EMPLOYEE STOCK OPTION/NON-COMPETE AGREEMENT
THIS EMPLOYEE STOCK OPTION/NON-COMPETE AGREEMENT ("the Agreement") is made
effective as of May 11, 1999, by and between XXXXXXX X. XXXXXX ("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 an "Eligible Person" as defined in the Policy Management Systems
Corporation 1999 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 an Eligible Person 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 11, 1999, PMSC grants EMPLOYEE "non-qualified"
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Options to purchase up to 145,000 shares of PMSC common stock pursuant to the
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Plan. Non-qualified options are subject to tax upon exercise as set forth in
paragraph 6 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., $40.125. 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 May 11, 2000;
50% will be available for exercise beginning May 11, 2001; 75% will be available
for exercise beginning May 11, 2002; and 100% will be available for exercise
beginning May 11, 2003. Once Options become available for exercise, they will
remain available for exercise in accordance with the terms of the Plan unless
they expire.
3a. Restriction on Exercise. Notwithstanding the foregoing, (a) the
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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; (b) no more than one-third
of the total number of Options hereby granted may be exercised in any calendar
year; provided however, all vested Options may be exercised regardless of the
one-third limit per calendar year after the earlier of:
(i) May 11, 2007;
(ii) a Change in Control as defined in the Plan; or
(iii) EMPLOYEE's "retirement", as defined in the Policy Management
Systems Corporation 401(k) Retirement Savings Plan; and
(c) no Options hereby granted may be exercised prior to EMPLOYEE establishing
residency in South Carolina by moving his primary and principal place of
residence to South Carolina.
4. Change in Control. If there is a Change in Control of PMSC prior to the
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Expiration Date, the Options shall vest and become exercisable in accordance
with the provisions of Section 16 of the Plan.
5. 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.
6. 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 value
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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 the
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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.
7. 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.
8. 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).
9. 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.
10. 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.
11. 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.
12. 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. It is understood further that the granting of
Options under this Agreement does not entitle EMPLOYEE to receive additional
Option grants in future years.
13. General. In the event that any provision of this Agreement or any word,
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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.
14. 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.
15. 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)
Xxxxxxx X. Xxxxxx
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(Type or Print Name)
_____________________________________
(Date Signed by Employee)
