EFFECTIVE MANAGEMENT SYSTEMS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS NONSTATUTORY STOCK OPTION AGREEMENT (this "Stock Option Agreement"),
dated as of this 1st day of February, 1999, by and between Effective Management
Systems, Inc., a Wisconsin corporation (the "Company"), and
______________________ (the "Optionee").
W I T N E S S E T H:
WHEREAS, in recognition of the Optionee's service as a non-employee
director of the Company, the Board of Directors has deemed it appropriate to
grant the Optionee an option to purchase shares of the Company's common stock,
par value $0.01 per share (the "Common Stock"); and
WHEREAS, the parties deem it appropriate to memorialize the grant of such
option.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements herein set forth, the parties hereby mutually covenant and agree as
follows:
1. Grant of Option. Subject to the terms and conditions of this Stock
Option Agreement, the Company hereby grants to the Optionee an option (the
"Option") to purchase from the Company all or any part of the aggregate amount
of ______________ shares of Common Stock (the "Optioned Shares"). The Option is
intended to constitute a nonstatutory stock option and shall not be treated as
an incentive stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
2. Option Price. The price to be paid for the Optioned Shares shall be
$1-7/16 per share.
3. Exercisability and Termination of Option.
a. The Option shall vest and become exercisable, but only during the time
that the Optionee is serving as a director of the Company, as to 30% of the
Optioned Shares immediately, as to an additional 30% after one calendar year has
elapsed from the date of this Stock Option Agreement, and as to the final 40%
after the second calendar year has elapsed from the date of this Stock Option
Agreement; provided, however, that if the Optionee ceases to be a director of
the Company by reason of death, disability, or retirement within two calendar
years after the date of this Stock Option Agreement or in the event of a Change
in Control (as defined in Section 3.b below), the Option shall become
immediately exercisable in full. The Option shall terminate on the earlier of:
(i) February 1, 2009; (ii) six months after the Optionee ceases to be a director
of the Company by reason of death; or (iii) three months after the Optionee
ceases to be a director of the Company for any reason other than death.
b. A "Change in Control" shall be deemed to have occurred if the events set
forth in any one of the following paragraphs shall have occurred:
i. any "Person" (as such term is defined in section 3(a)(9) of the
Securities Exchange Act of 1934, as amended, as modified and used in
sections 13(d) and 14(d) thereof), other than (A) the Company or any of its
subsidiaries, (B) a trustee or other fiduciary holding securities under any
employee benefit plan of the Company or any of its subsidiaries, (C) an
underwriter temporarily holding securities pursuant to an offering of such
securities or (D) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportion as their
ownership of Common Stock in the Company ("Excluded Persons"), is or
becomes the "Beneficial Owner" (as defined in rule 13d-3 under the
Securities Exchange Act of 1934, as amended), directly or indirectly, of
securities of the Company representing 25% or more of either the then
outstanding shares of Common Stock or the combined voting power of the
Company's the outstanding voting securities; or
ii. the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation or approve the issuance of voting
securities of the Company in connection with a merger or consolidation of
the Company (or any direct or indirect subsidiary of the Company) pursuant
to applicable stock exchange requirements, other than (i) a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof) at least
50% of the combined voting power of the voting securities of the Company or
such surviving entity or any parent thereof outstanding immediately after
such merger or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in
which no Person (other than an Excluded Person) is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company
representing 25% or more of either the then outstanding shares of Common
Stock or the combined voting power of the Company's then outstanding voting
securities; or
iii. the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets (in one transaction or a series of related transactions within any
period of 24 consecutive months), other than a sale or disposition by the
Company of all or substantially all of the Company's assets to an entity at
least 75% of the combined voting power of the voting securities of which
are owned by Persons in substantially the same proportion as their
ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be deemed to have
occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the Common Stock
immediately prior to such transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity that owns all or
substantially all of the assets of the Company immediately following such
transaction or series of transactions.
4. Manner of Exercise and Payment. Subject to the provisions of Paragraph 3
hereof, the Option may be exercised in full at any time or in part from time to
time by
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delivery to the Assistant Secretary of the Company at the Company's principal
office in Milwaukee, Wisconsin, of a written notice of exercise specifying the
number of shares with respect to which the Option is being exercised. The notice
of exercise must be accompanied by full payment of the option price of the
shares being purchased: (i) in cash or its equivalent; (ii) by tendering
previously acquired shares of Common Stock (valued at their fair market value as
of the date of exercise as determined in the manner as provided by the Board of
Directors); or (iii) by any combination of the means of payment set forth in
subparagraphs (i) and (ii). For purposes of subparagraphs (ii) and (iii) above,
the term "previously acquired shares of Common Stock" shall only include Common
Stock owned by the Optionee prior to the exercise of the Option and shall not
include shares of Common Stock which are being acquired pursuant to the exercise
of the Option. No Optioned Shares shall be issued until full payment therefor
has been made.
5. Nontransferability of the Option. The Option shall not be transferable
by the Optionee other than by will or the laws of descent and distribution. The
Option may be exercised during the life of the Optionee only by the Optionee or
the Optionee's guardian or legal representative.
6. Tax Withholding. The Company may deduct and withhold from any cash
otherwise payable to the Optionee (whether payable as director's fees, bonus or
other compensation) such amount as may be required for the purpose of satisfying
any obligation the Company may have to withhold federal, state or local taxes.
Further, in the event the amount so withheld is insufficient for such purpose,
the Company may require that the Optionee pay to the Company upon its demand or
otherwise make arrangements satisfactory to the Company for payment of such
amount as may be requested by the Company in order to satisfy its obligation to
withhold any such taxes.
7. Capital Adjustments Affecting the Common Stock. In the event of a
capital adjustment resulting from a stock dividend (other than a stock dividend
in lieu of an ordinary cash dividend), stock split, reorganization, spin-off,
split-up or distribution of assets to shareholders, recapitalization, merger,
consolidation, combination or exchange of shares or the like, the number of
shares of Common Stock subject to the Option shall be adjusted in a manner
consistent with such capital adjustment; provided, however, that no such
adjustment shall require the Company to sell any fractional shares and the
adjustment shall be limited accordingly. The price of any shares under the
Option shall be adjusted so that there will be no change in the aggregate
purchase price payable upon exercise of the Option. The determination of the
Board of Directors of the Company as to any adjustment shall be final.
8. Representation by the Optionee. By execution of this Stock Option
Agreement, the Optionee represents to the Company that his acquisition of
Optioned Shares upon exercise of the Option will be for investment purposes only
for his own account and not with a view to resell or otherwise distribute such
shares. The Optionee acknowledges that the issuance of Optioned Shares upon
exercise of the Option will not be registered under the Securities Act of 1933,
as amended, or under any state securities laws, and that such shares cannot be
resold or otherwise transferred unless registered under said Act and laws or
unless an exemption from registration is available. The Optionee further
acknowledges that the certificate or certificate representing the Optioned
Shares acquired upon exercise of the Option shall bear the following legend:
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"The shares of common stock of Effective Management Systems, Inc.
represented by this certificate have not been registered under the
Securities Act of 1933, as amended, or any state securities laws, and
such shares may not be resold or otherwise transferred unless
registered under said Act and laws or unless an exemption from
registration is available."
9. Status of Optionee. The Optionee shall have no rights as a shareholder
with respect to Optioned Shares covered by the Option until the date of issuance
of stock certificates to the Optionee and only after such shares are fully paid.
The Option shall not confer upon the Optionee the right to continue as a
director of the Company.
10. Powers of the Company Not Affected. The existence of the Option shall
not affect in any way the right or power of the Company or its shareholders to
make or authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the Company's capital structure or its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Common Stock or the rights
thereof, or any dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business or any other corporate act
or proceeding, whether of a similar character or otherwise.
11. Interpretation by the Board of Directors. As a condition of the
granting of the Option, the Optionee agrees, for himself and his legal
representatives or guardians, that this Stock Option Agreement shall be
interpreted by the Board of Directors and that any interpretation by the Board
of the terms of this Stock Option Agreement and any determination made by the
Board pursuant to this Stock Option Agreement shall be final, binding and
conclusive.
12. Requirements of Law. The grant of the Option and the issuance of
Optioned Shares pursuant to this Stock Option Agreement are subject to all
applicable laws, statutes, rules and regulations.
13. Governing Law. This Stock Option Agreement shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin.
14. Amendment. This Stock Option Agreement may not be amended, modified,
terminated or otherwise altered except by the written consent of the parties
hereto.
15. Severability. The parties agree that if any provision of this Stock
Option Agreement shall under any circumstances be deemed invalid or inoperative,
this Stock Option Agreement shall be construed with the invalid or inoperative
provision or provisions deleted and the rights and obligations of the parties
shall be construed and enforced accordingly.
16. Entire Agreement. This Stock Option Agreement evidences the entire
agreement between the parties hereto with respect to the matters provided for
herein and there are no agreements, representations or warranties with respect
to the matters provided herein other than those set forth herein.
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17. Headings. The headings for the paragraphs of this Stock Option
Agreement are inserted for convenience only and shall not constitute a part of
this Stock Option Agreement.
IN WITNESS WHEREOF, the Company has caused this Stock Option Agreement to
be executed by its duly authorized officers and its corporate seal to be
hereunto affixed, and the Optionee has hereunto affixed his hand and seal as of
the day and year first above written.
EFFECTIVE MANAGEMENT SYSTEMS, INC.
By: _________________________________
[SEAL]
Attest: _____________________________
_____________________________________ [SEAL]
_________________, Optionee
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