1
SHAREHOLDER' AGREEMENT
among
POLICY MANAGEMENT SYSTEMS CORPORTION,
GENERAL ATLANTIC PARTNERS 14, L.P.
and
GAP COINVESTMENT PARTNERS
__________________________
Dated as of April 26, 1994
__________________________
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TABLE OF CONTENTS
Page
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Transfers of Capital Stock . . . . . . . . . . . . . . . . . . 4
2.1 Right of First Offer. . . . . . . . . . . . . . . . . . . 4
2.2 Right of First Offer in Respect of Proposed
Transactions Under Rule 144. . . . . . . . . . . . . . 7
3. Board of Directors . . . . . . . . . . . . . . . . . . . . . . 9
3.1 General Atlantic Board Representative . . . . . . . . . . 9
4. Voting and Stand-still Agreement . . . . . . . . . . . . . . . 10
4.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Restrictions on Certain Actions by GAP 14 and
GAP Coinvestment.. . . . . . . . . . . . . . . . . . . 10
4.3 Stop Transfer Instructions. . . . . . . . . . . . . . . . 13
4.4 Voting. . . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Representations and Warranties . . . . . . . . . . . . . . . . 14
5.1 Representations and Warranties of GAP 14 and
GAP Coinvestment . . . . . . . . . . . . . . . . . . . 14
5.2 Representations and Warranties of the
Company. . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Indemnification.. . . . . . . . . . . . . . . . . . . . . 17
6. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1 Duration. . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Legend. . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3 Successors and Assigns. . . . . . . . . . . . . . . . . . 18
6.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.5 Severability. . . . . . . . . . . . . . . . . . . . . . . 20
6.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 20
6.7 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 20
6.8 Amendments and Waivers. . . . . . . . . . . . . . . . . . 21
6.9 Governing Law.. . . . . . . . . . . . . . . . . . . . . . 21
6.10 Rules of Construction.. . . . . . . . . . . . . . . . . . 21
6.11 Headings; References. . . . . . . . . . . . . . . . . . . 21
6.12 Further Assurances. . . . . . . . . . . . . . . . . . . . 21
6.13 Effectiveness . . . . . . . . . . . . . . . . . . . . . . 21
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SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT, dated as of April 26,
1994, by and among POLICY MANAGEMENT SYSTEMS CORPORATION, a
South Carolina corporation (the "Company"), GENERAL
ATLANTIC PARTNERS 14, L.P., a Delaware limited partnership
("GAP 14"), and GAP COINVESTMENT PARTNERS, a New York
general partnership ("GAP Coinvestment").
Pursuant to a Stock Purchase Agreement, dated as
of the date hereof, among GAP 14, GAP Coinvestment and
INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York
corporation ("IBM") (the "Stock Purchase Agreement"), GAP 14
and GAP Coinvestment have agreed to purchase in the
aggregate 1,519,024 shares of common stock, par value $.01
per share, of the Company ("Common Stock," and such
1,519,024 shares of Common Stock are referred to herein as
the "Purchased Common Stock") from IBM. Simultaneously with
or prior to such purchase, the Company acquired an
additional 2,278,537 shares of Common Stock from IBM.
As more fully provided for herein, GAP 14 and GAP
Coinvestment have granted to the Company certain rights of
first offer over the shares of capital stock of the Company
owned by GAP 14 and GAP Coinvestment and their affiliates
and associates and certain stand-still rights. As partial
consideration for the rights granted to the Company
hereunder, GAP 14 and GAP Coinvestment have been granted the
right to designate a director of the Company and certain
other rights, in each case as more fully provided for
herein.
As further consideration for the obligations of
GAP 14 and GAP Coinvestment hereunder, the Company has
agreed to provide registration rights to GAP 14 and GAP
Coinvestment, as provided for in the Registration Rights
Agreement, dated as of date hereof, among GAP 14, GAP
Coinvestment and the Company (the "Registration Rights
Agreement").
For good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows:
1. Definitions. As used herein, the following
terms shall have the meanings set forth below:
An "affiliate" of a Shareholder means any
individual, partnership, corporation, group, trust or other
entity that directly or indirectly through one or more
intermediaries controls, is controlled by, or is under
common control with, such Shareholder. The affiliates of
GAP 14 shall include, without limitation, (i) any general or
limited partner of GAP 14, (ii) any current or former
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partner, controlling person, shareholder, director, officer
or employee of such partner and (iii) any partnership,
corporation, group or trust that directly or indirectly
controls, or is controlled by, or is under common control
with, a general or limited partner of GAP 14. The parties
agree and acknowledge that GAP Coinvestment is an affiliate
of GAP 14 and that the partners of GAP Coinvestment are
affiliates of GAP Coinvestment.
An "associate" has the meaning assigned such term
in Rule 12b-2 under the Exchange Act.
"Beneficial owner" (including correlative forms of
such term such as "beneficially own," "beneficial ownership"
and "beneficially owned") has the meaning assigned such term
in Rule 13d-3 under the Exchange Act.
"Board" has the meaning assigned such term in
Section 3.1 of this Agreement.
"Business Day" means any day other than a Satur-
day, Sunday or other day on which commercial banks in the
City of New York are authorized or required by law or execu-
tive order to close.
"Common Stock" has the meaning assigned such term
in the second paragraph of this Agreement.
"Company" has the meaning assigned such term in
the first paragraph of this Agreement.
"Company Acceptance" has the meaning assigned such
term in Section 2.2(b) of this Agreement.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"IBM" has the meaning assigned such term in the
second paragraph of this Agreement.
"GAP 14" has the meaning assigned such term in the
first paragraph of this Agreement.
"GAP" has the meaning assigned such term in the
first paragraph of this Agreement.
"GASC" has the meaning assigned such term in
Section 6.4(c) of this Agreement.
"Offered Shares" has the meaning assigned such
term in Section 2.1(a) of this Agreement.
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"Person" means any individual, corporation,
limited liability company, partnership, association, trust
or other entity or organization.
"Purchased Common Stock" has the meaning assigned
such term in the second paragraph of this Agreement, and
shall include any shares of capital stock of the Company or
any successor or assign thereof (whether by merger,
consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for or in substitution of
shares of Purchased Common Stock and shall be appropriately
adjusted for any stock splits, reverse stock splits, combi-
nations, recapitalizations and the like occurring after the
date hereof.
"Registration Rights Agreement" has the meaning
assigned such term in the fourth paragraph of this
Agreement.
"Rule 144 Price" has the meaning assigned such
term in Section 2.2(b) of this Agreement.
"Rule 144 Offered Shares" has the meaning assigned
such term in Section 2.2(a) of this Agreement.
"Rule 144 Shareholder" has the meaning assigned
such term in Section 2.2(a) of this Agreement.
"Rule 144 Shareholder Offer" has the meaning
assigned such term in Section 2.2(a) of this Agreement.
"Securities Act" means the Securities Act of 1933,
as amended.
"Selling Shareholder" has the meaning assigned
such term in Section 2.1(a) of this Agreement.
"Selling Shareholder Offer" has the meaning
assigned such term in Section 2.1(a) of this Agreement.
"Shareholder" means GAP 14, GAP Coinvestment and
their respective successors and permitted assigns, to the
extent provided for in Section 6.3 hereof.
"Stock Purchase Agreement" has the meaning
assigned such term in the second paragraph of this
Agreement.
"Successor" means any corporation or other entity
succeeding to the Company, the majority of the voting shares
or other voting interests of which are at the time of such
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succession beneficially owned by the shareholders of the
Company.
"Term" has the meaning assigned such term in
Section 4.1 of this Agreement.
"Total Voting Power" has the meaning assigned such
term in Section 4.1 of this Agreement.
"Voting Securities" has the meaning assigned such
term in Section 4.1 of this Agreement.
2. Transfers of Capital Stock.
2.1 Right of First Offer.
(a) If any Shareholder (a "Selling
Shareholder") desires to sell, give, transfer, distribute,
assign or otherwise dispose of all or any portion of the
Purchased Common Stock (other than (i) to an affiliate of a
Shareholder who has agreed with the Company in writing to be
bound by the provisions of this Agreement, including without
limitation, in connection with the termination or amendment
of a Shareholder's partnership agreement (provided that the
availability of the exception to the right of first offer
provided by this clause (i) shall be subject to Section
2.1(e)) or (ii) in a sale under Rule 144 under the
Securities Act), then such Selling Shareholder shall first
make a written offer (a "Selling Shareholder Offer") (for
purposes of this Agreement, a request for registration
pursuant to the Registration Rights Agreement shall be
deemed to constitute a Selling Shareholder Offer) to sell,
transfer or assign such shares of Purchased Common Stock
(the "Offered Shares") to the Company. The Selling
Shareholder Offer shall state (i) the number of Offered
Shares, (ii) the proposed cash sale price therefor and
(iii) any other material terms and conditions of the Selling
Shareholder Offer.
A Selling Shareholder Offer shall constitute an
irrevocable offer by such Selling Shareholder to sell to the
Company the Offered Shares at the proposed cash sale price
in cash unless the closing does not occur for any reason
whatsoever within 60 days following receipt of the Selling
Shareholder Offer. For purposes of this Section 2.1(a), the
proposed cash sale price for any Purchased Common Stock
which a Selling Shareholder desires to give or distribute to
another Person (other than an affiliate acquiring pursuant
to clause (i) of the first sentence of this Section 2.1(a)
in a transaction exempt from the right of first offer
provided in this Section 2.1) shall be deemed to be the
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closing price of the Common Stock on the principal exchange
on which the Common Stock is listed on the day the Selling
Shareholder Offer is received by the Company.
(b) Upon receipt of a Selling Shareholder
Offer, the Company shall have the right to purchase, upon
the terms and conditions of the Selling Shareholder Offer,
all, but not less than all, of the Offered Shares, which
right shall be exercisable by irrevocable written notice to
the Selling Shareholder given within 5 Business Days after
the Selling Shareholder Offer is received by the Company.
(c) The closing of any sale to the Company
pursuant to this Section 2.1 shall be held at the principal
office of the Company on the 30th Business Day after the
Selling Shareholder Offer is received by the Company, or at
such other time and place as the Company and the Selling
Shareholder may agree upon; provided that if there is any
litigation or governmental requirements relating to such
purchase and sale, the closing date shall be postponed until
a date not more than 10 days after the termination of such
litigation or satisfaction of such governmental
requirements. At such closing, the Selling Shareholder
shall deliver to the Company certificates representing the
Offered Shares duly endorsed for transfer and accompanied by
all requisite stock transfer taxes, and such Offered Shares
shall be free and clear of any liens, claims, options,
charges, encumbrances, or rights of others. The Company
shall deliver to the Selling Shareholder at the closing, by
certified check or wire transfer, the purchase price for the
Offered Shares being sold by the Selling Shareholder. The
Company and the Selling Shareholder shall execute such
documents as are otherwise customary and appropriate.
(d) If the Company does not elect to pur-
chase all of the Offered Shares as set forth above, then,
during the 120 days following the date on which the Company
shall cease to be entitled to elect to purchase the Offered
Shares (or shall have waived in writing its right to do so),
the Selling Shareholder may dispose of all, but not less
than all, of the Offered Shares upon terms that, in the
aggregate, are no more favorable to the purchaser thereof
than those stated in the Selling Shareholder Offer. If such
disposition is not consummated within such 120 days, the
restrictions provided for herein shall again become effec-
tive.
(e) Notwithstanding clause (i) of the
second parenthetical contained in Section 2.1(a), any sale,
gift, transfer, assignment or other disposition of shares of
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Purchased Common Stock to an affiliate of a Selling
Shareholder shall be subject to the right of first offer
provided for in this Section 2.1 if (i) such sale, transfer,
assignment or other disposition is to occur prior to the
third anniversary of this Agreement or (ii) prior to such
sale, gift, transfer, assignment or other disposition, a
total of ten transfers which were exempt from the right of
first offer provided for in this Section 2.1 by virtue of
clause (i) of the second parenthetical contained in Section
2.1(a) were made.
(f) Notwithstanding the foregoing, not less
than 15 days prior to any proposed sale by a Selling
Shareholder of Voting Securities pursuant to this
Section 2.1 constituting 1% or more of the Total Voting
Power to any Restricted Person (as defined below) the
Selling Shareholder shall give notice of the identity of
such Restricted Person to the Company and the Company shall
have the right, exercisable by delivery of a written
election notice to the Selling Shareholder within 10 days of
receipt of the notice from the Selling Shareholder of the
proposed sale, to purchase all of the Offered Shares at the
price specified in the Selling Shareholder's Offer. If the
Company fails to purchase the Offered Shares within such 10-
day period, the Selling Shareholder shall be permitted to
proceed with its or their sale to such Restricted Person in
accordance with Section 2.1(d). "Restricted Person" shall
mean a person who is a material competitor of the Company or
any material subsidiary of the Company. The affiliates of
GAP 14 and GAP Coinvestment shall not be deemed Restricted
Persons by virtue of any ownership interest they may have in
other companies.
(g) No transfer of Offered Shares to a third
party (including, without limitation, any assignee of a
party entitled to purchase such shares) pursuant to
Section 2.1(d) shall be consummated or recorded in the
Company's stock transfer books unless (i) the transferee of
such Offered Shares shall have furnished the Company a
written opinion of counsel reasonably satisfactory to
counsel for the Company that the proposed transfer may be
effected without registration under the Securities Act, and
(ii) the transferee of such Offered Shares shall have
furnished the Company a written instrument to the effect
that (A) it is acquiring such shares for its own account,
for investment, and not with a view to, or for sale in
connection with, the distribution thereof, and (B) it
understands that such shares have not been registered under
the Securities Act by reason of their issuance in a
transaction exempt from the requirements of the Securities
Act and that such shares must be held indefinitely unless a
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subsequent disposition thereof is registered under the
Securities Act or is exempt from such requirements.
(h) Any underwriters participating in a
distribution of Voting Securities beneficially owned by a
Selling Shareholder or its affiliates or associates pursuant
to this Agreement, including without limitation any
distribution referred to in Section 2.1(a) hereof, shall use
all reasonable efforts to effect as wide a distribution as
is reasonably practicable, and in no event shall any sale
(other than a sale to underwriters making such a
distribution) of shares of Voting Securities be made
knowingly to any Person (including its affiliates or
associates and any group in which that Person or its
affiliates or associates shall be a member if the Selling
Shareholder or such underwriters know of the existence of
such a group or affiliate or associate) that, after giving
effect to such sale, would beneficially own Voting
Securities representing three percent (3%) or more of the
Total Voting Power. The Selling Shareholder shall use
reasonable best efforts to secure the agreement of the
underwriters, in connection with any underwritten offerings
of its Voting Securities, to comply with the foregoing.
2.2 Right of First Offer in Respect of
Proposed Transactions Under Rule 144.
(a) If, during any given 30-day period, any
Shareholder (a "Rule 144 Shareholder") contemplates the sale
of all or any portion of the Purchased Common Stock
beneficially owned by the Rule 144 Shareholder in a sale
under Rule 144 under the Securities Act, then, at least five
Business Days before the commencement of such period, the
Rule 144 Shareholder shall notify the Company in writing
that it is contemplating the sale of shares of Purchased
Common Stock in such manner and the maximum number of such
shares that the Rule 144 Shareholder contemplates the sale
of during such 30-day period; provided, however that the
Rule 144 Shareholder shall not give such notice more than
once during any 30-day period. If the Rule 144 Shareholder
thereafter decides to sell shares of Purchased Common Stock,
such Rule 144 Shareholder shall first make a written offer
(a "Rule 144 Shareholder Offer") to sell such shares of
Purchased Common Stock (the "Rule 144 Offered Shares") to
the Company. The Rule 144 Shareholder Offer shall be
provided to the Company no later that 4:30 p.m., local time,
on the Business Day preceding such contemplated sale and
shall set forth the number of shares of Rule 144 Offered
Shares.
(b) Upon receipt of the Rule 144
Shareholder Offer, the Company shall have the right to
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purchase all or any portion of the Rule 144 Offered Shares
at the closing price of the Common Stock on the principal
exchange on which the Common Stock is listed on the date on
which such notice is given (the "Rule 144 Price"), which
right shall be exercisable by written notice to the Rule 144
Shareholder (the "Company Acceptance") given by 8:00 a.m.
local time on the Business Day immediately following the
Business Day on which the Rule 144 Shareholder Offer is
received.
(c) If the Company Acceptance is delivered
by the Company to the Rule 144 Shareholder in accordance
with the preceding paragraph, the closing of the sale of the
Rule 144 Offered Shares to be sold to the Company shall be
held at the principal office of the Company on or before the
first Business Day following the date on which bond
settlements are made by brokers in the ordinary course for
bonds sold on the date of the Company Acceptance or at such
time and place as the Company and the Rule 144 Shareholder
shall agree upon. At such closing, the Rule 144 Shareholder
shall deliver to the Company certificates representing such
Rule 144 Offered Shares, duly endorsed for transfer and
accompanied by all requisite stock transfer taxes, and such
Rule 144 Offered Shares shall be free and clear of any
liens, claims, options, charges, encumbrances, or rights of
others. The Company shall deliver at the closing, by
certified check or wire transfer, the Rule 144 Price
multiplied by the number of Rule 144 Offered Shares
purchased by the Company. The Company and the Rule 144
Shareholder shall execute such documents as are otherwise
customary and appropriate.
(d) If the Company does not elect to
purchase all of the Rule 144 Offered Shares, or fails to
deliver the Company Acceptance in accordance with Section
2.2(b) above, then, during the ten Business Days following
the date on which the Rule 144 Notice was given, the Rule
144 Shareholder may dispose of the Rule 144 Offered Shares
which the Company has elected not to purchase in one or more
market transactions under Rule 144 under the Securities Act.
If such disposition is not consummated within such ten
Business Days, the restrictions provided for herein shall
again become effective.
(e) Failure by the Company to exercise its
right to purchase Rule 144 Shares held by the Selling
Shareholder pursuant to this Section 2.2 shall not affect
the Company's right to purchase Rule 144 Shares pursuant to
this Section 2.2 in any subsequent instance.
(f) Section 2.2(a) through (e) shall be
unavailable to the Shareholders during any period in which
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the conditions contained in Rule 144 have not been
satisfied. The Shareholders acknowledge that the conditions
contained in Rule 144, including Section (c)(1) thereof have
not been satisfied as of the date hereof. The Shareholders
agree to be bound by the requirements of Rule 144 applicable
to "affiliates" as defined therein as long as they meet the
definition of "affiliates" set forth therein.
3. Board of Directors.
3.1 General Atlantic Board Representative.
(a) The Company shall use its reasonable
best efforts to cause the Board of Directors of the Company
(the "Board") to promptly, but in no event later than
15 Business Days after the effective date hereof, appoint a
designee of GAP 14 and GAP Coinvestment to fill a vacancy on
the Board (which GAP 14 and GAP Coinvestment agrees shall be
Steven A. Denning or another general partner of the general
partner of GAP 14 reasonably acceptable to the Company).
The Company represents and warrants that on the date of such
appointment there shall be a vacancy on the Board.
Thereafter, for so long as GAP 14 and GAP Coinvestment and
their affiliates and associates shall together beneficially
own shares of capital stock of the Company representing at
least 5% of the Total Voting Power of the Company, and
subject to the further provisions hereof, the Company's
nominating committee (or any other committee exercising a
similar function) shall recommend to the Board that such
individual be included in the slate of nominees recommended
by the Board to shareholders for election as a director at
each annual meeting of shareholders of the Company at which
directors of the class of which the nominee of GAP 14 and
GAP Coinvestment is a member are elected, commencing with
the next annual meeting of shareholders after the effective
date hereof.
(b) Notwithstanding the provisions of this
Section 3.1, GAP 14 and GAP Coinvestment shall not be
entitled to designate any individual to the Board if such
designation would result in any violation of applicable law
or order. The Company shall not be obligated to elect to
its Board any individual who would cause or be reasonably
likely to cause the Company to be unable in any material
respect to conduct its business. If any such individual has
been designated by GAP 14 and GAP Coinvestment and rejected
by the Company, GAP 14 and GAP Coinvestment shall be
permitted to designate a substitute designee for such
individual in accordance with this Section 3.1.
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4. Voting and Stand-still Agreement.
4.1 Term. The term (the "Term") of the
obligations set forth in this Article 4 shall commence on
the date hereof and shall continue until the date on which
the Voting Power of the Voting Securities, on a fully
diluted basis, beneficially owned by GAP 14 and GAP
Coinvestment and their affiliates and associates shall
represent less than 1.5% of the Total Voting Power. For the
purposes of this Agreement (i) the term "Voting Securities"
shall mean any securities entitled to vote generally in the
election of directors of the Company or any Successor, or
any direct or indirect rights or options to acquire any such
securities or any securities convertible or exercisable into
or exchangeable for such securities, (ii) the term "Voting
Power" shall mean the voting power in the general election
of directors of the Company, and (iii) the term "Total
Voting Power" shall mean the total combined Voting Power of
all of the Voting Securities then outstanding. For purposes
of this Article 4, in the event that GAP 14 or GAP
Coinvestment, an affiliate or associate of GAP 14 or GAP
Coinvestment is, or has a representative or designee who is,
a member of the Board of Directors or other governing entity
of a corporation, partnership or other entity, a rebuttable
presumption shall be created that such corporation,
partnership or other entity is controlled by GAP 14 or GAP
Coinvestment or such affiliate and is an affiliate of GAP 14
or GAP Coinvestment.
4.2 Restrictions on Certain Actions by
GAP 14 and GAP Coinvestment.
(a) During the Term, GAP 14 and GAP
Coinvestment will not, and will cause each of its affiliates
and associates not to, singly or as part of a partnership,
limited partnership, syndicate or other group (as those
terms are used in Section 13(d)(3) of the Exchange Act),
directly or indirectly:
(i) acquire, offer to acquire, or agree
to acquire, directly or indirectly, by purchase, gift or
otherwise, any Voting Securities if, as a result of such
acquisition, GAP 14 and GAP Coinvestment and their
affiliates and associates would beneficially own in excess
of (A) at any time that the Company's directors' and
officers' liability insurance excludes claims in respect of
any director that is an affiliate of the beneficial owner of
15% or more of the Voting Securities, 14.99% of the Total
Voting Power or (B) at any other time, 19.99% of the Total
Voting Power;
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(ii) make, or in any way participate in
any "solicitation" of "proxies" to vote (as such terms are
defined in Rule 14a-1 under the Exchange Act), solicit any
consent or communicate with or seek to advise or influence
any person or entity with respect to the voting of any
Voting Securities or become a "participant" in any "election
contest" (as such terms are defined or used in Rule 14a-11
under the Exchange Act) with respect to the Company;
(iii) form, join or encourage the
formation of, any "person" or "group" within the meaning of
Section 13(d)(3) of the Exchange Act with respect to any
Voting Securities provided that this Section 4.2(a)(iii)
shall not prohibit any such arrangement solely among GAP 14
and any of its wholly-owned subsidiaries;
(iv) deposit any Voting Securities into
a voting trust or subject any such Voting Securities to any
arrangement or agreement with respect to the voting thereof,
provided that this Section 4.2(a)(iv) shall not prohibit any
such arrangement solely among GAP 14 and GAP Coinvestment
and any of their wholly-owned subsidiaries;
(v) initiate, propose or otherwise
solicit stockholders for the approval of one or more
stockholder proposals with respect to the Company as
described in Rule 14a-8 under the Exchange Act, or induce or
attempt to induce any other person to initiate any
stockholder proposal;
(vi) except for this Agreement, seek
election to or seek to place a representative on the Board
or, except with the approval of the Board, seek the removal
of any member of the Board;
(vii) except with the approval of the
Board, call or seek to have called any meeting of the
stockholders of the Company;
(viii) except through their
representative on the Board, otherwise act, directly or
indirectly, alone or in concert with others, to seek to
control, disrupt or influence the Board, policies or affairs
of the Company (including by means of providing or arranging
financing or providing financial advisory services for any
proposal or action referred to in this Section 4.2), except
with the approval of the Board;
(ix) sell or otherwise transfer in any
manner any Voting Securities to any "person" (within the
meaning of Section 13(d)(3) of the Exchange Act) who
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beneficially owns, or who as a result of such sale or
transfer will beneficially own, more than three percent (3%)
of any class of Voting Securities or who, without the
approval of the Board, has proposed a business combination
or similar transaction with, or a change of control of, the
Company or who has proposed a tender offer for Voting
Securities or who has discussed the possibility of proposing
a business combination or similar transaction with, or a
change in control of, the Company with GAP 14 or GAP
Coinvestment or any of their respective affiliates or
associates;
(x) solicit, propose, seek to effect,
negotiate with or provide any information to any other party
with respect to, or make any statement or proposal, whether
written or oral, to the Board or any director or officer of
the Company or otherwise make any public announcement or
proposal whatsoever with respect to, the Company, including,
without limitation, a merger, exchange offer or liquidation
of the Company's assets, or any restructuring,
recapitalization or similar transaction with respect to the
Company;
(xi) instigate or encourage any third
party to do any of the foregoing, including any statement or
proposal that is conditioned on or would require the Company
to waive the benefit of or amend any provision hereof, or
assist, participate in, facilitate, encourage any effort or
attempt by any person to do or seek to do any of the
foregoing;
(xii) request the Company (or its
directors, officers, employees or agents), directly or
indirectly, to amend or waive any provision of this Section
4.2(a) or otherwise seek any modification to or waiver of
any of GAP 14's, GAP Coinvestment's or their affiliates' or
associates' agreements or obligations under this Section
4.2(a); or
(xiii) encourage or render advice to or
make any recommendation or proposal to any person or other
entity to engage in any of the actions covered by this
Section 4.2(a).
(b) If, as a result of any repurchase of
Voting Securities by the Company, the percentage of Total
Voting Power to be held by a Shareholder together with its
affiliates and associates would exceed the percentage of
Total Voting Power permitted to be held by such Shareholder
and its affiliates and associates pursuant to clause (A) or
(B) of Section 4.2(a)(i) above, as applicable, such
Shareholder shall, and shall cause each of its affiliates
and associates to, sell to the Company (x) its pro rata
15
portion of the total number of Voting Securities
representing such excess to be repurchased by the Company or
(y) any percentage of the total number of Voting Securities
to be offered to the Company by such Shareholder and its
affiliates and associates as they and the Company shall each
agree. Such Voting Securities shall be offered to the
Company at a price per share equal to the average of the
closing price of the Common Stock of the Company on the
principal exchange on which such class of stock is then
listed for the ten trading days preceding the date on which
the requirement to make such offer to sell arose. If any of
the Shareholders or any of its affiliates or associates
beneficially owns or acquires any Voting Securities in
violation of this Agreement, such Voting Securities shall be
disposed of to persons who are not affiliates or associates
thereof but only in compliance with the provisions of this
Section 4.2; provided, however, that the Company may also
pursue any other available remedy to which it may be
entitled as a result of such violation. Nothing contained
in this Agreement shall prohibit GAP 14 or GAP Coinvestment
or any of their affiliates or associates from selling shares
of Common Stock to the Company in any Company-initiated
share tender.
4.3 Stop Transfer Instructions. The
certificates representing the Purchased Common Stock shall
have placed thereon a legend evidencing the foregoing
restrictions. Each Shareholder consents to the entry of a
stop transfer order with respect to any purported transfer
of Purchased Common Stock or Voting Securities in
contravention of the restrictions contained in this
Agreement.
4.4 Voting. During the Term, whenever a
Shareholder or any of its affiliates or associates shall
have the right to vote such Voting Securities, it shall and
shall cause its affiliates and associates to (a) be present,
in person or represented by proxy, at all shareholder
meetings of the Company so that all Voting Securities
beneficially owned by it and its affiliates and associates
shall be counted for the purpose of determining the presence
of a quorum at such meetings, and (b) vote or cause to be
voted, or consent with respect to, all Voting Securities
beneficially owned by it and its affiliates and associates
in the manner recommended by the Board, except that during
any period or at any time when there shall be in full force
and effect a valid order or judgment of a court of competent
jurisdiction or a ruling, pronouncement or requirement of
the New York Stock Exchange, Inc. (the "NYSE") to the effect
that the foregoing provision of this Section 4.4 is invalid,
void, unenforceable or not in accordance with NYSE policy,
then, such Shareholder shall, and shall cause its affiliates
16
and associates to, if so requested by the Board, vote or
cause to be voted all of its Voting Securities beneficially
owned by it and its affiliates and associates in the same
proportion as the votes cast by or on behalf of all the
other holders of the Company's Voting Securities.
5. Representations and Warranties.
5.1 Representations and Warranties of GAP 14
and GAP Coinvestment. Each of GAP 14 and GAP Coinvestment
hereby represents, warrants and covenants to the Company as
follows:
(a) Organization and Good Standing. GAP 14
is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of
Delaware. GAP Coinvestment is a general partnership duly
organized and validity existing under the laws of the State
of New York.
(b) Authority; Execution and Delivery, etc.
Each of GAP 14 and GAP Coinvestment has full power and
authority to enter into this Agreement and to perform its
obligations in accordance with the terms hereof. The
execution, delivery and performance of this Agreement have
been duly authorized by each of GAP 14 and GAP Coinvestment
and no other actions on the part of GAP 14 or GAP
Coinvestment are required. This Agreement has been duly
executed and delivered by each of GAP 14 and GAP
Coinvestment and constitutes the legal, valid and binding
obligation of each of GAP 14 and GAP Coinvestment,
enforceable against it in accordance with its terms.
(c) Consents, No Conflicts, etc. Neither
the execution and delivery of this Agreement, the
consummation by GAP 14 or GAP Coinvestment of the
transactions contemplated hereby, nor compliance by GAP 14
or GAP Coinvestment with any of the provisions hereof will
(with or without the giving of notice or the passage of
time) (i) violate or conflict with any provision of the
general or limited partnership agreement (or equivalent
organizational documents) of GAP 14 or GAP Coinvestment or
any agreement, instrument, judgment, decree, statute or
regulation applicable to GAP 14 or GAP Coinvestment or any
assets or properties of GAP 14 or GAP Coinvestment, (ii)
violate any order, writ, injunction, decree, statute, rule
or regulation applicable to GAP 14 or GAP Coinvestment, or
any of the respective assets or properties of GAP 14 or GAP
Coinvestment, or (iii) require the consent, approval,
permission or other authorization of or by, or designation,
declaration, filing, registration or qualification with, any
17
court, arbitrator or governmental, administrative or self-
regulatory authority or any other third party whatsoever
other than disclosure of the transactions contemplated
hereby in the filings of GAP 14, GAP Coinvestment or in the
filings of either of their respective affiliates, pursuant
to the federal securities laws and the rules of any stock
exchange on which the securities of GAP 14, GAP Coinvestment
or any of their respective affiliates are listed.
(d) Litigation. There is no litigation,
proceeding, labor dispute, arbitral action or government
investigation pending or, so far as known to GAP 14 or GAP
Coinvestment, threatened against GAP 14 or GAP Coinvestment
with respect to this Agreement which if adversely determined
could prohibit or prevent GAP 14 or GAP Coinvestment from
consummating the transactions contemplated hereby. There
are no decrees, injunctions or orders of any court or
governmental department or agency outstanding against GAP 14
or GAP Coinvestment.
(e) No Brokers. Neither GAP 14 nor GAP
Coinvestment has entered into and neither will enter into
any agreement, arrangement or understanding with any person
or firm which will result in the obligation of the Company
to pay any finder's fee, brokerage commission or similar
payment in connection with the transactions contemplated
hereby. Each of GAP 14 and GAP Coinvestment agrees to
indemnify and hold the Company harmless from and against any
and all claims, liabilities or obligations with respect to
any finder's fees, brokerage commissions or similar payments
asserted by any person on the basis of any act or statement
alleged to have been made by GAP 14 or GAP Coinvestment.
(f) Access to Information. Each of GAP 14
and GAP Coinvestment acknowledges that it has been furnished
access to the business records of the Company and such
additional information as it has requested in order that it
make an informed decision regarding the transactions
contemplated hereby and the acquisition of the Purchased
Common Stock and has been given the opportunity to meet with
representatives of the Company and to have them answer
questions regarding the Company's affairs and condition.
Each of GAP 14 and GAP Coinvestment is an experienced and
sophisticated participant in transactions of the kind
contemplated hereby, is capable of evaluating the merits and
risks of transactions of the kind contemplated hereby, is
experienced in the evaluation of enterprises such as the
Company and has undertaken such investigation and evaluated
such information regarding the Company as it has deemed
necessary to make an informed and intelligent decision with
respect to the execution and performance of this Agreement
and the acquisition of the Purchased Common Stock. Each of
18
GAP 14 and GAP Coinvestment acknowledges that the Company
makes no representation and warranty as to the Company's
financial condition, results of operations, business, assets
or prospects, except as set forth in Section 5.2(e) hereof.
Each of GAP 14 and GAP Coinvestment is acquiring the
Purchased Common Stock for investment only and not with a
view to the distribution of the Purchased Common Stock or
any interest therein.
5.2 Representations and Warranties of the
Company. The Company hereby represents, warrants and
covenants to GAP 14 and GAP Coinvestment as follows:
(a) Organization and Good Standing. The
Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of South
Carolina.
(b) Authority; Execution and Delivery, etc.
The Company has full power and authority to enter into this
Agreement and the Registration Rights Agreement and to
perform its obligations in accordance with the terms hereof
and thereof. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement have
been duly authorized by the Company and no other actions on
the part of the Company are required. This Agreement and
the Registration Rights Agreement have been duly executed
and delivered by the Company and constitute the legal, valid
and binding obligation of the Company, enforceable against
the Company in accordance with their respective terms except
for Section 8 of the Registration Rights Agreement, as to
which no representation is made.
(c) Consents, No Conflicts, etc. Neither
the execution and delivery of this Agreement nor the
Registration Rights Agreement, the consummation by the
Company of the transactions contemplated hereby and thereby,
nor compliance by the Company with any of the provisions
hereof or thereof will (with or without the giving of notice
or the passage of time) (i) violate or conflict with any
provision of the Articles of Incorporation or By-Laws of the
Company or any agreement, instrument, judgment, decree,
statute or regulation applicable to the Company or any
assets or properties of the Company, (ii) violate any order,
writ, injunction, decree, statute, rule or regulation
applicable to the Company or any assets or properties of the
Company or (iii) require the consent, approval, permission
or other authorization of or by, or designation,
declaration, filing, registration or qualification with, any
court, arbitrator or governmental, administrative or self-
regulatory authority or any other third party whatsoever,
19
other than disclosure of the transactions contemplated
hereby in the Company's filings pursuant to the federal
securities laws and the rules of any stock exchange on which
the Common Stock is listed except, in the case of clauses
(i), (ii) and (iii) above, for Section 8 of the Registration
Rights Agreement, as to which no representation is made.
(d) Litigation. There is no litigation,
proceeding, labor dispute, arbitral action or government
investigation pending or, so far as known to the Company,
threatened against the Company with respect to the
transactions contemplated by this Agreement or the
Registration Rights Agreement which if adversely determined
could prohibit or prevent the Company from consummating the
transactions contemplated hereby or thereby. There are no
decrees, injunctions or orders of any court or governmental
department or agency outstanding against the Company with
respect to the transactions contemplated hereby or by the
Registration Rights Agreement.
(e) Accuracy of Disclosure. To the best
knowledge of the Company, all of the information provided to
GAP 14 and GAP Coinvestment in connection with the
transactions contemplated hereby, by the Stock Purchase
Agreement and by the Registration Rights Agreement is true
and accurate in all material respects; provided, that, the
Company does not make any representations or warranties as
to the truth, completeness or accuracy of any projections or
other forward-looking information provided to GAP 14 and/or
GAP Coinvestment or any financial statements in respect of
any financial period of the Company that are to be restated.
(f) No Brokers. The Company has not entered
into and will not enter into any agreement, arrangement or
understanding with any person or firm which will result in
the obligation of GAP 14 or GAP Coinvestment to pay any
finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby. The
Company agrees to indemnify and hold GAP 14 or GAP
Coinvestment harmless from and against any and all claims,
liabilities or obligations with respect to any finder's
fees, brokerage commissions or similar payments asserted by
any person on the basis of any act or statement alleged to
have been made by the Company.
5.3 Indemnification.
The representations and warranties of the
parties made in this Agreement will survive for a period
ending on the first anniversary of the date of this
Agreement.
20
(a) The Company agrees to indemnify, defend
and hold harmless the Shareholders from and against all
losses, liabilities, damages and deficiencies, based upon,
arising out of, or otherwise in respect of, any inaccuracy
in or any breach of any representation or warranty contained
in Section 5.2 of this Agreement.
(b) The Shareholders agree to indemnify,
defend and hold harmless the Company from and against all
losses, liabilities, damages and deficiencies based upon,
arising out of, or otherwise in respect of, any inaccuracy
in or any breach of any representation or warranty contained
in Section 5.1 of this Agreement.
6. Miscellaneous.
6.1 Duration. This Agreement shall continue
in full force and effect until terminated by mutual
agreement between the Company and the Shareholders or until
the signatories hereto and each of the Persons who has
agreed in writing to be bound hereby cease to beneficially
own shares of capital stock of the Company.
6.2 Legend. Each certificate representing
shares of capital stock acquired from the Company by any
Shareholder shall, for as long as this Agreement is
effective, bear the legend set forth below (or such other
legend deemed to be appropriate by the Company and counsel
to the Shareholder beneficially owning the shares of capital
stock represented by such certificate):
"The securities represented by this Certificate
have not been registered under the Securities Act
of 1933, as amended, and are subject to a
Shareholders' Agreement, dated as of April 26,
1994, and may not be sold, assigned, transferred,
pledged or otherwise disposed of except in
compliance with applicable law and such
Shareholders' Agreement."
6.3 Successors and Assigns. This Agreement
shall inure to the benefit of and be binding upon the
successors and "permitted assigns" of the Company. For
purposes of this Agreement, permitted assigns means the
signatories hereto and each of the Persons who has agreed in
writing to be bound by the provisions hereof. This
Agreement shall inure to the benefit of and be binding upon
(i) the successors of GAP 14, GAP Coinvestment and their
respective affiliates and (ii) the permitted assigns of
GAP 14, GAP Coinvestment and their respective affiliates to
the extent that the assignee is an affiliate of such
21
assignor. Except as expressly otherwise provided herein,
this Agreement may not be assigned by any party hereto
without the prior written consent of the other parties
hereto.
6.4 Notices.
(a) All notices and other communications
hereunder shall be in writing and shall be deemed given if
telecopied or delivered personally or mailed by registered
or certified mail (return receipt requested) to the
following address (or at such other address as shall be
specified by like notice; provided, that, notice of a change
of address shall be effective only upon receipt thereof):
(i) if to GAP 14 or GAP Coinvestment:
General Atlantic Service Corporation
125 East 56th Street
New York, New York 10022
Attention: Steven A. Denning
Telephone: (212) 888-9191
Facsimile: (212) 644-8339
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Matthew Nimetz, Esq.
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
(ii) if to the Company (two copies):
Policy Management Systems Corporation
One PMS Center
Blythewood, South Carolina 29016
Attention: President; General Counsel
Telephone: (803) 735-4000
Facsimile: (803) 735-5560
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Attention: Robert C. Myers, Esq.
Telephone: (212) 259-8000
Facsimile: (212) 259-6333
22
(iii) if to any other Shareholder, at
its address as it appears on the
transfer books of the Company.
(b) Any notice given by telecopier or
delivered personally shall be deemed to have been received
by the recipient thereof on the day delivered if actually
received during normal business hours on a Business Day;
otherwise, such notice shall be deemed received on the next
following Business Day if actually received on such day.
All other notices in accordance herewith shall be effective
on the day actually received by the Company. Any party
hereto may, by notice to the other parties hereto, change
its address for receipt of notices hereunder.
(c) GAP 14 and GAP Coinvestment each hereby
designates General Atlantic Service Corporation ("GASC") as
its representative to receive any notice hereunder and to
communicate with the Company on its behalf. The Company
hereby acknowledges the designation of GASC as the repre-
sentative of each of GAP 14 and GAP Coinvestment for
purposes of this Section 6.4. Any notice given by the
Company to GASC shall be deemed given to the Shareholder to
whom it is addressed, and any notice given to the Company by
GASC on behalf either GAP 14 and GAP Coinvestment shall have
the same effect as if given to the Company by such
Shareholder.
6.5 Severability. If any one or more of the
provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable
in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect
and of the remaining provisions hereof shall not be in any
way impaired, it being intended that all of the rights and
privileges of the Shareholders shall be enforceable to the
fullest extent permitted by law.
6.6 Counterparts. This Agreement may be
executed simultaneously in one or more counterparts, each of
which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
6.7 Entire Agreement. This Agreement
embodies the entire agreement and understanding of the
parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties,
covenants or understandings, other than those set forth or
referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with
respect to such subject matter.
23
6.8 Amendments and Waivers. Except as
otherwise provided herein, the provisions of this Agreement
may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be
given unless such amendment, modification, supplement or
waiver has been consented to in writing by the Company and
the holders of a majority of the Voting Securities held of
record by the Shareholders.
6.9 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of South Carolina applicable to agreements made and to
be performed entirely within such State, without regard to
the principles of conflicts of law of such State.
6.10 Rules of Construction. Unless the
context otherwise requires, "or" is not exclusive, and
references to sections or subsections refer to sections or
subsections of this Agreement.
6.11 Headings; References. The headings
appearing in this Agreement are for convenience of reference
only and shall not affect the interpretation of this Agree-
ment. Except as otherwise indicated herein, all references
herein to Sections refer to the Sections contained in this
Agreement.
6.12 Further Assurances. Each of the parties
shall execute such documents and perform such further acts
as may be reasonably required or desirable to carry out or
to perform the provisions of this Agreement.
6.13 Effectiveness. This Agreement shall be
effective upon the purchase of the Purchased Common Stock by
GAP 14 and GAP Coinvestment pursuant to the Stock Purchase
Agreement, and if such purchase does not occur on or before
September 30, 1994, this Agreement shall terminate and be of
no force or effect.
24
IN WITNESS WHEREOF, the undersigned have duly
executed this Agreement as of the date first above written.
POLICY MANAGEMENT SYSTEMS CORPORATION
By: _________________________________
G. Larry Wilson
Chairman, President and Chief
Executive Officer
GENERAL ATLANTIC PARTNERS 14, L.P.
By: GENERAL ATLANTIC PARTNERS
Its General Partner
By: _________________________________
Steven A. Denning
Managing General Partner
GAP COINVESTMENT PARTNERS
By: __________________________________
Steven A. Denning
Managing Partner