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AMENDMENT NO. 1
TO THE
EMPLOYEE STOCK OPTION/NON-COMPETE AGREEMENT
BETWEEN
PAUL BUTARE AND PMSC
This Addendum is effective on November 8, 1995, and is hereby made a part of
and incorporated into the Employee Stock Option/Non-Compete Agreement
(hereinafter referred to as "Agreement") by and between POLICY MANAGEMENT
SYSTEMS CORPORATION ("PMSC") and Paul Butare ("EMPLOYEE"), dated with an
effective date of July 20, 1995. In the event that any provision of this
Addendum and any provision of the Agreement are inconsistent or conflicting,
the inconsistent or conflicting provision of this Addendum shall be and
constitute an amendment of the Agreement and shall control, but only to the
extent that such provision is inconsistent or conflicting with the Agreement.
PMSC and Employee hereby agree to amend the Agreement as follows:
1. The following terms and conditions are added as new Sections 3A, 3B and
3C to the Agreement:
3A. Change in Control. If there is a Change in Control (as
hereinafter defined) of PMSC prior to the Expiration Date, then,
notwithstanding any other provision of the Plan or this Agreement
to the contrary other than Section 1 above and 3B below, each
Option granted hereby then outstanding shall become immediately
exercisable in full and shall become nonforfeitable regardless of
whether there is a change in office or employment status
subsequent to such Change in Control.
For purposes of this Section, a "Change in Control" shall be
deemed to have occurred in the event: (1) that substantially all
of PMSC's assets are sold to another person, corporation,
partnership, or other entity other than one owned or controlled by
PMSC; or (2) any person, corporation, partnership or other entity,
either alone or in conjunction with its "affiliates" as that term
is defined in Rule 405 of the General Rules and Regulations under
the Securities Act of 1933, as amended, or other group of persons,
corporations, partnerships or other entities who are not
affiliates, but who are acting in concert, becomes the owner of
record or beneficially of securities of PMSC which represent
thirty-three and one-third percent (33 1/3%) or more of the
combined voting power of PMSC's then outstanding securities
entitled to elect directors; or (3) the Board or a committee
thereof makes a determination in its reasonable judgment that a
Change in Control of PMSC has taken place.
If there is a Change in Control of PMSC prior to the Expiration
Date, then notwithstanding any other provision of the Plan or this
Agreement except Sections 1 above and 3B below: (i) each Option
granted hereby then outstanding shall become immediately
exercisable in full regardless of whether there is a change in
office or employment status subsequent to such Change in Control;
(ii) EMPLOYEE shall have a period of ninety (90) days after
termination of employment to exercise the Options granted hereby;
and (iii) and in the event of
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the death of EMPLOYEE during the aforementioned ninety (90) day
period, said Options may be exercised during a period of one (1)
year from the date of death, as described in Section 10 of the
Plan, but in no event shall these Options be exercised after the
tenth anniversary date these Options were granted.
3B. Sale or merger. In the event of dissolution or liquidation of
PMSC or any merger or combination in which PMSC is not a surviving
corporation ("Sale or Merger"), each outstanding Option granted
hereunder shall terminate, but the EMPLOYEE shall have the right,
immediately prior to such dissolution, liquidation, merger or
combination, to exercise his or her Option, in whole or in part,
to the extent that it shall not have been exercised, without
regard to any installment exercise provisions.
3C. Additional Compensation. In the event a Change in Control or Sale
or Merger, as described in Sections 3A and 3B above, occurs while
EMPLOYEE is employed by PMSC and occurs prior to the Expiration
Date, then in addition to the exercise rights granted, EMPLOYEE
also shall be compensated based on the following formula, subject
to the following conditions, EMPLOYEE may elect by written notice
to PMSC's General Counsel the following in lieu of all other
compensation from PMSC:
(a) EMPLOYEE shall be paid an annual salary for two (2) years
following a Change in Control or Sale or Merger consisting
of one hundred percent (100%) of the average amount of total
cash compensation of EMPLOYEE for the two (2) calendar years
prior to the time of such Change in Control or Sale or
Merger. For purposes of the foregoing, "average amount of
total cash compensation" shall include salary and bonuses,
but shall specifically exclude income attributable to the
granting or exercising of stock options.
(b) Notwithstanding any of the provisions of this Agreement, the
amount of all payments to be made pursuant to this Agreement
after a Change of Control or a Sale or Merger shall not
exceed one dollar ($1.00) less than that amount which would
cause any such payment to be deemed a "parachute payment" as
defined in Section 280G of the Internal Revenue Code of 1986
(the "Code"), as amended, and as said statute is then in
effect at the time of such payment.
(c) Any payments made to EMPLOYEE following a Change of Control
or a Sale or Merger that shall be disallowed, in whole or in
part, as a deductible expense to PMSC for Federal income
tax purposes by the Internal Revenue Service on the basis
that Section 280G of the Code prohibits such deduction shall
be reimbursed by EMPLOYEE to the full extent of said
disallowance within six (6) months after the date on which
the amount of said disallowance has been finally determined
and PMSC has paid the deficiency with respect to said
disallowance. PMSC shall
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legally defend any proposed disallowance by the Internal
Revenue Service and the amount required to be reimbursed by
EMPLOYEE shall be the amount determined by an appropriate
court in a final, nonappealable decision that is actually
disallowed as a deduction. In lieu of payment to PMSC by
EMPLOYEE, PMSC may, in its discretion, withhold amounts from
EMPLOYEE's future compensation payments until the amount
owed to PMSC has been fully recovered. No such withholding
shall occur prior to the date on which EMPLOYEE would be
required to make reimbursement as provided herein.
(d) If the limitation set forth in (b) may at any time become
applicable to the amounts otherwise due pursuant to
paragraph (a) then PMSC shall continue to pay EMPLOYEE all
amounts as provided under paragraph (a) until such time as
cumulative payments equal the aggregate amount as limited by
paragraph (b) and EMPLOYEE may terminate his employment on
three (3) months notice at any time within the last twelve
(12) months of the time period during which the payments
described in this Section 3C will be paid without affecting
his rights to receive said payments.
(e) PMSC shall have no obligation to pay the amounts set forth
in (a) as limited by (b) if there is reasonable proof that
the non-competition or non-hire provisions of Sections 7 and
8 of this Agreement are being violated.
(f) In the event of termination of employment of EMPLOYEE for
Cause, as hereinafter defined, following a Change of Control
or Sale or Merger, PMSC shall not be obligated to make any
further payments of the compensation amounts provided for in
this Section. Notwithstanding any other provision of this
Agreement, except for (d) and (i) hereinafter which shall
control in the event EMPLOYEE terminates employment as
provided in (d) and (i), in the event EMPLOYEE voluntarily
terminates employment following a Change of Control or Sale
or Merger for other than Good Reason, as defined
hereinafter, compensation amounts set forth in (a) and (b)
shall be payable only for a one (1) year period following
termination of employment.
"Cause" for the purposes of this Section is defined to mean:
(1) willful failure to substantially perform prescribed
duties other than as a result of disability; or (2) willful
engagement in misconduct significantly detrimental to PMSC.
"Good Reason" to terminate employment with PMSC occurs if:
(1) duties are assigned that are materially inconsistent
with previous duties; (2) duties and responsibilities are
substantially reduced; (3) base compensation is reduced not
as part of an across the board reduction for all senior
officers or executives; (4) participation under compensation
plans or arrangements generally made available to persons at
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EMPLOYEE's level of responsibility at PMSC is denied; (5) a
successor fails to assume this Agreement; or (6) termination
is made without compliance with prescribed procedures.
(g) In the event EMPLOYEE is involuntarily terminated by PMSC
without Cause or EMPLOYEE voluntarily terminates employment
for Good Reason, PMSC's obligation to pay the compensation
amounts provided in this Section shall survive termination
of employment.
(h) Further, in the event of termination of employment during
the pendency of a "Potential Change of Control", as
hereinafter defined, the provisions of (f) and (g) shall
apply as if an actual Change of Control or Sale or Merger
had taken place. A Potential Change of Control shall be
deemed to have occurred if: (1) PMSC has entered into an
agreement or letter of intent the consummation of which
would result in a Change of Control or Sale or Merger; (2)
any person publicly announces an intention to take or to
consider taking actions which if consummated would
constitute a Change of Control or Sale or Merger; or (3) the
Board of Directors of PMSC or a Committee thereof in its
reasonable judgment makes a determination that a Potential
Change of Control for purposes of this Agreement has
occurred. A Potential Change of Control remains pending for
purposes of receiving payments under this Section until the
earlier of the occurrence of a Change of Control or Sale or
Merger or a determination by the Board of Directors or a
committee thereof (at any time) that a Change of Control or
Sale or Merger is no longer reasonably expected to occur.
(i) Notwithstanding anything contained in this Agreement to the
contrary, EMPLOYEE and PMSC or the person, corporation,
partnership or other entity acquiring control of PMSC, with
the concurrence of the Chief Executive Officer and
Compensation Committee of the Board of Directors of PMSC,
may mutually agree that EMPLOYEE, with three (3) months'
notice, may terminate his employment and receive a lump sum
payment equal to the present value of remaining payments
under this Agreement discounted by the then current Treasury
Bill rate for the remaining term of this Section.
2. Section 7 of the Agreement is deleted in its entirety and replaced with
the following:
7. Non-competition. In consideration of the Options hereby granted,
EMPLOYEE covenants and agrees that EMPLOYEE shall devote his or
her best efforts to furthering the best interests of PMSC and that
during the period of his or her employment with PMSC and for the
periods set forth below following the date of separation from
employment, EMPLOYEE shall not "Compete" with PMSC. The region
within which EMPLOYEE agrees not to Compete with PMSC is the
United States, Canada, and those countries in which PMSC has
customers or clients as of the date of EMPLOYEE's separation from
employment. For the purpose of this Agreement, the term "Compete"
shall have its commonly
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understood meaning which shall include, but not be limited by, the
following items with respect to PMSC's insurance application
software licensing, data processing, consulting and information
services businesses and any other businesses carried on by PMSC
at the time of EMPLOYEE's separation from employment:
(i) for a period of two (2) years, soliciting or accepting as a
client or customer any individual, partnership, corporation,
trust or association that was a client, customer or actively
sought after prospective client or customer of PMSC during the
twelve (12) calendar month period immediately preceding the
date of EMPLOYEE's separation from employment;
(ii) for a period of one (1) year, acting as an EMPLOYEE, independent
contractor, agent, representative, consultant, officer, director,
or otherwise affiliated party of any entity or enterprise which
is competing with PMSC in offering similar application software
or services to parties described in (i) above; or
(iii) for a period of one (1) year, participating in any such competing
entity or enterprise as an owner, partner, limited partner, joint
venturer, creditor or stockholder (except as an equity holder
holding less than a one percent (1%) interest).
The parties certify by their undersigned authorized agents that they have read
this Addendum and the Agreement and agree to be bound by their terms and
conditions.
PMSC EMPLOYEE
POLICY MANAGEMENT SYSTEMS PAUL BUTARE
CORPORATION
BY: BY: _________
(AUTHORIZED SIGNATURE)
(in non-black ink, please) (in non-black ink,
please)
Stephen G. Morrison
(NAME)
Executive Vice President
and General Counsel