EMPLOYEE STOCK OPTION/NON-COMPETE AGREEMENT
THIS EMPLOYEE STOCK OPTION/NON-COMPETE AGREEMENT ("the Agreement") is made
effective as of January 2, 1998, 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 January 2, 1998, PMSC grants EMPLOYEE
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"non-qualified" Options to purchase up to [SHARES] shares of PMSC common stock
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pursuant to the Plan. Non-qualified options are subject to tax upon exercise
as set forth in paragraph 5 below.
2. Price and Expiration. The option price of the shares subject to these
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Options is the closing price of the stock on the New York Stock Exchange on
the date of grant, i.e., January 2, 1998. These Options must be exercised
within ten (10) years of the effective date of this Agreement or they expire.
3. Availability for Exercise. 25% of the shares subject to the Options
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granted will become available for exercise at the end of each of the four (4)
years following the effective date of this Agreement. For example 25% of the
total number of Options granted will be available for exercise beginning
January 2, 1999; 50% will be available for exercise beginning January 2, 2000;
75% will be available for exercise beginning January 2, 2001; and 100% will be
available for exercise beginning January 2, 2002. Once Options become
available for exercise, they will remain available for exercise for so long as
EMPLOYEE is employed by PMSC 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
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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: (i) 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; (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.
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.
3B. Sale or Merger. In the event of dissolution or liquidation of PMSC or
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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
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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
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these Options is described below based upon present law and regulations which
are subject to change. Taxes incurred are:
+ when options are granted - none
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+ when options are exercised - the difference between the fair market
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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
exampleif 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
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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
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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 purchasedplus 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.
7. Noncompetition. In consideration of the Options hereby granted,
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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
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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,
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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
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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
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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
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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
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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
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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: _________________________________
Xxxxxxx X. Xxxxxxxx
TITLE: Executive Vice President
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EMPLOYEE
_____________________________________
(Signature)
_____________________________________
(Type or Print Name)
_____________________________________
(Date Signed by Employee)
INSTRUCTIONS FOR EXERCISE OF PMSC STOCK OPTIONS
Contact Person: Xxxx X. Xxxxxxx, Ext. 4303
2L3
Xxxx Xxxxxx Xxx Xxx
Xxxxxxxx, XX 00000
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.
SCHEDULE OF PARTICULARS
FOR NAMED EXECUTIVE OFFICERS
RE: EMPLOYEE STOCK OPTION/NON-COMPETE AGREEMENT
NAMED EXECUTIVE NUMBER
OFFICER GRANTED
G. Xxxxx Xxxxxx 75,000
Xxxxx X. Xxxxxx 35,000
Xxxx X. Xxxxxx 35,000
Xxxxxxx X. Xxxxxxxx 35,000
Xxxxxxx X. Xxxxxxxx 35,000
