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STOCK OPTION/NON-COMPETE AGREEMENT
THIS EMPLOYEE STOCK OPTION/NON-COMPETE AGREEMENT ("the Agreement") is made
effective as of May 28, 1996, by and between &NAME& ("EMPLOYEE") and Policy
Management Systems Corporation ("PMSC").
W I T N E S S E T H:
WHEREAS, EMPLOYEE has been employed by PMSC in a position of significant
responsibility and PMSC desires to recognize EMPLOYEE'S contribution to PMSC by
making EMPLOYEE a "Key Employee" as defined in the Policy Management Systems
Corporation 1989 Stock Option Plan ("Plan") and therefore eligible to be granted
Options as defined therein; and
WHEREAS, EMPLOYEE has developed and will continue to develop intimate knowledge
of PMSC's business practices, which, if exploited by EMPLOYEE in contravention
of this Agreement, could seriously, adversely and irreparably affect the
business of PMSC; and
WHEREAS, EMPLOYEE and PMSC each desire to induce the other to enter into this
Agreement; and
WHEREAS, PMSC would not make EMPLOYEE a Key Employee in the event that EMPLOYEE
refused to agree to the terms and conditions of this Agreement and thus EMPLOYEE
would not be eligible to receive Options under the Plan;
NOW, THEREFORE, in consideration of the premises and the mutual promises and
covenants of the parties hereto, EMPLOYEE and PMSC agree as follows:
1. Grant. Effective May 28, 1996, PMSC grants EMPLOYEE "non-qualified"
Options to purchase up to [Shares] shares of PMSC common stock pursuant to
the Plan. Non-qualified options are subject to tax upon exercise as set
forth in paragraph 5 below.
THESE OPTIONS MAY BE REVOKED BY THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS IN THEIR ABSOLUTE DISCRETION, PRIOR TO THE TIME THEY BECOME
EXERCISABLE IN ACCORDANCE WITH SECTION 9 OF THE PLAN IF THEY DEEM IT
APPROPRIATE TO DO SO BASED UPON SUCH FACTS OR CIRCUMSTANCES AS THEY DEEM
RELEVANT, INCLUDING, WITHOUT LIMITATION, THE RESULTS OR FINDINGS, WHETHER
PRELIMINARY OR FINAL, OF THE VARIOUS INVESTIGATIONS INTO THE COMPANY'S
PREVIOUSLY ISSUED FINANCIAL STATEMENTS.
2. Price and Expiration. The option price of the shares subject to these
Options is the closing price of the stock on the New York Stock Exchange
on the date of grant, i.e., $52.75. These Options must be exercised
within ten (10) years of the effective date of this Agreement or they
expire.
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3. Availability for Exercise. 20% of the shares subject to the Options
granted will become available for exercise at the end of each of the five
(5) years following the effective date of this Agreement. For example .
. . 20% of the total number of Options granted will be available for
exercise beginning May 28, 1997; 40% will be available for exercise
beginning May 28, 1998; 60% will be available for exercise beginning May
28, 1999; 80% will be available for exercise beginning May 28, 2000; and
100% will be available for exercise beginning May 28, 2001 Once Options
become available for exercise, they will remain available for exercise for
so long as EMPLOYEE is employed by the Company unless they expire.
Notwithstanding the foregoing, the Options hereby granted shall not be
exercisable until such time as the common stock to be issued on exercise
of the Options has been registered under the Securities Act of 1933 or
PMSC has otherwise qualified such issuance of shares under an exemption
from registration under said Act.
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 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
Section 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 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.
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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 Optionee 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.
4. Order of Exercise. The Options may be exercised without regard to the
order in which these and any other Options were granted and without regard
to any unexpired and unexercised qualified, Incentive Stock Options
("ISO's") or other non-qualified options.
5. Tax Liability. The tax liability which EMPLOYEE may incur relating to
these Options is described below based upon present law and regulations
which are subject to change. Taxes incurred are:
+ when options are granted - none
+ when options are exercised - the difference between the fair market
value of the stock at the date of exercise of an Option and the
option price is a capital gain but generally will be treated as
ordinary income during the year the Option is exercised. Such tax
liability is created at the time EMPLOYEE exercises an Option and
PMSC is required to collect withholding taxes from EMPLOYEE.
Federal income taxes (computed at a rate of 28% of the above
described difference) and FICA and state income taxes (computed at
the applicable rate of the above described difference) are withheld.
For example...if the option price is $33.00 and the fair market
value at the date of the exercise is $38.00, the difference is
$5.00, and assuming an applicable FICA rate of 7.65% and state
income tax rate of 7%, along with the 28% federal income tax, the
Company would collect a tax of $2.13 per share from EMPLOYEE.
+ when shares are sold - the difference between the fair market value
at the date of exercise (the $38.00 in the above example) and the
price at which EMPLOYEE sells the stock is treated the same as above
described during the year in which EMPLOYEE sells the stock
purchased by exercise of his or her options.
6. Exercise and Payment. Exercises of Options shall only be handled pursuant
to the Instructions set forth on the last page of this Agreement. To
exercise these Options, EMPLOYEE shall make payment in full to PMSC for
the option price of the shares to be purchased...plus the combined
(federal, FICA and state) tax liability EMPLOYEE incurs. Such taxes paid
to PMSC will be forwarded to the Internal Revenue Service and appropriate
state tax commission and credited to EMPLOYEE in the same manner as the
withholding tax on EMPLOYEE's salary. EMPLOYEE's actual tax will depend
upon the overall tax rate calculated when EMPLOYEE prepares his or her tax
returns. EMPLOYEE should consult a tax professional regarding questions
about EMPLOYEE's actual tax liability.
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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 for the one (1) year period
from the effective date hereof, and if EMPLOYEE separates from employment
with PMSC for any reason within said one (1) year period, then for a one
(1) year period from the date of such 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 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) 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) 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) 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).
8. Non-Hiring. During EMPLOYEE'S employment with PMSC and for a period of
three (3) years after separation from such employment, EMPLOYEE agrees
that EMPLOYEE shall under no circumstances hire, attempt to hire or assist
or be involved in the hiring of any employee of PMSC either on EMPLOYEE'S
behalf or on behalf of any other person, entity or enterprise. Also, for
a similar period of time, EMPLOYEE agrees to not communicate to any such
person, entity or enterprise the names, addresses or any other information
concerning any employee of PMSC or any past, present or prospective client
or customer of PMSC.
9. Equitable Relief. EMPLOYEE acknowledges (i) that EMPLOYEE'S skill,
knowledge, ability and expertise in the business described herein is of a
special, unique, unusual, extraordinary, and/or intellectual character
which gives said skill, etc. a peculiar value; (ii) that PMSC could not
reasonably or adequately be compensated in damages in an action at law for
breach of this Agreement; and (iii) that a breach of any of the provisions
contained in this Agreement could be extremely detrimental to PMSC and
could cause PMSC
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irreparable injury and damage. Therefore, EMPLOYEE agrees that PMSC shall
be entitled, in addition to any other remedies it may have under this
Agreement or otherwise, to preliminary and permanent injunctive and other
equitable relief to prevent or curtail any breach of this Agreement;
provided, however, that no specification in this Agreement of a specific
legal or equitable remedy shall be construed as a waiver of or prohibition
against the pursuing of other legal or equitable remedies in the event of
such a breach.
10. Breach of Agreement. EMPLOYEE agrees that in the event EMPLOYEE breaches
any provision of this Agreement, PMSC shall be entitled, in addition to
any other remedies it may have under this Agreement, to offset, to the
extent of any liability, loss, damage or injury from such breach, any
payments due to EMPLOYEE pursuant to his or her employment with PMSC.
11. Employment Understanding. This Agreement constitutes the entire agreement
between the parties with regard to the subject matter hereof, and there
are no agreements, understandings, restrictions, warranties or
representations between the parties relating to said subject matter other
than those set forth or provided for herein or in any Agreement Not To
Divulge or employment agreement between PMSC and EMPLOYEE. It is
understood that PMSC's and EMPLOYEE's relationship is one of "at will"
employment unless EMPLOYEE and PMSC have entered into a written employment
agreement which provides otherwise. This Agreement shall not affect, or
be affected by, any employment agreement, if any, between PMSC and
EMPLOYEE.
12. General. In the event that any provision of this Agreement or any word,
phrase, clause, sentence or other portion thereof (including, without
limitation, the geographical and temporal restrictions contained herein)
should be held to be unenforceable or invalid for any reason, such
provision or portion thereof shall be modified or deleted in such a manner
so as to make this Agreement enforceable to the fullest extent permitted
under applicable laws. All references to PMSC shall include its
subsidiaries as applicable. This Agreement shall inure to the benefit of
and be enforceable by PMSC and its successors and assigns. No provision
of this Agreement may be changed, modified, waived or terminated, except
by an instrument in writing signed by the party against whom the
enforcement of such is sought. No waiver of any provision or provisions
of this Agreement shall be deemed or shall constitute a waiver of any
other provision, whether or not similar, nor shall any waiver constitute
a continuing waiver. Headings in this Agreement are inserted solely as a
matter of convenience and reference and are not a part of this Agreement
in any substantive sense. This Agreement may be executed in two
counterparts, each of which will take effect as an original and shall
evidence one and the same Agreement.
13. Plan Controls. In the event of any discrepancy between this Agreement and
the Plan as to the terms and conditions of the Options, the Plan shall
control.
14. Governing Law. The terms of this Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the date first above written.
POLICY MANAGEMENT SYSTEMS CORPORATION
"PMSC"
BY: _________________________________
Stephen G. Morrison
TITLE: Executive Vice President
EMPLOYEE
_____________________________________
(Signature)
_____________________________________
(Type or Print Name)
_____________________________________
(Date Signed by Employee)
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INSTRUCTIONS FOR EXERCISE OF PMSC STOCK OPTIONS
Contact Person: Lynn W. Dillard, Ext. 4303
1A4
Post Office Box Ten
Columbia, SC 29202
An exercise form must be obtained and properly filled out. The form and
employee's check for the appropriate exercise price and withholding taxes
(federal and state income taxes and FICA) must be delivered to the Contact
Person. The Company does not deal with third parties concerning employee's
exercise of his or her stock options. If an employee deals with a brokerage
firm, a bank or any other third party, the employee shall be responsible to keep
such party from impacting on the two-party transaction between the Company and
the employee. This transaction solely consists of employee bringing Company the
exercise form and his or her own check and after several days the Company giving
employee a certificate for his or her shares of stock. The Company's stock
transfer agent is located in New York. If desired, an employee may request and
pay the charges for the certificate to be sent to the Company via Federal
Express. The certificate will only be issued in the employee's name. Employees
may only exercise a whole number of options as PMSC shall not direct the
transfer agent to issue fractional shares.
As an optionholder, an employee is entitled to request copies of the Company's
Annual and Quarterly Reports. An employee will not receive such reports
automatically as an optionholder. Additionally, reports are available upon
request showing a complete list of employee's options outstanding, options
available for exercise, cost per share, total costs, and expiration dates of
options. An employee may wish to request these materials or information before
exercising options by calling or writing the Contact Person.
THESE INSTRUCTIONS ARE SUBJECT TO CHANGE WITHOUT NOTICE.
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SCHEDULE OF PARTICULARS
FOR NAMED EXECUTIVE OFFICERS
RE: EMPLOYEE STOCK OPTION/NON-COMPETE AGREEMENT
Named Executive Date of Number Option
Officer Grant Grant Price
G. Larry Wilson May 28, 1996 75,000 $52.75
David T. Bailey May 28, 1996 35,000 $52.75
Paul R. Butare May 28, 1996 35,000 $52.75
Donald A Coggiola May 28, 1996 35,000 $52.75
Stephen G. Morrison May 28, 1996 30,000 $52.75
Timothy V. Williams May 28, 1996 25,000 $52.75