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SHAREHOLDER'S AGREEMENT
between
POLICY MANAGEMENT SYSTEMS CORPORATION
and
CONTINENTAL CASUALTY COMPANY
___________________________
Dated as of March 8, 1996
___________________________
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SHAREHOLDER'S AGREEMENT
SHAREHOLDER'S AGREEMENT, dated as of March 8, 1996, between
POLICY MANAGEMENT SYSTEMS CORPORATION, a South Carolina corporation (the
"Company"), and CONTINENTAL CASUALTY COMPANY, an Illinois domestic
insurance company ("CNA").
Pursuant to a Stock Purchase Agreement, dated as of the date
hereof, among CNA, GENERAL ATLANTIC PARTNERS 14, L.P., a Delaware
limited partnership ("GAP 14"), and GAP COINVESTMENT PARTNERS, L.P., a
New York limited partnership ("GAP Coinvestment"), as successor to GAP
Coinvestment Partners, a New York general partnership (the "Stock
Purchase Agreement"), CNA has agreed to purchase in the aggregate
759,512 shares of common stock, par value $.01 per share, of the Company
("Common Stock," and such 759,512 shares of Common Stock are referred to
herein as the "Purchased Common Stock") from GAP 14 and GAP
Coinvestment. Simultaneously with or prior to such purchase, the
Company acquired an additional 759,512 shares of Common Stock from GAP
14 and GAP Coinvestment.
As more fully provided for herein, CNA has granted to the
Company certain rights of first offer over the shares of capital stock
of the Company owned by CNA and its affiliates and associates. As
partial consideration for the rights granted to the Company hereunder,
CNA has been granted certain rights as more fully provided for herein.
As further consideration for the obligations of CNA
hereunder, the Company has agreed to provide registration rights to CNA,
as provided for in the Registration Rights Agreement, dated as of date
hereof, among CNA 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:
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An "affiliate" of a Shareholder means any Person that directly
or indirectly through one or more intermediaries controls, is controlled
by, or is under common control with, such Shareholder.
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.
"Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"CNA" has the meaning assigned such term in the first
paragraph of this Agreement.
"CNA Purchase Agreement" has the meaning assigned to such
term in Section 4.1(h) of this Agreement.
"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.
"GAP 14" has the meaning assigned such term in the second
paragraph of this Agreement.
"GAP Coinvestment" has the meaning assigned such term in the
second paragraph of this Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
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"Market Price" has the meaning assigned such term in Section
2.1(a) of this Agreement.
"Morgan Rate" means the prime rate as publicly announced
from time-to-time by Morgan Guaranty Trust Company of New York.
"Offered Shares" has the meaning assigned such term in
Section 2.1(a) of this Agreement.
"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,
combinations, 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.
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"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 CNA and its respective successors and
permitted assigns, to the extent provided for in Section 5.3 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 succession beneficially owned
by the shareholders of the Company.
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 (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) subject to Section 2.2 hereof, 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.
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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 35 days following acceptance
by the Company 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 price provided in clause (ii) of the last sentence of
the preceding paragraph except if the Selling Shareholder Offer shall be
pursuant to a request for registration in which case the proposed cash
sale price shall be deemed to be the closing price of the Common Stock
on the principal exchange on which the Common Stock is listed (the
"Market Price") 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 or before the 30th day following acceptance by the
Company of the Selling Shareholder Offer, or at such other time and
place as the Company and the Selling Shareholder may reasonably agree
upon, but not later than as provided in the second paragraph of Section
2.1(a) above. 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. Subject to the
further provisions of Section 2(d)(iii)
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below, the Company shall deliver to the Selling Shareholder at the
closing, by wire transfer of immediately available funds, 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) (i) Subject to the further provisions of
this Section 2.1(d), if the Company does not elect to purchase 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.
(ii) Notwithstanding paragraph (i) above and
subject to the further provisions of this Section 2.1(d), if the sale is
pursuant to a request for registration and the cash sale price pursuant
to such registration is higher than the proposed cash sale price
contemplated by the second paragraph of Section 2.1(a) above then the
Selling Shareholder may dispose of the Offered Shares pursuant to
Section 2.1(d)(i) above; provided, however, that if the cash sale price
pursuant to a request for registration is less than the proposed cash
sale price contemplated by the second paragraph of Section 2.1(a) then
the Selling Shareholder shall give the Company written notice of such
sale price and the Company shall have 24 hours from such notice to elect
in writing to purchase the Offered Shares at such price. The closing of
such purchase by the Company shall be held on the third Business Day
following the Company's election to purchase in accordance with the last
three sentences of Section 2.1(c) above. If the Company shall elect not
to purchase the Offered Shares after notice or shall fail to close the
purchase as provided in the previous sentence then the Selling
Shareholder may dispose of the Offered Shares pursuant to Section
2.1(d)(i) (without regard to price or the proviso of the previous
sentence) until the later of the expiration of the 120-day period or the
fifth Business Day after giving notice to the
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Company as contemplated by the previous sentence. If such disposition
is not consummated within such 120-day period (or the fifth Business Day
following notice to the Company as contemplated by the previous
sentence), the restrictions provided for herein shall again become
effective.
(iii) The following additional provisions shall apply
to a sale pursuant to a request for registration:
(A) The Company may, at its option, seek a purchaser
for the Offered Shares pursuant to Rule 144A under the Securities Act
and, if the Company is able to procure such a purchaser, CNA will use
reasonable best efforts to cause the Offered Shares to be sold to such
purchaser as promptly as practical at a purchase price per share equal
to the Market Price as of the day immediately prior to the closing date
of such sale or such higher price as the purchaser and CNA may agree.
For the purposes of paragraphs (B) - (E) below, a sale pursuant to Rule
144A of the Securities Act, as contemplated hereby, shall be deemed to
be a sale pursuant to a request for registration. The provisions of
this paragraph (A) shall in no way delay the Company's obligation to
file a registration statement pursuant to the terms of the Registration
Rights Agreement.
(B) If the cash sale price is higher than the Market
Price on the day the Selling Shareholder Offer is received by the
Company, CNA will, promptly upon the close of the sale of the Offered
Shares, remit to the Company such excess, less an amount equal to
interest on the proposed cash sale price at the Morgan Rate calculated
on the basis of the actual number of days elapsed divided by 365 for the
period from the third Business Day following the Company's receipt of
the Selling Shareholder Offer to the date of such closing.
(C) If the cash sale price is lower than the Market
Price on the day the Selling Shareholder Offer is received by the
Company, the Company will, promptly upon the close of the sale of the
Offered Shares remit to CNA such deficit, plus an amount equal to
interest on the proposed cash sale price at the Morgan Rate calculated
on the basis of the actual number of day elapsed divided by 365 for the
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period from the third Business Day following the Company's receipt of
the Selling Shareholder Offer to the date of such closing. It is
understood for the purposes of this paragraph (C) that the Company may
be the purchaser of the Offered Shares.
(D) In the event that the Company does not cause an
effective registration statement to be in place for the sale of the
Offered Shares within 120 days of the Company receiving the Selling
Shareholder Offer (subject to Section 3(a)(iv) of the Registration
Rights Agreement), then CNA may, upon written notice to the Company, put
such Offered Shares to the Company at a purchase price equal to the
Market Price on the day the Selling Shareholder Offer is received by the
Company, plus interest calculated as provided in paragraph (C) above.
(E) The Closing of any sale of the Offered Shares by
CNA to the Company as contemplated by this Section 2.1(d)(iii) shall be
held in accordance with the last three sentences of Section 2.1(c)
above.
(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 Purchased Common Stock to
an affiliate of a Selling Shareholder (other than to CNA Financial
Corporation and/or its majority owned subsidiaries) shall be subject to
the right of first offer provided for in this Section 2.1 if such sale,
transfer, assignment or other disposition is to occur prior to the third
anniversary of this Agreement.
(f) No transfer (other than by way of a
registered public offering pursuant to a request for registration or
pursuant to Rule 144A of the Securities Act) 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
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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, a
distribution thereof which would be in violation of the Securities Act,
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 subsequent disposition thereof is registered
under the Securities Act or is exempt from such requirements.
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 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
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right shall be exercisable by written notice to the Rule 144 Shareholder
(the "Company Acceptance") given by 9:00 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 fifth Business Day following 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 wire
transfer of immediately available funds, 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 30
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 30-day period, 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.
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(f) 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.
3. Certain Agreements.
3.1 Strategy Committee. CNA and the Company will
establish and maintain a technology/business strategy committee composed
of certain top executives at both companies which members shall be
designated by the respective companies. The technology/business
strategy committee will meet at least quarterly to review at least the
following: (i) major project status; (ii) planning for new information
services initiatives; and (iii) identifying areas of potential benefit
for each company.
3.2 Preferred Vendor. CNA agrees that it will
recognize the Company as one of a limited number of "preferred vendors"
for systems application software and systems services. The preferred
vendors will be looked to first to provide such software and services in
their areas of expertise and CNA will review all decision criteria for
such software and services with the Company at their regular quarterly
meetings.
4. Representations, Warranties and Covenants.
4.1 Representations and Warranties of CNA. CNA
hereby represents, warrants and covenants to the Company as follows:
(a) Organization and Good Standing. CNA is an
Illinois domestic insurance company duly authorized to conduct its
appropriate business under the insurance laws of the State of Illinois.
(b) Authority; Execution and Delivery, etc.
CNA 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
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of this Agreement have been duly authorized by CNA and no other actions
on the part of CNA are required. This Agreement has been duly executed
and delivered by CNA and constitutes the legal, valid and binding
obligation of CNA, enforceable against it in accordance with its terms.
(c) Consents, No Conflicts, etc. Neither the
execution and delivery of this Agreement, the consummation by CNA of the
transactions contemplated hereby, nor compliance by CNA 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
Certificate of Incorporation or by-laws of CNA, or any agreement,
instrument, judgment, decree, statute or regulation applicable to CNA or
any assets or properties of CNA, (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to CNA, or
any of the assets or properties of CNA, 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 other than disclosure of the
transactions contemplated hereby in the filings of CNA, in the filings
of its affiliates, pursuant to the federal securities laws and the rules
of any stock exchange on which the securities of CNA or any of its
affiliates are listed or pursuant to the HSR Act.
(d) Litigation. There is no litigation,
proceeding, labor dispute, arbitral action or government investigation
pending or, so far as known to CNA, threatened against CNA with respect
to this Agreement which if adversely determined could prohibit or
prevent CNA from consummating the transactions contemplated hereby.
There are no decrees, injunctions or orders of any court or governmental
department or agency outstanding against CNA.
(e) No Brokers. CNA 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 the Company to pay
any finder's fee, brokerage commission or similar payment in connection
with the transactions contemplated hereby. CNA agrees to
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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 CNA.
(f) Access to Information. CNA 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. CNA 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. CNA 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 4.2(e) hereof. CNA 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.
(g) HSR Act. CNA represents, warrants and
agrees that (i) it will make all necessary filings under the HSR Act in
connection with the transactions contemplated by the Stock Purchase
Agreement on or before March 22, 1996 and (ii) in response to Item 1(d)
of its Hart-Scott-Rodino Antitrust Improvements Act Notification and
Report Form filing, it will indicate that the highest notification
threshold in 16 C.F.R. ss 801.1(h) for which its form is being filed is
the $15 million threshold.
(h) HSR Act Restriction. In the event the
Federal Trade Commission or the Antitrust Division of
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the Department of Justice imposes any restriction upon CNA or the
Company by reason of CNA's purchase of the Purchased Common Stock as
contemplated by Section 6(h) of that certain Stock Purchase Agreement,
dated as of the date hereof, among GAP 14, GAP Coinvestment and CNA (the
"CNA Purchase Agreement"), then CNA agrees and covenants it will
terminate its purchase of the Purchased Common Stock as provided in the
CNA Purchase Agreement.
4.2 Representations, Warranties and Covenants of the
Company. The Company hereby represents, warrants and covenants to CNA
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 the provisions of the Registration Rights Agreement
relating to indemnification, contribution and related matters, as to
which no representation as to enforceability 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,
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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, 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 and except, in the case of clauses (i), (ii)
and (iii) above, for the provisions of the Registration Rights Agreement
relating to indemnification, contribution and related matters, as to
which no representation as to enforceability 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 CNA 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, if
any, provided to CNA.
(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
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will result in the obligation of CNA 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 CNA
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.
(g) The Purchased Stock. (i) The Purchased
Stock was validly issued and is fully paid and nonassessable and is not
subject to any restrictions on transfer other than as provided in this
Agreement, the Registration Rights Agreement or applicable securities
laws, rules or regulations or laws, rules or regulations pertaining to
CNA and/or its affiliates.
(ii) The transactions contemplated by the
agreement, the CNA Purchase Agreement and the Registration Rights
Agreement will not trigger or otherwise violate any provision of the
South Carolina Business Combination Statute or Control Share Acquisition
Statute.
(h) CNA Termination. In the event CNA
terminates its purchase of the Purchased Common Stock as contemplated by
Section 4.1(h) above, then the Company agrees and covenants that it will
purchase such Purchased Common Stock pursuant to the provisions of
Section 6 of that certain Stock Purchase Agreement, dated as of the date
hereof, among the Company, GAP Coinvestment and GAP 14.
4.3 Indemnification.
The representations and warranties of the parties made in
this Agreement will survive for a period ending on the date eighteen
months from the date of this Agreement.
(a) The Company agrees to indemnify, defend
and hold harmless the Shareholder, its officers, directors and each
Person who controls the Shareholder within the meaning of the Securities
Act 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
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warranty contained in Section 4.2 of this Agreement.
(b) The Shareholder agrees to indemnify,
defend and hold harmless the Company, its officers, directors and each
Person who controls the Company within the meaning of the Securities Act
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 4.1 of
this Agreement.
5. Miscellaneous.
5.1 Duration. This Agreement shall continue in full
force and effect until the earliest of (a) its termination by mutual
agreement between the Company and the Shareholder, (b) CNA and each of
the Persons who has agreed in writing to be bound hereby (other than the
Company) cease to beneficially own shares of capital stock of the
Company and (c) the date which is three years from the date of the
purchase of the Purchased Common Stock by CNA.
5.2 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 Shareholder's Agreement, dated
as of March 8, 1996, and may not be sold, assigned,
transferred, pledged or otherwise disposed of except in
compliance with applicable law and such Shareholder's
Agreement."
5.3 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
19
writing to be bound by the provisions hereof, except that it is
specifically understood with respect to CNA that this Agreement shall
not inure to the benefit of any Person, and no Person shall be bound
hereby, who purchases Common Stock from CNA (other than an affiliate as
contemplated by Section 2.1) pursuant to Section 2.1 or 2.2. This
Agreement shall inure to the benefit of and be binding upon (i) the
successors of CNA and its affiliates and (ii) the permitted assigns of
CNA and its affiliates to the extent that the assignee is an affiliate
of such 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.
5.4 Notices.
(a) All notices and other communications
hereunder shall be in writing and shall be deemed given if telecopied
(followed by same day telephone confirmation) 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 CNA:
Continental Casualty Company
CNA Plaza
Chicago, Illinois 60685
Attention: Secretary
Telephone: (312) 822-5158
Facsimile: (312) 822-1297
(ii) if to the Company (two copies):
Policy Management Systems Corporation
One PMS Center
Blythewood, South Carolina 29016
Attention: General Counsel
Telephone: (803) 735-4000
Facsimile: (803) 735-5560
20
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
(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.
5.5 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 Shareholder shall be enforceable to the
fullest extent permitted by law.
5.6 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.
5.7 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
21
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter
and there are no other shareholder or similar agreements in effect
between CNA and/or the Company and any other Person which relate to the
subject matter hereof.
5.8 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
Shareholder.
5.9 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such
State, without regard to the principles of conflicts of law of such
State.
5.10 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.
5.11 Headings; References. The headings appearing in
this Agreement are for convenience of reference only and shall not
affect the interpretation of this Agreement. Except as otherwise
indicated herein, all references herein to Sections refer to the
Sections contained in this Agreement.
5.12 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.
5.13 Effectiveness. Except for the provisions of
4.1(g) and (h) and 4.2(h) which shall be effective immediately, this
Agreement shall be effective upon the purchase of the Purchased Common
Stock by CNA pursuant to the Stock Purchase Agreement, and if such
22
purchase does not occur on or before May 15, 1996 this Agreement shall
terminate and be of no force or effect.
23
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the date first above written.
POLICY MANAGEMENT SYSTEMS CORPORATION
By:
Name:
Title:
CONTINENTAL CASUALTY COMPANY
By:
Name:
Title:
24
TABLE OF CONTENTS
Page
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Transfers of Capital Stock. . . . . . . . . . . . . . . . . 3
2.1 Right of First Offer. . . . . . . . . . . . . . . . . 3
2.2 Right of First Offer in Respect of Proposed
Transactions Under Rule 144. . . . . . . . . . . . 7
3. Certain Agreements. . . . . . . . . . . . . . . . . . . . . 9
3.1 Strategy Committee. . . . . . . . . . . . . . . . . . 9
3.2 Preferred Vendor. . . . . . . . . . . . . . . . . . . 9
4. Representations, Warranties and Covenants . . . . . . . . . 10
4.1 Representations and Warranties of CNA . . . . . . . . 10
4.2 Representations, Warranties and Covenants of the
Company. . . . . . . . . . . . . . . . . . . . . . 12
4.3 Indemnification . . . . . . . . . . . . . . . . . . . 14
5. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Duration. . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Legend. . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 Successors and Assigns. . . . . . . . . . . . . . . . 15
5.4 Notices . . . . . . . . . . . . . . . . . . . . . . . 15
5.5 Severability. . . . . . . . . . . . . . . . . . . . . 16
5.6 Counterparts. . . . . . . . . . . . . . . . . . . . . 16
5.7 Entire Agreement. . . . . . . . . . . . . . . . . . . 16
5.8 Amendments and Waivers. . . . . . . . . . . . . . . . 17
5.9 Governing Law . . . . . . . . . . . . . . . . . . . . 17
5.10 Rules of Construction . . . . . . . . . . . . . . . . 17
5.11 Headings; References. . . . . . . . . . . . . . . . . 17
5.12 Further Assurances. . . . . . . . . . . . . . . . . . 17
5.13 Effectiveness . . . . . . . . . . . . . . . . . . . . 17