debt rating of A-1 or better by Standard & Poor’s Ratings Group and P-1 by Moody’s Financial Institutions Service, Inc.

(f) Legal Opinion . If requested by the Falcon Agent, the Assignee will deliver to the Falcon Agent, in form reasonably acceptable to the Falcon Agent, an opinion of the Assignee’s counsel covering the matters set forth in clauses (a)-(d) above.

(g) Miscellaneous . The Assignee hereby (i) confirms that it has received a copy of the RPA, together with copies of such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment, (ii) agrees that it will, independently and without reliance upon the Falcon Agent, the Assignor or any other Purchaser and based on such documents and information at it will deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Transaction Documents, (iii) appoints and authorizes the Falcon Agent to take such action as agent on its behalf and to exercise such powers under the Transaction Documents as are delegated to the Falcon Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Transaction Documents are required to be performed by it as a Financial Institution, (v) agrees that its payment instructions are as set forth in the attachment hereto, (vi) confirms that none of the funds, monies, assets or other consideration being used to make the purchase and assumption hereunder are “plan assets” as defined under ERISA and that its rights, benefits and interests in and under the Transaction Documents will not be “plan assets” under ERISA, and (vii) attaches the forms prescribed by the Internal Revenue Service of the United States certifying that the Assignee is entitled to receive payments under the Transaction Documents without deduction or withholding of any United States federal income taxes (and, if the Assignee is organized under the laws of a jurisdiction other than the United States of America or one of its political subdivisions, the Assignee has enclosed herewith two copies of its duly executed and completed I.R.S. Form 4224 or I.R.S. Form 1009, as applicable).

5. Effect of Assignment . From and after the Effective Date:

(a) Assignee as a Financial Institution . The Assignee will have the rights and obligations of a Financial Institution under the RPA with respect to the Assigned Interest, including, without limitation, a Liquidity Commitment in the amount set forth in Section 1 above, a Pro Rata Share equal to the percentage set forth in Section 1 above and outstanding Capital in the amount set forth in Section 1 above.

(b) Assignee’s Funding Obligations . The Assignee will fund its Pro Rata Share of the aggregate Purchase Price of each of the Receivable Interests the Financial Institutions purchase directly from Seller and its Acquisition Amount for each of the Receivable Interests the Financial Institutions purchase from Falcon.

(c) Sharing of Payments to the Financial Institutions . To the extent actually received by the Falcon Agent for the account of the Financial Institutions, the Assignee will be entitled to receive its Pro Rata Share of all Capital, Discount and Liquidity Fees (as hereinafter

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defined). In the event that either party hereto receives any payment from and after the Effective Date to which the other party hereto is entitled under this Assignment, then the party receiving such amount will promptly remit it to the other party hereto. [ As used herein, “Liquidity Fee” means a fee equal to basis points (0. %) per annum multiplied by the average Purchase Limit in effect during the month then most recently ended, which fee is payable by Seller on the first Business Day of each calendar month after the date of the RPA and for so long as any Aggregate Unpaids remain outstanding. ]

(d) Release of Assignor . The Assignor will automatically be deemed to have relinquished its rights and to have been released from its corresponding obligations under the Transaction Documents to the extent of the Assigned Interest.

6. Payment for Assigned Interest . If any Capital is outstanding from the Assignor at the opening of the Assignor’s business on the Effective Date, the Assignee will pay to the Assignor in immediately available funds on the Effective Date, an amount equal to the product of (a) the percentage set forth in Section 1 above in the definition of “Assigned Interest,” times (b) the aggregate outstanding amount of the Assignor’s Capital immediately prior to the effectiveness of this Assignment.

7. Limitations on the Assignor’s Liability . The Assignor represents and warrants that neither the Assignor nor any of its officers, directors, employees, agents or attorneys will be responsible for (i) the due execution, legality, validity, enforceability, genuineness, sufficiency or collectibility of any Transaction Document, (ii) any representation, warranty or statement made in or in connection with any of the Transaction Documents, (iii) the financial condition or creditworthiness of Falcon, (iv) the performance of or compliance with any of the terms or provisions of any of the Transaction Documents, (v) inspecting any of the property, books or records of Falcon, (vi) the validity, enforceability, perfection, priority, condition, value or sufficiency of any of the Receivable Interests, or (vii) any mistake, error of judgment, or action taken or omitted to be taken in connection with the Receivable Interests or the Transaction Documents.

8. Indemnity . The Assignee agrees to indemnify and hold the Assignor harmless against any and all losses, costs and expenses (including, without limitation, reasonable attorneys’ fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee’s non-performance of the obligations assumed under this Assignment.

9. Subsequent Assignments . After the Effective Date, the Assignee will have the right pursuant to Section 12.1 of the RPA to assign all or any portion of the rights which are assigned to the Assignee hereunder subject to the terms and provisions of such Section 12.1.

10. Bankruptcy Petition Against Falcon . The Assignee hereby covenants and agrees that, prior to the date which is one year and one day after the payment in full of all debt securities of Falcon rated at the request of Falcon by a nationally recognized rating agency, it will not institute against, or join any other Person in instituting against, Falcon any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of any jurisdiction.

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11. Entire Agreement; Counterparts . This Assignment embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings between the parties hereto relating to the subject matter hereof. This Assignment may be executed in one or more counterparts, all of which, taken together, will constitute one and the same instrument, and each of which will be deemed an original.

12. Governing Law . This Assignment will be governed by the internal law, and not the law of conflicts, of the State of Illinois.

13. Notices . Notices will be given under this Assignment in the manner set forth in the RPA. For the purpose hereof, the address of the Assignee (until notice of a change is delivered) will be the address set forth in the attachment hereto.

IN WITNESS WHEREOF, the parties hereto have executed this Assignment by their duly authorized officers as of the date first above written.

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Assignor:

By:

Name: Title:

Assignee:

By:

Name: Title:

[By its signature below, Falcon hereby consents to the foregoing assignment as required by Section 12.1 of the RPA:

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FALCON ASSET SECURITIZATION CORPORATION

By:

Authorized Signatory] 1

1 Delete if not applicable

Assignee’s Wire Transfer Instructions and Address for Notices:

90

EXHIBIT VIII

CREDIT AND COLLECTION POLICY

[attached]

91

EXHIBIT IX

FORM OF CONTRACT(S)

[attached]

92

EXHIBIT X

FORM OF MONTHLY REPORT

[attached]

93

SCHEDULE A COMMITMENTS AND LIQUIDITY COMMITMENTS

COMMITMENTS

LIQUIDITY COMMITMENTS

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Entity

Commitment

Bank One, NA $ 150,000,000 Fifth Third Bank $ 50,000,000

Entity

Liquidity Commitment

Bank One, NA $ 153,000,000

SCHEDULE B

DOCUMENTS TO BE DELIVERED TO THE ADMINISTRATIVE AGENT ON OR PRIOR TO THE INITIAL PURCHASE

1. Counterparts of this Agreement, duly executed by each of the parties hereto;

2. A certificate of the Secretary or Assistant Secretary of each Seller Party certifying (A) the names and true signatures of the officers

authorized on its behalf to sign this Agreement and the other Transaction Documents to be delivered by it hereunder (on which certificate the Agents and the Purchasers may conclusively rely until such time as the Administrative Agent shall receive from such Seller Party a revised certificate meeting the requirements of this item #2), (B) an attached copy of the articles of incorporation certified as of a recent date acceptable to the Administrative Agent by the Secretary of State of such State of incorporation and regulations (the “Organic Documents”) of such Seller Party, and (C) an attached copy of resolutions of such Seller Party’s board of directors authorizing its execution and delivery of this Agreement and the other Transaction Documents to be delivered by it hereunder;

3. Good Standing Certificates dated as of a recent date satisfactory to the Administrative Agent for each of the Companies from the Secretary of State of the State of each Company’s state of incorporation.

4. A letter from Frost Brown Todd LLC (a) authorizing Fifth Third to rely on Frost & Jacobs LLP’s (i) true sale, and (ii) nonconsolidation opinions delivered in connection with the Existing Agreement as though such opinions were dated the date hereof;

5. Opinion of Frost Brown Todd LLC with respect to this Agreement covering the following matters:

• Each of the Companies is a corporation, duly organized, validly existing, and in good standing under the laws of its state of

formation.

• Each of the Companies has all requisite authority to conduct its business in each jurisdiction where failure to be so qualified would

have a material adverse effect on such Person’s business.

• The execution and delivery by each of the Companies of this Agreement and the other Transaction Documents to be delivered by it

hereunder and its performance of its obligations thereunder have been duly authorized by all necessary action and proceedings on the part of such Person and will not:

95

(a) require any action by or in respect of, or filing with, any governmental body, agency or official (other than the filing of UCC

financing statements);

(b) contravene, or constitute a default under, any provision of applicable law or regulation or of its organizational documents or

of any agreement, judgment, injunction, order, decree or other instrument binding upon such Person; or

(c) result in the creation or imposition of any Adverse Claim on assets of such Person or any of its Subsidiaries (except as

contemplated by the First-Step Receivables Purchase Agreement, the Receivables Sale Agreement and this Agreement).

• This Agreement and the other Transaction Documents to be delivered by it hereunder have each been duly executed and delivered by such Person and constitutes the legal, valid, and binding obligation of such Person, enforceable in accordance with its terms, except to the extent the enforcement thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and subject also to the availability of equitable remedies if equitable remedies are sought.

• SPV has a valid and unencumbered ownership interest in each Receivable in existence as of the date of this Agreement and, if a

Purchase is made as of such date, the Administrative Agent for the benefit of the Falcon Agent and the Purchasers shall acquire a first perfected ownership interest in each Receivable, the related Collections and the Related Security.

• To the best of the opinion giver’s knowledge after due inquiry, there is no action, suit or other proceeding against any of the Companies or any of their Affiliates, which would materially adversely affect the business or financial condition of the Companies taken as a whole or which would materially adversely affect the ability of any of the Companies to perform its obligations under this Agreement .

6. The Falcon Fee Letter and the Fifth Third Fee Letter, together with payment of any and all fees due on or prior to the date hereof;

7. A certificate of an Authorized Officer of each of the Seller Parties certifying that as of the date of this Agreement:

• Valid creation, perfection and filing priorities of Administrative Agent’s security interests on behalf of the Falcon Agent and the

Purchasers.

(a) the representations and warranties set forth in Section 5.1 are true and correct on and as of the date of such Incremental

Purchase or Reinvestment as though made on and as of such date; and

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(b) no event has occurred, or would result from such Incremental Purchase or Reinvestment, that will constitute an Amortization

Event, and no event has occurred and

8. UCC-3 Amendments if any.

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Exhibit 12 to 2003 10-K

CONVERGYS CORPORATION Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends

(Amounts in millions)

Exhibit 21 to 2003 10-K

LIST OF SUBSIDIARIES

is continuing, or would result from such Incremental Purchase or Reinvestment, that would constitute a Potential Amortization Event.

For the Twelve

Months Ended

Dec. 31, 2003

Earnings:

Income before income taxes, extraordinary charges and cumulative effect of change in accounting principle $ 271.6 Adjustment for undistributed (income)/losses of partnerships 13.8 Interest expense 6.9 Portion of rental expense deemed interest 37.3

Total earnings $ 329.6

Fixed Charges:

Interest expense $ 6.9 Portion of rental expense deemed interest 37.3

Total fixed charges $ 44.2

Preferred dividends:

Preferred dividends —

Combined fixed charges and preferred dividends $ 44.2

Ratio of Earnings to Fixed Charges 7.46

Ratio of Earnings to Combined Fixed Charges and Preferred Dividends 7.46

(1) Convergys Customer Management Group Inc., a corporation organized under the laws of the State of Ohio.

(2) Convergys Information Management Group Inc., a corporation organized under the laws of the State of Ohio.

Exhibit 23 to 2003 10-K

Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-66992) pertaining to the Geneva Technology Limited Unapproved Share Option Scheme 1998, in the Registration Statement (Form S-8 No. 333-69633) pertaining to the Convergys Corporation Employee Stock Purchase Plan, in the Registration Statement (Form S-8 No. 333-86137) pertaining to the Convergys Corporation Canadian Employee Share Purchase Plan, in the Registration Statement (Form S-8 No. 333-96727) pertaining to the Convergys Corporation 1998 Long Term Incentive Plan, in the Registration Statement (Form S-8 No. 333-96729) pertaining to the Convergys Corporation Deferred Compensation and Option Gain Deferral Plan for Non-Employee Directors, in the Registration Statement (Form S-8 No. 333-96733) pertaining to the Convergys Corporation Retirement and Savings Plan, of our report dated February 6, 2004, with respect to the consolidated financial statements and schedule of Convergys Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 2003. /s/ Ernst & Young LLP

Ernst and Young LLP Cincinnati, Ohio March 5, 2004

(3) Convergys CMG Utah Inc., a corporation organized under the laws of the State of Utah.

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ John F. Barrett

John F. Barrett Director

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ Gary C. Butler

Gary C. Butler Director

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ David B. Dillon

David B. Dillon Director

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ Eric C. Fast

Eric C. Fast Director

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ Joseph E. Gibbs

Joseph E. Gibbs Director

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ Roger L. Howe

Roger L. Howe Director

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ Steven C. Mason

Steven C. Mason Director

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ Philip A. Odeen

Philip A. Odeen Director

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is an officer of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ Earl C. Shanks

Earl C. Shanks Chief Financial Officer

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ James F. Orr

James F. Orr Director Chairman, President and Chief Executive Officer

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is an officer of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ William H. Hawkins II

William H. Hawkins II General Counsel and Secretary

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is an officer of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ Michael D. Jones

Michael D. Jones Vice President and Controller

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ James M. Zimmerman

James M. Zimmerman Director

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ Sidney A. Ribeau

Sidney A. Ribeau Director

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

/s/ David R. Whitwam

David R. Whitwam Director

Exhibit 24 to 2003 10-K

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS:

WHEREAS, CONVERGYS CORPORATION, an Ohio corporation (hereinafter referred to as the “Company”), proposes shortly to file with the Securities and Exchange Commission under the provisions of the Securities Exchange Act of 1934, as amended, and the Rules and Regulations thereunder, an annual report on Form 10-K for the year ended December 31, 2003; and

WHEREAS, the undersigned is a director of the Company;

NOW, THEREFORE, the undersigned hereby constitutes and appoints James F. Orr, Earl C. Shanks and William H. Hawkins II, and each of them singly, his attorneys for him and in his name, place and stead, and in his office and capacity in the Company, to execute and file such annual report on Form 10-K, and thereafter to execute and file any amendments or supplements thereto, hereby giving and granting to said attorneys full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as he might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 24th day of February, 2004.

Exhibit 31.1 to 2003 10-K

CERTIFICATION

I, James F. Orr, President and Chief Executive Officer of Convergys Corporation, certify that:

/s/ Zoë Baird

Zoë Baird Director

1. I have reviewed this annual report on Form 10-K of Convergys Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Exhibit 31.2 to 2003 10-K

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 5, 2004 /s/ James F. Orr

James F. Orr President and Chief Executive Officer

CERTIFICATION

I, Earl C. Shanks, Chief Financial Officer of Convergys Corporation, certify that:

1. I have reviewed this annual report on Form 10-K of Convergys Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Exhibit 32.1 to 2003 10-K

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 5, 2004 /s/ Earl C. Shanks

Earl C. Shanks Chief Financial Officer

CERTIFICATION OF PERIODIC FINANCIAL REPORT BY CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Form 10-K for the year ended December 31, 2003 of Convergys Corporation (the “Company”), as filed with the Securities and Exchange Commission on March 5, 2004 (the “Report”), I, James F. Orr, President and Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

March 5, 2004 A signed original of this written statement required by Section 906 has been provided to Convergys Corporation and will be retained by Convergys Corporation and furnished to the Securities and Exchange Commission or its staff upon request. Exhibit 32.2 to 2003 10-K

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James F. Orr

James F. Orr President and Chief Executive Officer

CERTIFICATION OF PERIODIC FINANCIAL REPORT BY CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Form 10-K for the year ended December 31, 2003 of Convergys Corporation (the “Company”), as filed with the Securities and Exchange Commission on March 5, 2004 (the “Report”), I, Earl C. Shanks, Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

March 5, 2004 A signed original of this written statement required by Section 906 has been provided to Convergys Corporation and will be retained by Convergys Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

End of Filing

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(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Earl C. Shanks

Earl C. Shanks Chief Financial Officer