OUTSOURCING SOLUTIONS INC.
YEAR 2000
MANAGEMENT INCENTIVE PLAN
(MIP)
OUTSOURCING SOLUTIONS INC.
Bonus Incentive Compensation Plan Description and Payout Guidelines for 2000
I. Purpose
Outsourcing Solutions Inc. (the Company) has created this Bonus
Incentive Compensation Plan to provide significant cash incentives for
executives, managers, and other key personnel to attain the Company's
EBITDA and certain other business objectives as may be established by
the Chief Executive Officer and/or the Compensation Committee of the
Board of Directors of the Company. The Plan is intended to provide
financial recognition for the results these individuals achieve in
exercising their judgement, initiative and effort.
II. Effective Date
This Plan is effective January 1, 2000, is intended to run annually
thereafter concurrent with the Company's fiscal year (January 1 -
December 31) and is subject to annual review / modification by the Chief
Executive Officer.
III. Participation
Participation in the Plan is limited to executives, managers and
equivalent and key professional personnel. Each year, senior management
of the Company will recommend to the CEO the participants for that year.
Once eligible, persons not employed in a designated position for a full
calendar year will be eligible for incentive payments on a prorata basis
for their period of participation. A person must be employed by
September 30 in order to receive a prorata incentive payment for the
calendar year.
An individual must be on the payroll at December 31 in order to be
eligible to receive an incentive payment for that year. Participants who
terminate employment after December 31 but prior to the date when
payouts are made will not receive an incentive payment except at the
discretion of the CEO. Participants whose employment is terminated
during the year as a result of retirement, disability, or death may be
eligible for a prorata incentive payment and will be at the discretion
of the CEO.
An employee is eligible to participate in only one Company incentive
compensation plan at a time. Individuals participating in commission
plans, override plans, or branch productivity plans are not eligible to
participate in this Plan. Participants in this Plan are not eligible to
participate in any other incentive plan.
IV. Target Bonus Incentive Compensation Awards
Target awards represent the percent of base salary at December 31 that
would be paid when Consolidated Corporate, Business Unit and Individual
objectives are completely fulfilled. Payout will be done based upon the
attainment of the financial and other incentives which will be set
annually as part of the annual budget cycle. These incentives will be
reflected in the format on the attached matrix draft. While these awards
will be determined based on the actual performance of the company
utilizing the attached matrices, in no case will the bonuses exceed 160%
of the target. No awards will be paid when the Company's consolidated
actual performance is less than as indicated on the matrix chart unless
authorized by the CEO and/or the Compensation Committee at which time,
any payouts would be deemed fully discretionary. Bonus payments which
meet the minimum requirements but are less than the maximum payouts will
be interpolated from the respective matrices.
Unbudgeted acquisition impact on target performance will be measured at
a rate of 50% of incremental EBITDA. Acquisition impact on targets will
generally affect only the Consolidated Corporate Portion of the award.
Acquisition impact will affect the Business Unit targets if the acquired
entity becomes a part of the Business Unit.
V. Performance Criteria
A. Corporate Criteria: Represent W percent of total target award and
will be determined on the percentage attainment of approved Con-
solidated Corporate Revenue and EBITDA objectives as determined
annually.
B. Leverage Criteria: Represent X percent of total target award and
will be determined on the level of year-end leverage ratio
attained.
C. Business Unit Criteria: Represent Y percent of total target award
and will be determined on the percentage attainment of approved
business unit Revenue and EBITDA objectives as determined
annually.
D. Individual Criteria: Represent Z percent of total target award
and will be determined based on the attainment of individual
objectives as judged by each participant's supervisor. Individual
objectives will be weighted, with the total weight equal to 100%
of the individual portion (Z) of the total target award. No
corporate, business unit, or individual bonuses will be paid if
actual Consolidated Corporate EBITDA is less than as indicated on
the matrix chart unless authorized by the CEO and/or the
Compensation Committee at which time, any payouts would be deemed
fully discretionary.
E. Objective Mix: Target awards will be determined based upon an
appropriate mix of Corporate, Business Unit(s) and Individual
objectives. In general, the mix of objectives should generally
follow as indicated below. The mix of objectives should consider
the nature and direct financial impact of an individual's
responsibilities as they relate to the overall financial results
of the Company.
Position Corporate Leverage SBU Ind. Group Individual
- -------- --------- -------- --- ---------- ----------
CEO 70% 15% - - 15%
CFO, Corp. SVP's 70% 15% - - 15%
SBU Heads 30% 15% 40% - 15%
Corp. VP's ----------85%--------- - - 15%
SBU Mgmt. 25% 15% ------50%--------- 10%
Staff Mgmt 60 - 70% 30 - 40%
E. Computation Examples:
Assume: SBU Mgmt eligible for 20% target based on 25% Corporate,
15%, Leverage, 50%, Business unit and 10% Individual:
Base Salary: $80,000
Target Award: 20% of base or $16,000
Corporate portion: 25% of $16,000 or $4,000
Leverage portion: 15% of $16,000 or $2,400
Business unit portion: 50% of $16,000 or $8,000
Individual portion: 10% of $16,000 or $1,600
Minimum award: 0%
Maximum award: $25,600
1. Performance Situation #1:
-------------------------
Corporate performance 85% of plan, payout (85% x 4,000): $ 3,400
Leverage performance 80% of plan, payout (80% x 2,400): $ 1,920
Business unit performance 100% of plan, payout (100% x 8,000): $ 8,000
Individual performance judged 110% of plan, payout (110% x 1,600): $ 1,760
--------
$15,080
2. Performance Situation #2:
-------------------------
Corporate performance 115% of plan, payout (115% x 4,000): $ 4,600
Leverage performance 100% of plan, payout (100% x 2,400): $ 2,400
Business unit performance 100% of plan, payout (100% x 8,000): $ 8,000
Individual performance judged 85% of plan, payout (85% x 1,600): $ 1,360
--------
$16,360
3. Performance Situation #3:
-------------------------
Corporate performance 100% of plan, payout (100% x 4,000): $ 4,000
Leverage performance 120% of plan, payout (120% x 2,400): $ 2,880
Business unit performance 85% of plan, payout (85% x 8,000): $ 6,800
Individual performance judged 70% of plan, payout (70% x 1,600): $ 1,120
---------
$14,800
VI. Bonus Incentive Compensation Pool
A Bonus Incentive Compensation Pool will be accrued annually and will be
allocated among participants based on a combination of corporate,
business unit, and individual performance. The size of the pool will be
determined annually based on Company and Business Unit performance
against targets and the base salaries of the participants of the Plan.
VII. Plan Administration
Participation: In December of each year Management will compile a list
of all employees eligible for the following year and submit it for
review and approval by the CEO.
Payouts: Payouts will be made in a single lump sum by March 31 of the
year following the year in which bonuses were earned.
VIII. Management Rights
This Plan replaces all prior bonus incentive compensation plans.
Outsourcing Solutions Inc. reserves the right to alter, amend, suspend,
or terminate this Plan prospectively (and any other variable
compensation plan) at any time without notice and without any future
liability.
Designation of job classification, salary grade, or an individual
neither guarantees the individual a right to a bonus nor a right to
continued employment. The payout guidelines and formulas described in
Section V herein, as well as actual payouts recommended, may be
adjusted, modified, or revised at any time at the discretion of the CEO
subject to approval of the Board of Directors.
An employee who is included in this Plan may be given certain individual
performance objectives to achieve in order in qualifying for any bonus
payment. Such objectives, and the standards by which achievement is
measured, may vary from job-to-job, and will be determined at the start
of each calendar year through discussions between the employee's
supervisor and the employee, and must be approved by the supervisor's
supervisor. Approved individual performance objectives must be submitted
in writing to the CEO for approval no later than January 31 of the
calendar year for which they apply. Such individual performance
objectives may be reviewed and modified by meeting and co-signed
agreement of the employee and the employee's supervisor at any time
during the calendar year.
Outsourcing Solutions Inc.
Corporate Matrix Year 2000
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
REVENUES
$505.0 $539.0 $572.5 $606.0 $640.0
Adjusted Budget
EBITDA *
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$75.0 .40 .55 .70 .85 1.0
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$83.4 .55 .70 .85 1.0 1.15
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$91.8 .70 .85 1.0 1.15 1.3
Budget
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$100.2 .85 1.0 1.15 1.3 1.45
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$108.6 1.0 1.15 1.3 1.45 1.6
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
* Adjusted EBITDA is calculated as EBITDA less portfolio amortization.
Outsourcing Solutions Inc.
Contingency Matrix Year 2000
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
REVENUES
$370.0 $387.5 $405.1 $422.7 $440.2
Adjusted Budget
EBITDA
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$62.0 .40 .55 .70 .85 1.0
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$66.5 .55 .70 .85 1.0 1.15
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$71.7 .70 .85 1.0 1.15 1.3
Budget
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$76.9 .85 1.0 1.15 1.3 1.45
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$81.4 1.0 1.15 1.3 1.45 1.6
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Outsourcing Solutions Inc.
Outsourcing Matrix Year 2000
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
REVENUES
$75.0 $85.0 $94.8 $104.6 $114.6
Adjusted Budget
EBITDA
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$9.0 .40 .55 .70 .85 1.0
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$10.8 .55 .70 .85 1.0 1.15
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$12.7 .70 .85 1.0 1.15 1.3
Budget
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$14.6 .85 1.0 1.15 1.3 1.45
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$16.4 1.0 1.15 1.3 1.45 1.6
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Outsourcing Solutions Inc.
Portfolio Matrix Year 2000
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
REVENUES
$70.0 $79.0 $88.3 $97.6 $106.6
Adjusted
EBITDA
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$12.0 .40 .55 .70 .85 1.0
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$14.0 .55 .70 .85 1.0 1.15
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$16.0 .70 .85 1.0 1.15 1.3
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$18.0 .85 1.0 1.15 1.3 1.45
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
$20.0 1.0 1.15 1.3 1.45 1.6
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
Outsourcing Solutions Inc.
Leverage Matrix Year 2000
- ----------------------- ---------- -------------- ------------- ------------- ------------ ------------ ------------
Maximum Leverage Ratio
Total Net Debt/EBITDA
4.99 4.75 4.50 4.25 4.00 3.75 3.50
- ----------------------- ---------- -------------- ------------- ------------- ------------ ------------ ------------
Total Maximum Net Debt
(In Millions) $513 $505 $497 $490 $480 $468 $455
- ----------------------- ---------- -------------- ------------- ------------- ------------ ------------ ------------
Bonus
Payout .40 .60 .80 1.00 1.20 1.40 1.60
- ----------------------- ---------- -------------- ------------- ------------- ------------ ------------ ------------
Indebtedness includes: Senior Bank Debt, Sub Debt, Capital Leases, Letters of Credit less cash on hand