Document:

Exhibit 10

 

EXHIBIT 10.53

 

EXTENDED EMPLOYMENT AGREEMENT

 

THIS EXTENDED EMPLOYMENT AGREEMENT, entered into

and effective December 17, 2001, by and between , INC., a North Carolina corporation (the “Company”) and DAVID L. TURNEY (the “Employee”).

 

WHEREAS, the Company

employed the Employee on a full-time basis as our Chief Executive Officer

effective January 1, 1998; 

 

WHEREAS, the Company desires

to extend and modify that Employment Agreement as set forth herein;

 

WHEREAS, Employee desires to

continue to be employed by the Company, from and after the date of this

Agreement;

 

WHEREAS, this Extended

Employment Agreement continues the nondisclosure, noncompetition and other

significant secrecy agreements; and

 

WHEREAS, Employee agrees

that the four (4) year extension of employment and increased compensation and

other modifications given herein are significant consideration for the

provisions of this Extended Employment Agreement.

 

NOW, THEREFORE, in

consideration of the mutual covenants contained herein, the parties agree as

follows:

 

ARTICLE I

EMPLOYMENT DUTIES AND BENEFITS

 

Section

1.1  Employment.  The Company

hereby continues to employ the Employee in the position described on Schedule 1

hereto as an executive officer of the Company. 

The Employee accepts such continued employment and agrees to perform the

duties and responsibilities assigned to him pursuant to this Agreement upon the

terms and conditions set forth in this Agreement.

 

Section

1.2  Duties and Responsibilities. 

The Employee shall hold the position with the Company which is specified

on Schedule 1, which is attached hereto and incorporated herein by

reference.  The Employee is employed

pursuant to the terms of this Agreement and agrees to devote full-time to the

business of the Company.  The Employee

shall perform the duties set forth on Schedule 1, and such further duties

consistent with Employee’s position as defined herein as may be determined and

assigned to him from time-to-time by the Board of Directors of the

Company.  Further, Employee shall be

nominated during the term hereunder for a seat on the Board of Directors and

his annual re-election shall be recommended to the shareholders for their

approval so long as this Agreement is in effect.

 

Section

1.3  Working Facilities.  The

Employee shall be furnished with facilities in Dallas and collateral services

suitable to the position and adequate for the performance of Employee’s duties

under this Agreement.

 

Section

1.4  Vacations.  The Employee

shall be entitled each year to a reasonable vacation of not less than three (3)

weeks in accordance with the established practices of the Company now or

hereafter in effect for executive personnel, during which time the Employee’s

compensation shall be 

 

 

paid in full.  Employee shall be permitted to carryover up to twelve (12) weeks

of accrued but unused vacation.

 

Section 1.5  Term.  The term of this Extended Employment

Agreement is for a period of four (4) years commencing on the effective date

specified above, unless otherwise terminated as provided in this Agreement.

 

Section

1.6  Expenses.  The Employee

is authorized to incur reasonable expenses for promoting the domestic and

international business of the Company in all respects, including expenses for

entertainment, travel and similar items. 

The Company will pay, within the policies and guidelines established by

the Board of Directors, all reasonable expenses incurred by Employee in the

conduct of Company business and discharge of duties hereunder, including but

not limited to, dues and fees of business, civic, social, and professional

societies and organizations, the expense of attending business and professional

meetings, conventions, and institutions, and the cost of all business and

professional books and periodicals.  The

Company will reimburse the Employee for all such expenses upon the presentation

by the Employee, from time-to-time, of an itemized account of such

expenditures.

 

Section

1.7  Automobile.  The Company

will purchase or lease in its own name every three (3) years, or more

frequently at Employer’s option, a new automobile.

 

Section

1.8  Employee’s Other Business. 

Employee shall be allowed to participate in outside business activities

provided (i) such activities do not interfere with Employee’s performance of

his duties as a full-time employee of the Company; and (ii) the outside

business is not a “Business Opportunity” of the Company, as defined

herein.  A Business Opportunity of the

Company shall be a product, service, investment, venture or other opportunity

which is either:

 

(a)  directly related to or within the scope of

the existing business of the Company; or

 

(b)  Within the logical scope of the business of

the Company, as such scope may be expanded or altered from time-to-time by the

Board of Directors.

 

ARTICLE II

COMPENSATION

 

Section

2.1  Base Salary.  The

Company shall pay to the Employee a base salary of not less than the amount

specified on Schedule 1, such salary to be paid in accordance with Company’s

payroll policy then in effect.  This

amount will be reviewed annually for consideration of increase in the

discretion of the Compensation Committee for approval by the Board of Directors

on the basis of the value of such Employee’s services to the Company and market

competitive considerations.

 

Section

2.2  Bonus. In addition to the basic compensation described in

Section 2.1 above, the Company may pay to the Employee an additional sum during

each year of employment as a bonus as proposed in the discretion of the

Compensation Committee and approved by the Board of Directors and may discretionarily

grant additional stock options.

 

Section

2.3  Option Grants.  Employee

shall have received the Option Grants set forth on Schedule 1 and shall also be

eligible for future grants as provided by the Compensation Committee.

 

2

 

ARTICLE III

TERM OF EMPLOYMENT AND TERMINATION

 

Section

3.1  Term.  This Agreement

shall be for a term which is specified on Schedule 1, commencing on its

effective date, subject, however, to termination during such period as provided

in this Article.  After the term, this

Agreement shall be renewed automatically for succeeding periods of one (1) year

each on the same terms and conditions as contained in this Agreement unless

either the Company or the Employee shall, at least 180 days prior to the

expiration of the initial term or of any renewal term, give written notice of

the intention not to renew this Agreement. 

Such renewals shall be effective in subsequent years on the same day of

the same month as the original effective date of this Agreement.

 

Section

3.2  Termination by Either Company or Employee Without Cause.  Subject to other clauses in this Section 3,

the Company or Employee, without cause, may terminate this Agreement upon

ninety (90) days’ written notice to the other.  In either event, the Employee shall not be required to render the

services required under this Agreement during the ninety (90) day period;

however, normal salary and benefits shall continue.  Compensation for vacation time not taken by Employee shall be paid

to the Employee at the date of termination. 

With regard to all options vested or unvested, under any Stock Option

Plan in effect, all outstanding options shall vest immediately if the Company

terminates Employee’s employment without cause.  If Employee terminates without cause, all unvested options shall

be forfeited; but Employee shall retain any vested options.

 

Section

3.3  Termination by the Company with Cause.  The Company may terminate the Employee, at

any time, upon 30 days’ written notice and opportunity for Employee to remedy

any non-compliance with the terms of this Agreement, by reason of the willful

misconduct of the Employee which results in a material financial loss or other

detriment to the Company, as expressed in the written opinion of the Board of

Directors.  Termination for cause shall

result in immediate forfeiture of Employee’s right to receive future salary,

accrued bonus and other future benefits as may be granted herein.  Employee shall receive any accrued vacation,

earned salary, and any reimbursements or payments pursuant to Section 1.6 supra.  Employee shall only be allowed to retain any

vested options; all others shall be forfeited.

 

Section

3.4  Termination by the Employee with Cause.  The Employee may terminate his employment with

the Company at any time, upon 30 day’s written notice and opportunity for the

Company to remedy any non-compliance, by reason of (i) our material failure to

perform its duties pursuant to this Agreement, or (ii) any material change in

the duties and responsibilities, working facilities, or benefits as described

in Article I of this Agreement.  With

regard to all options, vested or unvested, under any Stock Option Plan in

effect, all outstanding options shall vest immediately if Employee terminates

his employment with cause.

 

Section

3.5  Termination upon Death of Employee.  In addition to any other provision relating to termination, this

Agreement shall terminate upon the Employee’s death.  A severance allowance equal to 180 days of salary continuation shall

be paid to the Employee’s estate pursuant to regularly scheduled salary

payments, all benefits shall be continued to the surviving spouse for the same

period, and all options held by Employee shall vest and be exercisable pursuant

to any outstanding Employee Stock Option Plan.

 

Section

3.6  Lump Sum Compensation and Continuation of Benefits.  In the event the Employee shall terminate

this Agreement pursuant to Section 3.4 of this Agreement, or in the event the

Company or Employee shall terminate this Agreement under Section 3.2 hereof

then, in such

 

3

 

event, the Employee shall be entitled to

receive the following on the date of such termination or, as the case may be,

as specified below:

 

(i)  The Employee shall receive lump sum

compensation equal to 180 days worth of Base Salary, unless Employee terminates

voluntarily pursuant to Section 3.2 in which case no compensation shall be

paid.

 

(ii)  For a period of 6 months from the date of

the Employee’s termination or resignation, the Employee shall be entitled to

continue to participate, at our cost, in all existing benefit plans provided to

our executive employees at the time of the Employee’s termination or

resignation, unless specifically prohibited by said plan.  Such plans shall include, but are not

limited to, then-existing medical, health, disability, life insurance and death

benefit plans.

 

(iii)  Within 90 days of the Employee’s termination

or resignation, the Employee shall have the right, but not the obligation, to

purchase any life insurance policy now maintained by the Company on the life of

the Employee.  The purchase price of

such life insurance policy shall be equivalent to 105% of the cash surrender

value of such life insurance policy. 

The Employee, at his option, shall have the right to pay such purchase

price in the form of Common Shares of the Company which shall be valued at the

market close price of such Common Shares on the date of purchase of such life

insurance policy.

 

(iv)  All outstanding options under any Employee

Stock Option Plan shall vest pursuant to the specific provisions of Sections

3.2 and 3.4.

 

(v)  Notwithstanding any language to the contrary

above, the Company shall not be obligated to pay Employee any compensation

specified in this Section 3.6 in the event termination is a direct result of

liquidation of the Company by action of the Board of Directors or shareholders

of the Company pursuant to a bankruptcy (voluntary or involuntary),

receivership or any credit-enforced action.

 

(vi)  In the event of the occurrence of a

“Triggering Event” which shall be defined to include a (i) change in ownership

in one or a series of transactions of 50% or more of the outstanding shares of

the Company, or (ii) merger, sale, consolidation, re-organization or

liquidation of the Company, and following such Triggering Event the Employee’s

services are terminated by the Company or the Employee or the Employee’s

duties, authority or responsibilities are substantially changed, or the

Employee is unable to negotiate a satisfactory new employment agreement, the

Employee shall receive lump sum compensation equal to 2.9 times his annual

salary and incentive or bonus payments, if any, as shall have been paid to the

Employee during our most recent 12-month period ending within 30 days of the

Triggering Event.  If the total amount

of the change of control compensation were to exceed three (3) times the

Employee’s base amount (the average annual taxable compensation of the Employee

for the five (5) years preceding the year in which the change of control

occurs), the Company and the Employee may agree to reduce the lump sum

compensation to be received by Employee in order to avoid the imposition of the

golden parachute tax as provided in the Tax Reform Act of 1984, as amended by

the Tax Reform Act of 1986.

 

In the event the Employee is

required to hire counsel to negotiate on his behalf in connection with his

termination or resignation from the Company upon the occurrence of a Triggering

Event, or in order to enforce the rights and obligations of the Company as

provided in this Paragraph, the Company shall reimburse to the Employee all

reasonable attorneys’ fees which may be expended by the Employee in seeking to

enforce the terms hereof. Such reimbursement shall be paid every 30

 

4

 

days after the Employee provides copies of

invoices from the Employee’s counsel to the Company.  However, such invoices may be redacted to preserve the

attorney-client privilege, client confidentiality or work product.

 

ARTICLE IV

DISABILITY INSURANCE

 

Section

4.1  Disability Insurance. 

During the term of this Agreement, the Company agrees that it shall

provide disability coverage consistent with that offered to the other executive

employees.

 

ARTICLE V

CONFIDENTIALITY

 

Section

5.1  Confidentiality. 

Employee acknowledges that (i) the Company is in the business of selling

and distributing highly technical and proprietary work products, information

and technology developed or acquired by the Company (hereinafter collectively

referred to as “Technology”), (ii) certain of the Technology is a trade secret,

is confidential and proprietary, and (iii) the secret, confidential and

proprietary nature of the Technology is essential to the Company.  The Technology which constitutes trade

secrets shall be kept confidential by the Employee and shall not be used or

disclosed by the Employee to any third party unless written permission to

disclose such information is provided by the Company to the Employee.  Employee agrees to secure and protect the

Technology in a manner consistent with our rights in the Technology.  Employee shall not use the Technology to

develop or to aid in the development by any third party of competing

Technology.  Upon termination of

Employee, the Company shall provide Employee a detailed listing stating the

scope of any Technology, which may not include items in the public domain or

known to third parties having no obligation with confidentiality.  Provided, however, this Section 5.1 shall

not apply if a “triggering event” occurs pursuant to Section 3.6(vi) supra

and Employee is not paid pursuant to the terms thereunder.

 

Section

5.2  Covenant of Non-Disclosure. 

Employee agrees that during the term of this Agreement or thereafter, Employee

will neither disclose any confidential information as to the Company nor at any

time remove for purposes other than the conduct of Company business or retain

without our express consent any figures, calculations, letters, papers or other

confidential information of any type or description.  Employee also warrants and covenants not to disclose, to reveal,

to divulge or to make known to any person, firm, corporation or entity or use

for any purpose outside Company’s business, Company’s clientele lists, contents

of any process, data, consulting information, methods, office procedures,

filing systems, computer software systems, subsystems, routines and

subroutines, proprietary rights, work product developed for or on behalf of the

Company (except information within the public domain) or any information

regarding any trade secrets or confidential information reposed in him by the

Company or any information regarding the transactions of the Company with its

clients or the state of the accounts of the individuals, firms, corporation, or

others with whom the Company does business, without the prior written

permission of the Company.  Anything in

this Section to the contrary notwithstanding, Employee may use or disclose those

portions of the confidential information which: (1)  are or become part of the public domain (other than as a result

of a breach by Employee); (2)  were

known to Employee or obtained by Employee from a third party; or (3)  Employee is ordered by a court to produce;

provided Employee promptly notifies the Company of receipt of any order or

motion to require the production of any portion of the confidential

information.

 

5

 

Section

5.3  Shop Right.  With

respect to Inventions made or conceived by the Employee, whether or not during

the hours of his employment or with the use of the Company facilities,

materials, or personnel, either solely or jointly with others during his

employment by the Company or within one year after termination of such employment

if based on or related to Confidential Information, and without royalty or any

other consideration, the following shall apply:

 

(i)  Inventions.  “Inventions” means discoveries, concepts, and ideas, whether

patentable or not, including, but not limited to, processes, methods, formulas,

programs, and techniques, as well as improvements or know-how, concerning any

present or prospective activities of the Company with which the Employee

becomes acquainted as a result of his employment by the Company.

 

(ii)  Reports.  The Employee shall inform the Company promptly and fully of such

Inventions by a written report, setting forth in detail the procedures employed

and the results achieved.  A report will

be submitted by the Employee upon completion of any studies or research

projects undertaken on our behalf, whether or not in the Employee’s opinion a

given project has resulted in an Invention.

 

(iii)  Patents.  The Employee shall apply, at our request and expense, for United

States and foreign letter patent either in the Employee’s name or otherwise as

the Company shall desire.

 

(iv)  Assignment.  The Employee hereby assigns and agrees to assign to the Company

all of this rights to such Inventions, and to applications for United States

and/or foreign letters patent and to United States and/or foreign letters

patent granted upon such Inventions.

 

(v)  Cooperation.  The Employee shall acknowledge and deliver

promptly to the Company, without charge to the Company but at its expense, such

written instruments and do such other reasonable acts, such as giving testimony

in support of the Employee’s inventorship, as may be necessary in the opinion

of the Company to obtain and maintain United States and/or foreign letters

patent and to vest the entire right and title thereto in the Company.

 

(vi)  Use. 

The Company shall also have the royalty-free right to the business, and

to make, use, and sell products, processes, and/or services derived from any

inventions, discoveries, concepts, and ideas, whether or not patentable, including,

but not limited to, processes, methods, formulas, and techniques, as well as

improvements or know-how, whether or not within the scope of inventions, but

which are conceived or made by the Employee during the hours which he is

employed by the Company or with the use or assistance of our facilities,

materials, or personnel, or within the period set forth in this Section 5.3.

 

Section

5.4  Enforcement by Injunctive Relief.  The Employee acknowledges and agrees that any breach of this

Article V by Employee would cause immediate irreparable harm to the Company and

monetary damages would be difficult if not impossible to ascertain.  Employee agrees that should he violate any

of the terms and conditions of this Article V, the Company shall be entitled to

seek and obtain immediate injunctive relief and enjoin further and future

violations of this Agreement. Nothing contained herein shall affect the right

of the Company to seek and obtain monetary damages in addition to or in

substitution for such equitable relief.

 

Section

5.5  Scope of Covenant.  In

the event a court of competent jurisdiction finds any provision of this Article

V to be so overboard as to be unenforceable, then such provision shall be

reduced in scope by the court, but only to the extent deemed necessary by the

court to render the provision reasonable and enforceable, it being the

Employee’s intention to provide the Company with protection to the extent

provided herein.

 

6

 

Section

5.6  Non-Compete Covenant. 

The Employee acknowledges that the Company is presently engaged in

utilizing the Technology; and the Employee specifically agrees that he will not

use the Technology in any business, other than the business of the Company,

except as provided herein.  The terms

“use” and “engage” include any attempt to use or any participation in any

manner in the use of, either directly or indirectly, including without

limitation, employment by (whether as a common law employee, consultant or

expert witness) or more than a nominal ownership interest in any business which

competes with the Company or otherwise uses the Technology.  The Employee agrees that he will not engage

in any competition with the Company as described in preceding sections within

the United States, Canada, Europe, or other geographical territory in which the

Company has material sales during the term of this Agreement and for a term of

one (1) year from and after the termination of this Agreement if termination is

initiated by Employee pursuant to Section 3.2 or is pursuant to Sections 3.3 or

3.4; however, if termination is initiated by the Company pursuant to Section

3.2, then the term shall only be for six (6) months.

 

However, this provision

shall not apply if a “triggering event” occurs pursuant to Section 3.6(vi) supra

and Employee is not paid pursuant to the terms thereunder.  The Employee acknowledges that the Company

would suffer irreparable harm if the Employee were to violate the provision of

this Agreement.  The Employee warrants that

he is now, and will in the future, be able to support himself and his family

without the need so to breach the terms hereof.

 

ARTICLE VI

GENERAL MATTERS

 

Section

6.1  North Carolina Law. 

This Agreement shall be governed by the laws of the State of North

Carolina and shall be construed in accordance therewith.

 

Section

6.2  No Waiver.  No provision

of this Agreement may be waived except by an agreement in writing signed by the

waiving party.  A waiver of any term or

provision shall not be construed as a waiver of any other term or provision.

 

Section

6.3  Amendment.  This

Agreement may be amended, altered or revoked at any time, in whole or in part,

by execution of a written instrument setting forth such changes, signed by each

of the parties.

 

Section

6.4  Entire Agreement.  This

Agreement contains the entire agreement of the parties and it may not be

changed orally, but only by written agreement signed by the party against whom

enforcement of any waiver, change, modification, extension or discharge is

sought.

 

Section

6.5  Construction. 

Throughout this Agreement the singular shall include the plural, and the

plural shall income the singular, and the masculine and neuter shall include

the feminine, wherever the context so requires.

 

Section

6.6  Text to Control.  The

headings of articles and sections are included solely for convenience of

reference.  If any conflict between any

heading and the text of this Agreement exists, the text shall control.

 

Section

6.7  Severability.  If any

provision of this Agreement is declared by any court of competent jurisdiction

to be invalid for any reason, such invalidity shall not affect the remaining

provisions.  On the contrary, such

remaining provisions shall be fully severable, and this Agreement

 

7

 

shall be construed and enforced as if such

invalid provisions had not been included in the Agreement.

 

Section

6.8  Authority.  The officer

executing this Agreement on behalf of the Company has been empowered and

directed to do so by the Board of Directors of the Company.

 

Section

6.9  Insurance.  The Employee

agrees that the Company, in its discretion, may apply for and procure in its

own name and for its own benefit insurance of any kind and in any amount or

amounts considered advisable and that the Employee may have no right, title, or

interest therein, excepting group term life insurance.

 

Section

6.10  Executory Rights.  The

Company agrees that with the exception of Section 3.6(iii), nothing contained

herein is intended, or will be deemed to be granted to Employee in lieu of any

rights or privileges to which the Employee may be entitled as an employee of

the Company under any retirement, pension, profit sharing, insurance,

hospitalization, health, or other plan or plans which may now be in effect or

which may be adopted hereafter.

 

Section

6.11  Assignment.  In the

event of sale, assignment, or other transfer of our business or a substantial

part of its assets or of our merger into or consolidation with another

corporation, the rights and benefits of the Company under this Agreement may be

transferred and assigned, with the written consent of the Employee, and all

obligation and liability of the Company will thereafter continue; provided that

the transferee, in writing, assumes the full performance on our behalf of all

the terms and provisions hereof to be performed following the date of such

assignment, with the same force and effect as if such transferee originally had

been a party to this Agreement.

 

Section

6.12  Arbitration.  Any controversy,

dispute or claim arising out of, or relating to, this Agreement and/or its

interpretation shall, unless resolved by agreement of the parties, be settled

by binding arbitration in Raleigh, North Carolina in accordance with the Rules

of the American Arbitration Association then existing.  This Agreement to arbitrate shall be

specifically enforceable under the prevailing arbitration law of the State of

North Carolina.  The award rendered by

the arbitrators (or a single arbitrator that both parties agree to) shall be

final and judgment may be entered upon the award in any court of the State of

North Carolina having jurisdiction of the matter.

 

 

	

   

  	

  DIGITAL

  RECORDERS, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

  DAVID L.

  TURNEY

  
					

 

Reviewed and approved by the Compensation Committee

of Digital Recorders, Inc. this 17th day of December, 2001.

 

	

   

  	

   

  	

   

  
	

   

  	

  Juliann Tenney,

  Chairperson

  
	

   

  	

  Compensation Committee

  

 

8

 

DIGITAL RECORDERS, INC.

EXTENDED EMPLOYMENT AGREEMENT

 

Schedule 1

Duties and Compensation

 

	

  Employee:

  	

   

  	

  David L. Turney

  
	

   

  	

   

  	

   

  
	

  Position:

  	

   

  	

  President and Chief

  Executive Officer

  
	

   

  	

   

  	

   

  
	

  Base Salary:

  	

   

  	

  $215,000

  per year, payable pursuant to regular Company payroll policy/$235,000 per

  year beginning January 1, 2002.

  
	

   

  	

   

  	

   

  
	

  Bonus:

  	

   

  	

  Discretion per

  Compensation Committee.

  
	

   

  	

   

  	

   

  
	

  Term:

  	

   

  	

  Four (4) years

  

 

Duties

and Responsibilities:

Supervision

and coordination of all operations of the Company; supervision of management

and coordination of all other operations, officers, managers and key persons

within  the Company.

 

	

  Options:

  	

   

  	

  (i)

  	

   

  	

  86,000 incentive stock

  options exercisable at $2.00 per share (GRANTED PREVIOUSLY).

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (ii)

  	

   

  	

  Up to 14,000 incentive

  stock options which may be available at June 1, 1998 at the price per share

  of that same date (GRANTED PREVIOUSLY).

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (iii)

  	

   

  	

  A total of 150,000

  additional options shall be requested in the 1998 Proxy and grants thereunder

  shall be subject to shareholder approval of the requested increase under the

  Option Plan and pursuant to other terms thereof.  Specifically, however, grants, if approved by the shareholders’

  vote for increase it the Option Plan, will be made at the stock price that

  exists on June 30, 1998 with vesting to occur as follows:  (a) 75,000 shares shall vest when Company

  stock trades for ten (10) consecutive trading days at or above $4.00 per

  share; and (b) 75,000 shares shall vest when 

  Company stock trades for ten (10) consecutive trading days at or above

  $5.00 per share (GRANTED PREVIOUSLY), however, these options shall

  automatically vest upon a Triggering Event as previously defined herein.

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (iv)

  	

   

  	

  Other future grants in the

  discretion of the Compensation Committee.

  

 

APPROVED:

 

	

  THE COMPANY:

  	

   

  	

   

  	

  EMPLOYEE:

  	

   

  
	

   

  	

   

  	

   

  
	

  By

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  DAVID L. TURNEY

  	

   

  	

   

  
									

 

9UNITED STATES

 

EXHIBIT 10.23

 

 

 

UNITED

WISCONSIN SERVICES, INC.

 

AND

 

BLUE

CROSS & BLUE SHIELD

 

UNITED

OF WISCONSIN

 

 

 

 

2001

 

MANAGEMENT

INCENTIVE PLAN

 

 

2001 MANAGEMENT

INCENTIVE PLAN

 

PARTICIPANT:                                                            PAYOUT RANGE:                        of Base

Earnings as defined in 2001 UWSI/

BCBSUW Profit Sharing Plan.

           

% for satisfactory performance

           

% for targeted performance

           

% for outstanding performance

 

OBJECTIVES

 

1.               To heighten participant awareness of

financial results and to motivate employees to strive for financial success.

 

2.               To motivate participants to provide

excellent service to our customers and to maximize customer satisfaction

results.

 

3.               To motivate key management personnel to

stretch performance to meet the documented personal objectives which are of

most importance in the attainment of business unit/regional area and corporate

goals and objectives.

 

4.               To maintain a competitive compensation

package for highly motivated key management employees and to increase the

leverage of performance-based compensation.

 

ELIGIBILITY

 

Employees are eligible to participate in the Management Incentive Plan

(the “Plan”) based on the number of evaluation points attributed to the

position they hold -OR - on holding an exempt position

entitled Supervisor or Team Leader, with responsibility for supervising a staff

of employees.  In order to be a

participant in the 2001 Plan, the following requirements must be met:

 

1.               The employee must be actively at work on

or before June 30, 2001.

 

2.               The employee must hold the incentive

eligible position on or before June 30, 2001.

 

3.               The employee must have held a management

incentive eligible position for at least six consecutive months during calendar

year 2001.

 

4.               The employee must be continuously

employed by the corporation through the date of payment (anticipated to be

March 2002).

 

 

 

 

COMPONENTS

OF THE PROGRAM

 

The Plan has 2 components:

 

1.               Business Unit/Regional Area Objective -

33 1/3%

2.               Individual and/or Local Area Performance

Objectives - 66 2/3%

 

BUSINESS

UNIT/REGIONAL AREA OBJECTIVE - 33 1/3%

 

This Component of the Management Incentive

Plan is based on the Business Unit/Regional Area Financial Results (“Local

Component”) of the 2001 UWSI/BCBSUW Profit Sharing Plan.  One-third of a participant’s payout from the

Management Incentive Plan will be determined by his or her payout from the

Local Component of the Profit Sharing Plan according to the following schedule:

 

	

  Participant’s Payout From

  Local Component of 2001

  Profit Sharing Plan

  	

   

  	

  Level of Management

  Incentive Plan Payout

  
	

  Less than

  1.3% of Base Earnings

  	

   

  	

  No Payout

  
	

  1.3% of Base

  Earnings

  	

   

  	

  “Satisfactory

  Performance” Level

  
	

  3.0% of Base

  Earnings

  	

   

  	

  “Targeted

  Performance” Level

  
	

  7.0% of Base

  Earnings

  	

   

  	

  “Outstanding

  Performance” Level

  

 

Prorated payouts will be made for performance

between the stated percentages of payouts from the Local Component of the

Profit Sharing Plan.

 

INDIVIDUAL

AND/OR LOCAL AREA PERFORMANCE OBJECTIVES - 66 2/3%

 

This component of the Plan is a mix of

Individual and/or Local Area objectives based on the participant’s Local Area

as well as on the participant’s functional responsibilities.  The mix may be any combination of Individual

and/or Local Area objectives which together total 66 2/3%.  Individual performance objectives shall be

specific and quantifiable and should be set in such a manner as to stretch the

participant’s performance.  Local Area

objectives may include such things as Local Area expense ratio targets.

 

Individual and/or Local Area Performance

Objectives are to be determined and listed beginning on Page 3 of this

document.

 

PAYMENT

OF AWARDS

 

Management Incentive Plan payments will be

made to eligible participants only in years in which an award is made under the

Company’s Profit Sharing Plan. 

Notwithstanding the previous sentence, the Management Review Committees

of the Boards of Directors of United Wisconsin Services, Inc. and Blue Cross

& Blue Shield United of Wisconsin (collectively the “Committee”) reserve

the right to selectively award bonuses for outstanding performance.

 

 

 

Management Incentive Plan payments will be

awarded in cash on or before April 1, 2002.

 

Participants who otherwise meet eligibility

requirements for the Plan Year but who die, become disabled, or retire before

the end of the Plan Year, will be eligible for a pro-rata bonus based on the

participant’s achievement of his or her goals prior to the termination of

employment and on months of completed service during the Plan Year.  Participants who otherwise meet eligibility

requirements for the Plan Year but who die, become disabled, or retire before

the payment date but after completing the full Plan Year of service, will be

eligible for a bonus based on the participant’s achievement of his or her

goals.  In the case of death, payment

will be made to the participant’s estate.

 

Employees who otherwise terminate employment

with the Corporation prior to the payment date will not be eligible for the

bonus payment.

 

PLAN

ADMINISTRATION

 

The Committee maintains overall

responsibility for the Management Incentive Plan and is given complete

discretion to administer the Plan and to interpret and/or modify all terms and

conditions of the Plan.

 

The Committee, at its discretion, reserves

the right to amend, suspend, or terminate the Management Incentive Plan,

provided that no such amendment, suspension, or termination shall reduce or

impair the value of any awards after such awards are made by the Committee.

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