OUTSOURCING SOLUTIONS INC.
Bonus Incentive Compensation Plan Description and Payout Guidelines
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
objectives. 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, 1998 and is intended to run annually
thereafter, concurrent with the Company's fiscal year (January 1 -
December 31).
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 will be eligible for a prorata
incentive payment.
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. While these a wards may be adjusted
when actual performance varies from planned performance, in no case may
the adjustment exceed 150% of target. No awards will be paid when the
Company's consolidated actual performance is 80% or less of the budgeted
plan.
Unbudgeted acquisition impact on target performance will be measured at a
rate of 50% of incrementa EBITDA. Acquisition impac 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 X percent of total target award and will
be determined on the percentage attainment of approved Consolidated
Corporate EBITDA objectives.
Actual vs. Plan* Corporate Performance Adjustment Factor
Less than 80% of Consolidated 0% Nocorporate, business unit, or
individual bonuses will be paid
80% 70% of corporate target bonus
90% 85% of corporate target bonus
100% 100% of corporate target bonus
110% 125% of corporate target bonus
120% or above 150% of corporate target bonus
*Interpolated based on actual results; e.g., 98% actual performance vs.
plan yields 97% of corporate target bonus.
B. Business Unit Criteria: Represent Y percent of total target award and
will be determined on the percentage attainment of approved business
unit EBITDA objectives.
Actual vs. Plan* Business Unit Performance Adjustment Factor
Less than 80% 0% No business unit bonus will be paid
80% 70% of business unit target bonus
90% 85% of business unit target bonus
100% 100% of business unit target bonus
110% 125% of business unit target bonus
120% and above 150% of business unit target bonus
*Interpolated based on actual results; e.g., 98% actual performance vs.
plan yields 97% of business unit target bonus.
C. 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 80% of plan.
D. Computation Examples:
Assume: Vice President eligible for 20% target based on 40% corporate,
40% business unit and 20% individual:
Base Salary: $80,000
Target Award: 20% of base or $16,000
Corporate portion: 40% of $16,000 or $6,400
Business unit portion: 40% of $16,000 or $6,400
Individual portion: 20% of $16,000 or $3,200
Minimum award: 0%
Maximum award: 30% or $24,000
1. Performance Situation #1:
Corporate performance 90% of plan,
payout (85% x 6,400): $ 5,440
Business unit performance 100% of plan,
payout (100% x 6,400): $ 6,400
Individual performance judged 110% of plan,
payout (125% x 3,200): $ 4,000
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$15,840
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2. Performance Situation #2:
Corporate performance 110% of plan,
payout (125% x 6,400): $ 8,000
Business unit performance 100% of plan,
payout (100% x 6,400): $ 6,400
Individual performance judged 90% of plan,
payout (85% x 3,200): $ 2,720
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$17,120
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3. Performance Situation #3:
Corporate performance 100% of plan,
payout (100% x 6,400): $ 6,400
Business unit performance 90% of plan,
payout (85% x 6,400): $ 5,440
Individual performance judged 75% of plan,
payout (0% x 3,200): $ 0
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$11,840
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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
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.