OUTSOURCING SOLUTIONS INC.
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Management Incentive Compensation Plan Description and Payout Guidelines
I. Purpose
Outsourcing Solutions Inc. (the Company) has created this Management
Incentive Compensation Plan (Plan) to provide significant cash
incentives for executives, managers, and other key personnel to attain
the Revenue and Company's EBITDA or EBITDA, after Portfolio
Amortization, if applicable and certain other business objectives as
may be established by the Chief Executive Officer (CEO) and/or the
Compensation Committee of the Board of Directors of the Company. The
Plan is intended to provide financial recognition for the results
these individuals achieve in exercising their judgement, initiative
and effort.
II. Effective Date
This Plan is effective January 1, 2001, is intended to run annually
thereafter concurrent with the Company's fiscal year (January 1 -
December 31) and is subject to annual review / modification by the
Chief Executive Officer.
III. Participation
Participation in the Plan is limited to executives, managers and
equivalent and key professional personnel. Each year, senior
management of the Company will recommend to the CEO the participants
for that year.
Once eligible, persons not employed in a designated position for a
full calendar year will be eligible for incentive payments on a
prorata basis for their period of participation. During the plan year,
a person moving into a designated incentive position must be in that
capacity by September 30 in order to receive a prorata incentive
payment for the calendar year.
An individual must be on the payroll at December 31 in order to be
eligible to receive an incentive payment for that year. Participants
who terminate employment after December 31 but prior to the date when
payouts are made will not receive an incentive payment except at the
discretion of the CEO. Participants whose employment is terminated
during the year as a result of retirement, disability, or death may be
eligible for a prorata incentive payment and will be at the discretion
of the CEO.
An employee is eligible to participate in only one Company incentive
compensation plan at a time. Individuals participating in commission,
override, or branch productivity plans are not eligible to participate
in this Plan. Participants in this Plan are not eligible to
participate in any other incentive plan nor given discretionary
bonuses throughout the plan year.
IV. Target Bonus Incentive Compensation Awards
Target awards represent the percent of base salary at December 31 (end
of plan year) that would be paid when Consolidated Corporate, Business
Unit and Individual objectives are completely fulfilled. Payout will
be done based upon the attainment of the financial and other
incentives which will be set annually as part of the annual budget
cycle. These incentives will be reflected in the format on the
attached matrices. Bonuses payable pursuant to this Plan will be
calculated (in whole numbers) by determining the appropriate payout
from the applicable matrices. The appropriate percentage will be an
absolute percentage from the matrices and will not be an interpolation
from the matrices. While these awards will be determined based on the
actual performance of the company utilizing the attached matrices, in
no case will the bonuses exceed 160% of the target.
In general, subject to the discretion of the CEO, no corporate,
leverage, business unit, or individual bonuses will be paid if actual
Consolidated Corporate Revenue and EBITDA after Portfolio Amortization
is less than as indicated on the matrix chart.
Unbudgeted acquisition impact on target performance will be measured
at a rate of 50% of incremental Revenue and EBITDA or EBITDA, after
Portfolio Amortization. Acquisition impact on targets will generally
affect only the Consolidated Corporate Portion of the award.
Acquisition impact will affect the Business Unit targets if the
acquired entity becomes a part of the Business Unit.
V. Performance Criteria
A. Corporate Criteria: Represent W percent of total target award and
will be determined on the percentage attainment of approved
Consolidated Corporate Revenue and EBITDA less Portfolio Amortization
objectives as determined annually.
B. Leverage Criteria: Represent X percent of total target award and
will be determined on the level of year-end leverage ratio attained.
C. Business Unit Criteria (SBU & Ind. Group): Represent Y percent of
total target award and will be determined on the percentage attainment
of approved business unit Revenue and EBITDA or EBITDA less Portfolio
Amortization objectives as determined annually.
D. Individual Criteria: Represent Z percent of total target award and
will be determined based on the attainment of individual objectives as
judged by each participant's supervisor subject to approval and/or
adjustment by the CEO. Individual objectives will be weighted, with
the total weight equal to 100% of the individual portion (Z) of the
total target award.
E. Objective Mix: Target awards will be determined based upon an
appropriate mix of Corporate, Leverage, Business Unit(s) and
Individual objectives as approved by the CEO. The mix of objectives
should consider the nature and direct financial impact of an
individual's responsibilities as they relate to the overall financial
results of the Company. Performance criteria mix will be represented
in whole number percentages and must total 100%. No more than 50% can
be placed in the Individual criteria unless approved by the CEO. In
the majority of cases, criteria mix should be consistent among like
jobs.
F. Computation Examples:
Assume: SBU Mgmt eligible for 20% target based on 10% Corporate,
10%, Leverage, 60%, Business unit and 20% Individual:
Base Salary: $80,000
Target Award: 20% of base or $16,000
Corporate portion: 10% of $16,000 or $1,600
Leverage portion: 10% of $16,000 or $1,600
Business unit portion: 60% of $16,000 or $9,600
Individual portion: 20% of $16,000 or $3,200
Minimum award: 0%
Maximum award: $25,600
1. Performance Situation #1:
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Corporate performance 85%
of plan,payout (85% x1,600): $ 1,360
Leverage performance 80%
of plan,payout (80% x 1,600): $ 1,280
Business unit performance 100%
of plan, payout (100% x 9,600): $ 9,600
Individual performance judged 110%
of plan, payout (110% x 3,200): $ 3,520
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$ 15,760
2. Performance Situation #2:
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Corporate performance 115%
of plan, payout (115% x1,600): $ 1,840
Leverage performance 100%
of plan, payout (100% x 1,600): $ 1,600
Business unit performance 100%
of plan, payout (100% x 9,600): $ 9,600
Individual performance judged 85%
of plan, payout (85% x 3,200): $ 2,720
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$ 15,760
3. Performance Situation #3:
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Corporate performance 100%
of plan, payout (100% x 1,600): $ 1,600
Leverage performance 120%
of plan, payout (120% x 1,600): $ 1,920
Business unit performance 85%
of plan, payout (85% x 9,600): $ 8,160
Individual performance judged 70%
of plan, payout (70% x 3,200): $ 2,240
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$ 13,920
VI. Bonus Incentive Compensation Pool
A Bonus Incentive Compensation Pool will be accrued annually and will
be allocated among participants based on a combination of corporate,
leverage, business unit, and individual performance. The size of the
pool will be determined annually based on Company and Business Unit
performance against targets and the base salaries of the participants
of the Plan.
VII. Plan Administration
Participation: In December of each year Management will compile a list
of all employees eligible for the following year and a recommended
performance criteria mix for each and submit it for review and
approval by the CEO.
Changes to Performance Criteria Mix: Changes to an individual's Target
% of Base or Performance Criteria Mix must have prior approval from
the appropriate Senior Executive and CEO.
Payouts: Payouts will be made in a single lump sum by March 31 of the
year following the year in which bonuses were earned. Tax regulations
(e.g. federal, state, county, local) for lump sum distribution will
apply.
VIII. Management Rights
This Plan replaces the 2000 Management Incentive Plan. Outsourcing
Solutions Inc. reserves the right to alter, amend, suspend, or
terminate this Plan prospectively (and any other variable compensation
plan) at any time without notice and without any future liability.
Designation of job classification, salary grade, or an individual
neither guarantees the individual a right to a bonus nor a right to
continued employment. The payout guidelines and formulas described in
Section V herein, as well as actual payouts recommended, may be
adjusted, modified, revised or eliminated at any time at the
discretion of the CEO subject to approval of the Compensation
Committee of the Board of Directors.
An employee who is included in this Plan may be given certain
individual performance objectives to achieve in order to qualify for
any bonus payment. Such objectives, and the standards by which
achievement is measured, may vary from job-to-job, and will be
determined early each calendar year through discussions between the
employee's supervisor and the employee, and must be approved by the
supervisor's supervisor. Approved individual performance objectives
must be submitted in writing to the CEO for approval no later than the
later of (i) March 31 or (ii) 30 days following the date the
participant is selected to participate in the Plan of the calendar
year for which they apply. Such individual performance objectives may
be reviewed and modified by meeting and co-signed agreement of the
employee and the employee's supervisor at any time during the calendar
year.