OUTSOURCING SOLUTIONS INC.
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT [C]
This Agreement (the "Agreement"), dated [ ] , 1996, is made
between Outsourcing Solutions Inc. (the "Company") and Timothy G. Beffa (the
"Optionee"). All capitalized terms that are not defined herein shall have the
meaning as defined in the Outsourcing Solutions Inc. 1995 Stock Option and Stock
Award Plan, as amended (the "Plan"). References to "he," "him," and "his" shall
mean the feminine form of such terms, when applicable.
W I T N E S S E T H :
1. Grant of Option. Pursuant to the provisions of the Plan, the
Company hereby grants to the Optionee, subject to the terms and conditions of
the Plan and subject further to the terms and conditions herein set forth, the
right and option to purchase from the Company, all or any part of an aggregate
of 41,555.21 shares of $0.01 par value common stock of the Company (the "Stock")
at a per share purchase price equal to $12.50 (the "Option"), such Option to be
exercisable as hereinafter provided. The Option shall not be treated as an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended.
2. Terms and Conditions. It is understood and agreed that the
Option evidenced hereby is subject to the following terms and conditions:
(a) Expiration Date. The Option shall expire ten (10) years
after the date indicated above.
(b) Exercise of Option. Subject to the other terms of this
Agreement and the Plan, the Option may be exercised on or after the date which
is eight years from the date hereof; provided, however, that notwithstanding any
other provision of this Agreement, the Option shall only be cumulatively
exercisable with respect to an aggregate number of shares of Stock equal to 2.5%
of the number of shares of Stock, if any, issued by the Company from time to
time, prior to the expiration date of the Option, upon conversion by the holders
thereof of the Company's Preferred Stock and provided further that, subject to
the preceding clause, such Option shall become exercisable (i) with respect to
fifty percent (50%) of the shares of Stock subject to the Option on or after the
satisfaction by the Company of such reasonable performance targets as are
established in good faith by the Committee or the Board in writing on or before
December 31 of each year for the next succeeding year, as set forth in a
resolution of the Committee or the Board (as applicable), as to that percentage
of the total shares of Stock covered by this Option set forth on Schedule I
attached hereto and (ii) with respect to the remaining fifty percent (50%) of
the shares of Stock subject to the Option upon the occurrence of a Liquidation
Event, as defined on Schedule I attached hereto, subject to the achievement by
the Company of internal rate of return targets as set forth on such Schedule I,
plus any shares of Stock as to which the Option could have been exercised prior
to satisfaction of such conditions in (i) and/or (ii) in a particular year (if
any) but was not so exercised. Notwithstanding the foregoing, the Option shall
become fully exercisable as to those shares of Stock referred in clause (i)
above immediately upon the occurrence of a Change in Control (as defined in
Section 3 below).
Any exercise of all or any part of this Option shall be
accompanied by a written notice to the Company specifying the number of shares
of Stock as to which the Option is being exercised. Notation of any partial
exercise shall be made by the Company on Schedule II attached hereto.
(c) Consideration. At the time of any exercise of the Option, the
purchase price of the shares of Stock as to which the Option shall be exercised
shall be paid to the Company (i) in cash, (ii) with Stock already owned for at
least eight months by the Optionee having a total fair market value, as
determined in accordance with Section 6(a) of the Plan ("Fair Market Value"),
equal to the purchase price of such Stock, or (iii) a combination of cash and
Stock (such Stock having already been owned for at least eight months by the
Optionee) having a total Fair Market Value, as so determined, equal to the
purchase price of such Stock.
(d) Exercise Upon Death, Disability or Termination of Employment.
(i) In the event of the death of the Optionee while an employee of the Company
or a subsidiary of the Company, the Option, to the extent such Option would be
exercisable in accordance with Section 2(b) hereof as of the date of his death,
may be immediately exercised after his death by the legal representative of the
Optionee's estate or by the legatee of the Optionee under his last will for a
period of two years from the date of his death or until the expiration of the
stated period of the Option, whichever period is the shorter.
(ii) If the Optionee's employment with the Company or a
subsidiary of the Company shall terminate by reason of permanent disability (as
defined in the last sentence of this Section 2(d)(ii)), his Option, to the
extent exercisable in accordance with Section 2(b) hereof as of the date of such
termination, may be immediately exercised after such termination of employment
but may not be exercised after the expiration of the period of one year from the
date of such termination of employment or of the stated period of the Option,
whichever period is the shorter; provided, however, that if the Optionee dies
within a period of one year from the date of such termination of employment, any
unexercised Option, to the extent exercisable in accordance with Section 2(b)
hereof as of the date of such termination, may be exercised after his death by
the legal representative of his estate or by the legatee of the Optionee under
his last will until the expiration of the period of two years from the date of
his death or of the stated period of the Option, whichever period is the
shorter. For purposes of this Agreement, "permanent disability" shall mean an
inability (as determined by the Committee) to perform duties and services as an
employee of the Company or a subsidiary of the Company by reason of a medically
determinable physical or mental impairment, supported by medical evidence, which
can be expected to last for a continuous period of not less than eight (8)
months.
(iii) If (A) the Company or a subsidiary of the Company
terminates the Optionee's employment with the Company or such subsidiary and
such termination is not "for cause" (as defined in Section 2.5(d) of the
Stockholders Agreement, dated as of September 21, 1995, as amended and restated
on January 10, 1996 and on February 16, 1996 and as may be further amended from
time to time, by and among Outsourcing Solutions Inc., the MDC Entities (as
defined therein), APT (as defined therein), the Management Stockholders (as
defined therein) and the Non-Management Stockholders (as defined therein) (as
amended, the "Stockholders Agreement")) or (B) the Optionee terminates
employment with the Company or such subsidiary for "good reason" (as defined in
Section 2.5(c) of the Stockholders Agreement), the Optionee's Option, to the
extent such Option would have been exercisable in accordance with Section 2(b)
hereof as of the date of such termination, may thereafter be immediately
exercised but may not be exercised after the expiration of the period of one
year from the date of such termination of employment or of the stated period of
the Option, whichever period is the shorter; provided, however, that if the
Optionee dies within a period one year from the date of such termination of
employment, any unexercised Option, to the extent such Option would have been
exercisable in accordance with Section 2(b) hereof as of the date of such
termination, may thereafter be exercised by the legal representative of his
estate or by the legatee of the Optionee under his last will until the
expiration of the period of two years from the date of his death or of the
stated period of the Option, whichever period is the shorter.
(iv) If the Optionee's employment with the Company or a
subsidiary of the Company is terminated by reason of the Optionee's retirement
after attaining both five (5) years of continuous service with the Company or a
subsidiary of the Company and 59 1/2 years of age, to the extent exercisable in
accordance with Section 2(b) hereof as of the date of such termination, such
Option may thereafter be immediately exercised but may not be exercised after
the expiration of the period of two (2) years from the date of such termination
of employment or of the stated period of the Option, whichever period is the
shorter; provided, however, that if the Optionee dies within a period of two (2)
years from the date of such termination of employment, any unexercised Option,
to the extent exercisable in accordance with Section 2(b) hereof as of the date
of such termination, may thereafter be exercised by the legal representative of
his estate or by the legatee of the Optionee under his last will until the
expiration of the period of two years from the date of his death or of the
stated period of the Option, whichever period is the shorter.
(v) If the Optionee's employment is terminated by the Company or
a subsidiary of the Company "for cause" (as defined in Section 2.5(d) of the
Stockholders Agreement) or if the Optionee's employment is terminated for any
reason not described in this Section 2(d), the Optionee's Option shall terminate
on the date of such termination.
(e) Nontransferability. This Option shall not be transferable
other than by will or by the laws of descent and distribution.
(f) Withholding Taxes. If required by applicable law, the
Optionee shall be required to pay withholding taxes, if any, to the Company in
cash at the time of receipt of Stock upon the exercise of all or any part of
this Option; provided, however, tax withholding obligations may be met by the
withholding of Stock otherwise deliverable to the Optionee pursuant to
procedures approved by the Committee; provided further, however, the amount of
Stock so withheld shall not exceed the minimum required withholding obligation.
In no event shall Stock be delivered to any Optionee until he has paid to the
Company in cash the amount of tax required to be withheld by the Company under
applicable law, if any, or has elected to have such tax withholding obligations,
if any, met by the withholding of Stock in accordance with procedures approved
by the Committee.
(g) No Rights as Stockholder. The Optionee shall have no dividend
rights or any other rights as a stockholder with respect to any shares of Stock
subject to the Option until he has given written notice of exercise of the
Option and paid in full for such shares.
(h) No Right to Continued Employment. This Option shall not
confer upon the Optionee any right with respect to continuance of employment by
the Company or a subsidiary of the Company, nor shall it interfere in any way
with the right of the Company or such a subsidiary to terminate his employment
at any time.
(i) Inconsistency with Plan. Notwithstanding any provision herein
to the contrary, this Option provides the Optionee with no greater rights or
claims than are specifically provided for under the Plan. If and to the extent
that any provision contained herein is inconsistent with the Plan, the Plan
shall govern.
(j) Compliance with Laws, Regulations, Stockholders Agreement,
Etc. This Option and the obligation of the Company to sell and deliver shares of
Stock hereunder, shall be subject to (i) all applicable federal and state laws,
rules and regulations, (ii) any registration, qualification, approvals or other
requirements imposed by any government or regulatory agency or body which the
Committee shall, in its sole discretion, determine to be necessary or applicable
and (iii) the terms of the Stockholders Agreement in all respects. Moreover,
this Option may not be exercised if its exercise, or the receipt of shares of
Stock pursuant thereto, would be contrary to applicable law.
3. Change in Control. For purposes of this Agreement, a "Change
in Control" shall be deemed to have occurred if a "Sale of the Business," as
defined in and contemplated by Section 2.4 of the Stockholders Agreement shall
have occurred.
4. Investment Representation. If at the time of exercise of all
or part of this Option the Stock is not registered under the Securities Act of
1933, as amended (the "Securities Act"), and/or there is no current prospectus
in effect under the Securities Act with respect to the Stock, the Optionee shall
execute, prior to the issuance of any shares of Stock to the Optionee by the
Company, an agreement (in such form as the Committee may specify) in which the
Optionee represents and warrants that the Optionee is purchasing or acquiring
the shares acquired under this Agreement for the Optionee's own account, for
investment only and not with a view to the resale or distribution thereof, and
represents and agrees that any subsequent offer for sale or distribution of any
of such shares shall be made only pursuant to either (i) a registration
statement on an appropriate form under the Securities Act, which registration
statement has become effective and is current with regard to the shares being
offered or sold, or (ii) a specific exemption from the registration requirements
of the Securities Act, but in claiming such exemption the Optionee shall, prior
to any offer for sale or sale of such shares, obtain a prior favorable written
opinion, in form and substance satisfactory to the Committee, from counsel for
or approved by the Committee, as to the applicability of such exemption thereto.
5. Disposition of Stock. Any shares of Stock received by the
Optionee upon exercise of this Option (or any interest or right in such shares)
cannot be sold, assigned, pledged or transferred in any manner except as
permitted by the Stockholders Agreement.
6. Optionee Bound by Plan; Stockholders Agreement. The Optionee
hereby acknowledges receipt of a copy of the Plan and the Stockholders Agreement
and agrees to be bound by all of the terms and provisions thereof, including the
terms and provisions adopted after the granting of this Option but prior to the
complete exercise hereof, subject to the last paragraph of Section 16 of the
Plan as in effect on the date hereof.
7. Notices. Any notice hereunder to the Company shall be
addressed to it at c/o McCown De Leeuw & Co., 101 East 52nd Street, 31st Floor,
New York, New York 10022, Attention: David King, and any notice hereunder to the
Optionee shall be addressed to him at 2015 Kings Pointe Drive, St. Louis,
Missouri 63005, subject to the right of either party to designate at any time
hereafter in writing some other address.
8. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
9. Counterparts. This Agreement has been executed in two
counterparts each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Outsourcing Solutions Inc. has caused this
Agreement to be executed by an appropriate officer and the Optionee has executed
this Agreement, both on the day and year first above written.
OUTSOURCING SOLUTIONS INC.
By:
---------------------------------
Title:
------------------------------
OPTIONEE
________________________(L.S.)
SCHEDULE I
Subject to paragraph (b) of Section 2 of the Agreement, the Option will vest and
become exercisable in accordance with paragraph (1) below with respect to fifty
percent (50%) of the shares of Stock subject to the Option and the Option will
vest and become exercisable in accordance with paragraph (2) below with respect
to the remaining fifty percent (50%) of the shares of Stock subject to the
Option.
(1) With respect to 50% of the shares of Stock subject to the
Option: Subject to the achievement of annual performance targets established by
the Board of Directors of the Company (the "Board") or the Committee (as defined
in the Agreement) in consultation with management, this portion of the Option
will vest evenly on an annual basis over five (5) years beginning on the date of
the Agreement, i.e., with respect to 20% of the total number of shares subject
to this portion of the Option in each year (the "Annual Option Allocation").
50% of the Annual Option Allocation not vested in any year would be subject to
catch-up vesting in the immediately following year, based upon the achievement
of the performance targets applicable to such immediately following year, and to
the extent such Annual Option Allocation does not vest in such immediately
following year, it shall be forfeited and the Option shall never be exercisable
with respect to the shares covered by such unvested portion of such Annual
Option Allocation; provided, however, that, notwithstanding the foregoing, the
Option may become exercisable with respect to such shares to the extent
otherwise provided in paragraph (b) of Section 2 of the Agreement.
(2) With respect to 50% of the shares of Stock subject to the
Option: This portion of the Option will vest upon the occurrence of a
"Liquidation Event" (as defined below), subject to the achievement by the
Company of McCown De Leeuw & Co. ("MDC") internal rate of return ("IRR") targets
according to the schedule set forth below :
================================================================================
Year
-------------------------------------------------------------------
1 2 3 4 5
-------------------------------------------------------------------
25.00% 0.00% 0.00% 0.00% 20.00% 40.00%
-------------------------------------------------------------------
30.00% 0.00% 0.00% 20.00% 40.00% 60.00%
-------------------------------------------------------------------
MDC IRR* 35.00% 0.00% 20.00% 40.00% 60.00% 80.00%
-------------------------------------------------------------------
40.00% 20.00% 40.00% 60.00% 80.00% 100.00%
-------------------------------------------------------------------
45.00% 40.00% 60.00% 80.00% 100.00%
-------------------------------------------------------------------
50.00% 60.00% 80.00% 100.00%
-------------------------------------------------------------------
55.00% 60.00% 100.00%
-------------------------------------------------------------------
75.00% 80.00%
-------------------------------------------------------------------
100.00% 100.00%
===================================================================
*After giving effect to exercise of management options.
===================================================================
For purposes of this Agreement, "Liquidation Event" shall mean a sale by MDC of
any of its shares of common stock of the Company to an unaffiliated third party
(including, without limitation, in a public offering). Upon a Liquidation Event
in which MDC sells less than all of its shares of common stock of the Company,
this portion of the Option will partially vest and become exercisable, in
accordance with the foregoing schedule, on a ratable basis based upon the
proportion of MDC shares sold in the Liquidation Event relative to the total
number of shares owned by MDC immediately prior to the Liquidation Event.
SCHEDULE II
NOTATIONS AS TO PARTIAL EXERCISE
- - --------------- --------------- ---------------- ---------------- --------------
Number of Balance of
Date of Purchased Shares on Authorized Notation
Exercise Shares Option Signature Date
- - --------------- --------------- ---------------- ---------------- --------------
- - --------------- --------------- ---------------- ---------------- --------------
- - --------------- --------------- ---------------- ---------------- --------------
- - --------------- --------------- ---------------- ---------------- --------------
- - --------------- --------------- ---------------- ---------------- --------------
- - --------------- --------------- ---------------- ---------------- --------------
- - --------------- --------------- ---------------- ---------------- --------------
- - --------------- --------------- ---------------- ---------------- --------------
- - --------------- --------------- ---------------- ---------------- --------------