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STOCK OPTION/NON-COMPETE AGREEMENT
THIS EMPLOYEE STOCK OPTION/NON-COMPETE AGREEMENT ("the Agreement") is made
effective as of October 22, 1996, by and between Stephen G. Morrison
("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 October 22, 1996, PMSC grants EMPLOYEE "non-qualified"
Options to purchase up to 20,000 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 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., $35.00. These Options must be
exercised within ten (10) years of the effective date of this Agreement
or they expire.
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 October 22, 1997; 40% will be available
for exercise beginning October 22, 1998; 60% will be available for
exercise beginning October 22, 1999; 80% will be available for exercise
beginning October 22, 2000; and 100% will be available for exercise
beginning October 22, 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
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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.
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
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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.
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).
Notwithstanding any other provision of this Agreement, nothing in
this provision or Agreement shall prohibit EMPLOYEE from returning to
the practice of law at any time or any place.
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, with the
exception of Carol Collier-Plexico, 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, 5
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 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 incure 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
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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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the date first above written.
POLICY MANAGEMENT SYSTEMS CORPORATION
"PMSC"
BY: _________________________________
G. Larry Wilson
TITLE: 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.