Schedule 14a
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ X ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
POLICY MANAGEMENT SYSTEMS CORPORATION
(Name of Registrant as Specified in its Charter)
Payment of filing fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
__________
(2) Aggregate number of securities to which transaction applies: __________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction: ________________
(5) Total fee paid: ______________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ____________________________________
(2) Form, Schedule or Registration Statement No.: __________________
(3) Filing Party: ______________________________________________
(4) Date Filed: _______________________________________________
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NOTICE OF 2000 ANNUAL MEETING
Dear Stockholders:
We are pleased to invite you to attend the 2000 annual meeting of stockholders
of Policy Management Systems Corporation d/b/a Mynd Corporation, which will be
held at the Company's executive offices at One Mynd Center, Blythewood, South
Carolina, at 11:00 a.m., on September 27, 2000 for the following purposes:
(1) to elect three directors;
(2) to approve an amendment to the Company's Articles of Incorporation
to change the Company's name to Mynd Corporation;
(3) to ratify the selection of independent auditors for 2000; and
(4) to transact other business as may properly come before the meeting.
Stockholders owning shares of the Company as of the close of business on
September 5, 2000, the record date, are entitled to vote at the meeting. A
complete list of all stockholders entitled to vote at the meeting is available
for examination at the Company's executive offices located at One Mynd Center,
Blythewood, South Carolina, 29016 and will continue to be available through the
meeting.
WE HOPE THAT YOU WILL ATTEND THE MEETING, BUT EVEN IF YOU ARE GOING TO ATTEND,
YOU ARE URGED TO COMPLETE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED WHEN MAILED IN THE UNITED STATES.
SHOULD YOU ATTEND THE MEETING AND DECIDE THAT YOU WANT TO VOTE IN PERSON, YOU
MAY REVOKE YOUR PROXY. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN
FAVOR OF THE NOMINEES FOR DIRECTORS, APPROVAL OF THE COMPANY'S NAME CHANGE, AND
RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT AUDITORS FOR 2000.
Please read the attached Proxy Statement carefully for information on the items
that will be considered and voted on at the meeting.
By Order of the Board of Directors
Stephen G. Morrison
Secretary
September 8, 2000
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PROXY STATEMENT
This Proxy Statement and proxy card have been sent to all holders of common
stock of Policy Management Systems Corporation d/b/a Mynd Corporation in
connection with PMSC's Board of Directors soliciting proxies to be voted at the
annual stockholders meeting on September 27, 2000. Because your vote is
important, the Board of Directors is requesting that you allow your shares to be
represented at the annual meeting by Mr. John P. Seibels and Dr. John M. Palms
(the proxies named in the enclosed proxy card).
This Proxy Statement describes those matters that will be voted on at the annual
meeting and also contains additional information about our executive officers
and directors and principal stockholders. In this Proxy Statement, "we," "us,"
"our," "PMSC," and the "Company" generally refer to Policy Management Systems
Corporation. This Proxy Statement is first being sent to our stockholders on or
about September 8, 2000.
GENERAL INFORMATION ABOUT VOTING
WHO CAN VOTE. Only stockholders as of the close of business on September 5,
2000 (the "Record Date") may vote at the meeting. On the Record Date, there
were 35,585,504 shares of common stock outstanding. Each share of common stock
is entitled to one vote. The enclosed proxy card(s) show the number of shares
that you are entitled to vote.
VOTING IN PERSON. Written ballots will be available for those stockholders
wishing to vote at the meeting. If your shares are held in an account at a
brokerage firm ("held in street name"), you must request a legal proxy form from
your stockbroker in order to vote at the meeting.
VOTING BY PROXY. To vote by proxy, simply sign and date your proxy card and
return it in the enclosed, pre-paid envelope. By signing and dating the
enclosed proxy card, you appoint Mr. Seibels and Dr. Palms as your
representatives at the meeting. If you mark your selections, they will vote
your shares in accordance with your instructions. If you do not mark any
selections, your shares will be voted in favor of the three proposals.
The Board currently is not aware of any other matters that will come before the
meeting. If, however, matters other than those set forth on the proxy card come
up for a vote at the meeting, Mr. Seibels and Dr. Palms will vote your shares as
they deem proper.
REVOKING YOUR PROXY INSTRUCTIONS. You may revoke your proxy at any time before
the meeting by: (i) returning a later dated proxy; (ii) delivering written
notice of revocation to Stephen G. Morrison, Secretary, Policy Management
Systems Corporation, Post Office Box Ten, Columbia, South Carolina 29202; or
(iii) voting in person at the meeting.
RECEIVING SEVERAL PROXY CARDS. If you receive more than one proxy card, it
means that you have multiple accounts at the transfer agent and/or with
stockbrokers and/or are a participant in the PMSC Restricted Stock Ownership
Plan, the PMSC Employee Stock Purchase Plan and/or the PMSC Stock Fund in the
PMSC 401(k) Retirement Savings Plan. To ensure that all your shares are voted,
please sign, date, mark your instructions, and return all proxy cards.
VOTING YOUR PMSC 401(K) RETIREMENT SAVINGS PLAN PMSC STOCK FUND SHARES. Shares
owned by the PMSC 401(k) Retirement Savings Plan PMSC Stock Fund are actually
voted at the meeting by the Plan trustee. However, if you are a PMSC 401(k)
Retirement Savings Plan participant and hold shares in the PMSC Stock Fund, you
will receive a proxy card for those shares, whether or not the shares are
vested. By completing this proxy card, you provide voting instructions to the
Plan trustee who will vote the shares in the PMSC Stock Fund. Your shares will
not be voted unless you sign, date, and return the proxy card. For
administrative reasons, your completed proxy card must be received by September
21, 2000, in order for your shares in the PMSC Stock Fund to be voted at the
meeting.
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HOW VOTES ARE COUNTED. The annual meeting will be held if a majority of the
outstanding shares of common stock entitled to vote is present at the meeting.
Shares are counted as present if the stockholder is present and votes in person
at the meeting or has properly submitted a proxy card. If you have returned a
valid proxy card but wish to abstain from voting on some or all of the matters
to be voted on at the meeting, your shares will be counted for the purpose of
determining whether there is a quorum. If you abstain from voting on any
matter, your shares will be included in the total number of shares having voting
power and will have the same effect as "no" votes on the matter. If you hold
your shares through a broker, bank, or other nominee, generally the nominee may
only vote the shares it holds for you in accordance with your instructions.
However, if it has not received your instructions within ten days of the
meeting, the nominee may vote the shares on matters that the New York Stock
Exchange ("NYSE") considers to be routine and cannot vote the shares on matters
that are not routine. If a nominee cannot vote on a particular matter because
it is not routine, it is considered to be a "broker non-vote" on that matter.
In determining whether or not a quorum is present for the purpose of the
meeting, broker non-votes are counted as shares being present. They are not
considered as shares having voting power and therefore are not counted as votes
cast on non-routine matters. Because the matters to be voted on at the meeting
are all considered to be routine by the NYSE, we do not expect that there will
be any broker non-votes at the meeting.
In the election of directors, you have the right to cumulate your votes and cast
as many votes as the number of shares held by you multiplied by the number of
directors to be elected for the specified term. You may cast such cumulated
votes for any one nominee or distribute the votes among the nominees for
election. To exercise the right of cumulative voting, you must declare your
intent to do so prior to the beginning of voting. If any stockholder declares
the intent to cumulatively vote, all stockholders shall automatically have the
right to cumulate their votes without any further notice. In the event of
cumulative voting, Mr. Seibels and Dr. Palms shall have authority to vote shares
represented by proxy for one Board nominee or distribute such votes among the
Board's nominees to maximize the number of Board's nominees elected.
VOTES REQUIRED. For Proposal 1, the election of directors, the three nominees
for director receiving the largest number of votes shall be elected to a
three-year term. For Proposal 2, the Company's name change will be approved if
at least sixty-six and two-thirds percent (66 2/3%) of the shares outstanding at
the Record Date vote in favor of the proposed name change either in person at
the meeting or by proxy. For Proposal 3, ratification of PricewaterhouseCoopers
as independent auditors, the proposal will be approved if it receives a majority
of the votes present, either in person or by proxy, at the meeting.
PROXY SOLICITATION EXPENSES. We will pay for the cost of soliciting proxies and
have engaged D.F. King & Company, Inc. to assist with solicitation of proxies
for the meeting for a fee estimated at $6,000.00, plus expenses. In addition,
our officers, directors and employees may solicit proxies by telephone,
facsimile or personal interview.
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PROPOSALS TO BE VOTED ON AT THE MEETING
PROPOSAL 1: ELECTION OF DIRECTORS
The election of three directors, each to serve a three-year term. The Board's
nominees are Alfred R. Berkeley, III, Donald W. Feddersen, and Richard G. Trub.
All three nominees are currently members of the Board.
The Board recommends that the stockholders vote FOR these nominees.
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION TO CHANGE THE COMPANY'S NAME TO MYND
CORPORATION
On February 8, 2000 the Board approved an amendment to the Company's Articles of
Incorporation to change the Company's name to Mynd Corporation. On May 1, 2000,
the Company began doing business as Mynd Corporation.
Due to diversification and acquisitions, the name Policy Management
Systems Corporation no longer adequately represents our extensive products
and services capabilities. Currently, in addition to our historical
business as a provider of computerized insurance policy management systems, we
have established ourselves as a provider of systems for life insurance,
annuities, risk management, and as a provider of professional and outsourcing
services. We teamed with Duffy Design, an award-winning creative branding
firm, to help restate and formulate an identity that accurately reflects our
collective experience. We believe the new name reflects our worldwide
reputation for visionary leadership and experience in technology and the
insurance and related financial services industries. The Board has determined
that the proposed name change is an important step to provide a more accurate
perception of the Company, its business and its role in the marketplace.
The Board of Directors has considered the fact that there may be some negative
effects of a name change. For example, this year we have incurred expenses
associated with the name change of approximately $2.1 million, such as changing
the corporate logo, marketing materials and other corporate signage. We may also
experience higher marketing costs as we seek to familiarize existing customers
with the new corporate name and product focus. However, the Board of Directors
determined that the benefits of the name change likely outweighed any short-term
costs.
Approval of the proposed amendment to the Articles of Incorporation requires the
affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of the
shares of the Company's common stock outstanding on the Record Date.
If the name change is approved, you will not be required to surrender your stock
certificate in exchange for a certificate containing our new name. However,
stock certificates containing the name Mynd Corporation will be issued to a
stockholder upon any purchase of our capital stock by such stockholder after the
effective date of the name change. We also intend to change our common stock
trading symbol.
The Board recommends that the stockholders vote FOR the approval of the
Company's name change.
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PROPOSAL 3: RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT AUDITORS
The Board has selected PricewaterhouseCoopers LLP as the Company's independent
auditors for the 2000 fiscal year. PricewaterhouseCoopers (formerly known as
Coopers & Lybrand) has been our independent auditors since 1994.
Representatives from PricewaterhouseCoopers are expected to be present at the
meeting and will have the opportunity to make a statement and will be available
to answer any stockholder questions.
The Board recommends that the stockholders vote FOR the ratification of
PricewaterhouseCoopers LLP as the Company's independent auditors.
OTHER BUSINESS
The Board is not aware of any other business at this time. If any other
business should be properly presented at the meeting, Mr. Seibels and Dr. Palms
will vote in accordance with their best judgment.
THE BOARD OF DIRECTORS
We currently have seven directors. Three directors are nominees for re-election
this year. The remaining four directors will continue to serve the terms
described below. Our directors serve staggered terms. This is accomplished as
follows:
- the directors are divided into three classes as nearly equal as possible;
- each director serves a three-year term; and
- the terms of each of the three classes are staggered.
NOMINEES FOR RE-ELECTION THIS YEAR:
ALFRED R. BERKELEY, III, age 55, has been a director since 1997. Mr. Berkeley
has served as Vice Chairman of The Nasdaq Stock Market, Inc. since July 2000,
and previously served as President from May 1996 until July 2000. Before that,
he served as Managing Director and Senior Banker of Alex. Brown & Sons
Incorporated. He is currently also a director of Princeton Capital Management,
Inc. He also serves as a director of several privately owned companies
DONALD W. FEDDERSEN, age 66, has been a director since 1997 and previously
served as a director from January 1983 to October 1994. Mr. Feddersen is
currently a private investor. Before that, he was General Partner of Charles
River Ventures. He serves as a director of a number of privately-owned high
technology companies.
RICHARD G. TRUB, age 70, has been a director since 1981. Mr. Trub is the
Chairman and Treasurer of Trubco, Inc. He previously held the position of
Senior Vice President with the Connecticut National Bank.
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2001:
JOSEPH D. SARGENT, age 70, has been a director since 1986. Mr. Sargent is the
Chairman of Bradley, Foster, & Sargent, Inc. He serves as Vice-Chairman for
Connecticut Surety Corporation and until February 1998, he served as Treasurer.
He also serves as director for each of Trenwick Group, Inc., Mutual Risk
Management Ltd., and Command Systems, Inc.
G. LARRY WILSON, age 54, has been a director since 1981. Mr. Wilson is the
Chairman of the Board, President and Chief Executive Officer of the Company. He
has been employed by the Company since its inception.
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DIRECTORS WHOSE TERMS WILL EXPIRE IN 2002:
DR. JOHN M. PALMS, Ph.D., age 65, has been a director since 1992. Dr. Palms is
the President of the University of South Carolina. He also serves as a director
of Peco Energy Company and Fortis, Inc., and serves as Chairman of the Board of
the Institute of Defense Analyses.
JOHN P. SEIBELS, age 58, has been a director since 1981. Mr. Seibels is
currently a private investor. He also serves as a director of The Seibels Bruce
Group, Inc. and certain of its subsidiaries.
On July 22, 1997, the Securities and Exchange Commission ("SEC") commenced a
civil proceeding against the Company and certain current and former officers and
employees of the Company, including Mr. Wilson and David T. Bailey, an executive
officer of the Company. In its complaint, the SEC alleged that the Company and
the named individuals had violated certain provisions of the Securities Exchange
Act of 1934 relating to reporting, books and records and internal controls in
connection with the Company's 1990-1993 financial statements and reports.
Simultaneously with the filing of the complaint, all defendants filed consents
in which they neither admitted nor denied the allegations made, agreed to the
entry of an injunction requiring future compliance with those provisions of the
federal securities laws, and agreed to pay certain civil penalties. The Company
agreed to pay a civil penalty of one million dollars and each individual agreed
to pay a civil penalty of twenty thousand dollars.
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BOARD AND COMMITTEE MEETINGS
<TABLE>
<CAPTION>
During 1999, the Board met eleven times. All of the directors attended at least
75% of the aggregate of all meetings of the Board and all committees of which
they were members. The following table describes the Board's committees.
<S>
<C> <C> <C>
COMMITTEE . . . FUNCTIONS OF THE COMMITTEE TIMES MET IN 1999
--------------- -------------------------- -----------------
AUDIT COMMITTEE - recommends selection of our independent
Trub (Chairman) auditors; 10
Feddersen - reviews with the independent and internal
Seibels auditors their planned activities, audits and
findings, and report
- reviews financial reports; and
- reviews the Company's financial and
accounting policies and disclosures
----------------------------------------------------------------------------------------------
COMPENSATION COMMITTEE - establishes compensation for senior officers
Sargent (Chairman) and directors; 5
Berkeley . . . . . . . - administers compensation plans in which
Palms employees, officers and directors are eligible
to participate; and
- approves compensation guidelines for
employees
----------------------------------------------------------------------------------------------
CORPORATE GOVERNANCE - recommends nominees for election as
COMMITTEE directors and officers to the full Board; and 4
Seibels (Chairman) - reviews the performance of current directors
Berkeley and officers
Palms
. Wilson
----------------------------------------------------------------------------------------------
EXECUTIVE COMMITTEE - acts on behalf of the full Board between
Wilson (Chairman) Board meetings or as appropriate 2*
Feddersen
Sargent
Trub
<FN>
*The Executive Committee also took four actions by unanimous written
consent without meeting during 1999.
</TABLE>
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AUDIT COMMITTEE REPORT
On February 8, 2000, the Board adopted a written charter for the Audit
Committee, a copy of which is attached as Appendix A to this Proxy Statement.
All of the members of the Audit Committee are independent as such term is
defined in the NYSE's listing standards.
Report of the Audit Committee
We have reviewed and discussed the audited financial statements for the fiscal
year ended December 31, 1999, with the Company's management. We have also
discussed with PricewaterhouseCoopers the matters required to be discussed by
SAS 61 and have received the written disclosures and the letter from
PricewaterhouseCoopers required by Independence Standards Board Standard No. 1
and have discussed with PricewaterhouseCoopers its independence. Based on the
above review and discussions, we recommended to the Board that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.
The Audit Committee
Richard G. Trub (Chairman)
Donald W. Feddersen
John P. Seibels
COMPENSATION PLANS AND ARRANGEMENTS
REPORT OF THE COMPENSATION COMMITTEE
COMPENSATION PHILOSOPHY.
The Company's executive compensation program is based on the beliefs that:(i) to
ensure the continued growth and performance of the Company, it is necessary to
attract, retain and motivate qualified executives through competitive
compensation, and (ii) the interests of executives should be closely aligned
with those of the Company's stockholders. Under this philosophy:
- To motivate executive personnel to perform at their full potential, a
significant portion of compensation is incentive-based and is linked to
accomplishing specific, financial objectives (both individual and corporate)
which are intended to create both long- and short-term value for the
Company's stockholders.
- Each executive's individual performance and contribution should be
reflected through salary adjustments and the amount of incentive awards paid, if
any.
- A significant portion of executive officers' total compensation should be
in the form of stock and stock-based incentives.
- In years of strong performance, executives can earn a highly competitive
level of compensation. As a result, the Company will be able to attract, retain
and motivate the leadership talent needed to maintain and grow the Company's
business successfully. Conversely, in years of below average performance, an
executive will receive compensation that is less competitive.
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It is essential that the Committee retain the flexibility to evaluate not only
the overall performance of the individual executive officers, and the Company as
a whole, but also all other circumstances and challenges facing the Company and
the respective executive officer. Consequently, the Committee uses its
subjectivity rather than objective formulas in setting and adjusting the base
salary of the CEO and other executive officers.
ELEMENTS OF COMPENSATION.
Executive compensation consists primarily of three parts:
- Base Salary;
- Annual Incentives; and
- Stock-Based Incentives.
Each of these elements is described in more detail below. (The executive
officers were also eligible for other benefits, such as perquisites standard for
executives and those offered under the Company-sponsored broad-based plans.)
In reviewing the level of cash compensation for the CEO and other executive
officers for 1999, the Committee engaged Deloitte & Touche LLP to survey the
total cash compensation for the CEO and senior executives of the S&P Computer
and Software Services Index Companies, which had comparable compensation
structures. The purpose of the survey was to confirm that the total cash
compensation levels were at levels to allow the Company to effectively compete
in recruiting and retaining executive management.
BASE SALARY. For 1999, the Committee used a subjective assessment of the
overall performance of the Company and the executive officers, including their
achievements, responsibilities, experience and breadth of knowledge, in setting
the amount of salary increase for 1999 for all executive officers, including the
CEO. No specific weight was assigned to these factors. For 1999, base salaries
for all executive officers, including the CEO, were targeted at the base
salaries which surveyed firms might offer the executive officers for performing
similar functions in an equally challenging and complex environment. The base
salaries for 1998 for the CEO and Messrs. Bailey, Morrison, and Risley were
either below or equal to the average of the companies surveyed and the base
salary for Mr. Williams was near the mid-point range of the companies surveyed,
which the Committee generally believed to be appropriate in accordance with the
Committee's subjective assessments of overall performance and the goals of
maintaining base salary compensation levels for the Company's executives, which
are adequate to recruit and retain executive management. Consequently, the
Committee increased the 1999 salary for Mr. Morrison by a percentage the
Committee deemed appropriate based upon his performance and similar to what the
Committee believed to be percentage increases appropriate to remain at or near
the mid-range for competitive companies, using the Committee's subjective
assessment. Mr. Risley received an increase in his salary at the time of his
promotion to Executive Vice President in November 1998 and received no 1999
increase. Mr. Bailey did not receive an increase for 1999.
In determining Mr. Wilson's base salary increase, the Committee also considered
how well he performed in the following areas in addition to those set forth
above:
- development and implementation of a strategic vision for the Company,
integrating insurance industry knowledge, technology trends, product directions,
and customers' needs;
- management of the Company's financial affairs;
- recruitment and retention of qualified executives;
- delegation of responsibility and authority to qualified managers;
- capitalization on business opportunities; and
- exhibition of leadership in achieving the Company's goals.
No specific weight was assigned to these factors.
In addition, in determining the amount of increase in compensation in 1999, the
Committee considered the Company's actual results for 1998 in the areas of:
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- product development;
- new business acquisitions;
- overall financial strength;
- perceived customer satisfaction; and
- the Company's prospects for long-term growth.
Based upon the Committee's evaluations of the above factors and Mr. Wilson's
significant contribution to the Company's 1998 performance, the Committee
increased his base salary for 1999 by approximately 10%.
ANNUAL INCENTIVES AND RESTRICTED STOCK OWNERSHIP PLAN. The annual bonus
program for executive officers, including the CEO, is intended to meet two
primary objectives. First, it is designed to provide short-term incentives and
rewards based on the Company's short-term goals that are consistent with its
long-term goals. Second, the annual bonus program is designed to promote the
Company's philosophy of having a substantial portion of executive compensation
at risk. The Committee believes that for the executive officers, a bonus amount
equal to 60% of base salary is an appropriate percentage to have at risk on an
annual basis.
The Committee also believes that one of the best ways to align the interests of
the Company's executive officers with the interests of its stockholders is by
promoting executive officers' ownership of Company stock. To promote this goal,
the Company established the Restricted Stock Ownership Plan during 1998. The
Plan establishes stock ownership guidelines for officers and directors and
enables the Company to further the long-term goal of increasing the level of
stock ownership while continuing to provide significant short-term rewards.
Participation in the Plan is mandatory for directors and United States-based
officers until they have satisfied the applicable stock ownership guidelines.
Under the guidelines, officers are required to hold Company stock in multiples
of their base salary ranging from 1 times salary for vice presidents to 5 times
salary for the Chief Executive Officer. Directors who are not employees are
required to hold 5 times the annual retainer for directors. Directors and
officers have annual targeted percentages of ownership to achieve each year and
are to achieve 100% of the guideline for their office within 6 years of the
Plan's adoption or their first election to the office to which this guideline is
applicable. They may elect not to participate in the Plan after having achieved
100% of the stock ownership guidelines applicable to their position.
Under the Plan, annual retainers for directors and bonuses for officers are paid
partially in cash and partially in restricted stock. The Company engaged Hewitt
Associates LLC to assist in developing the Plan and in determining the
appropriate level of stock premium to compensate plan participants for risks
associated with the forfeiture of restricted stock, market fluctuations, and
deferral of current economic benefits of current cash compensation. The
Company's 50% increase in the value of the portion of the bonus paid in
Restricted stock ("50% premium") is within the recommended premium range.
Generally, for those directors and officers who have achieved their annual
targeted percentages of ownership, annual retainers and any bonuses will be paid
50% in cash and 50% in restricted stock (with a 50% premium). For directors and
officers who have not achieved their stock ownership guidelines, annual
retainers and any bonuses will be paid 100% in restricted stock (with a 25%
premium).
The restricted shares vest in 20% increments on January 1 of each of the five
calendar years following the year in which the restricted shares are awarded.
Unvested restricted shares are forfeited upon termination for cause, upon the
voluntary termination of a directorship, or upon the voluntary termination of
employment by an officer. Upon death, retirement or disability of a participant
or upon a change in control, all unvested restricted shares shall fully vest.
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The annual bonus for executive officers with profit and loss responsibility
reporting to the CEO (a "P&L Executive Officer") was generally comprised of two
parts. One part was based on the Company's performance, as measured by targeted
earnings-per-share. If actual 1999 earnings-per-share were less than the
target, the bonus would be reduced for 1999 by stated percentages. The other
part was based on the performance of the group for which the executive is
responsible, as measured against the business plan established for 1999 and
group earnings growth over the prior year. If the actual 1999 group performance
or growth was less than the target, the bonus was to be reduced for 1999 by a
stated percentage.
For Mr. Wilson and those executive officers other than the P&L Executive
Officers, the annual bonus was based on the Company's performance, as measured
by targeted earnings-per-share for 1999. Messrs. Morrison and Williams are the
only named executive officers who are not P&L Executive Officers. As with the
P&L Executive Officers, if the actual 1999 performance was less than the target,
the bonus was to be reduced for 1999 by a stated percentage. In addition, for
Messrs. Morrison and Williams, part of such a bonus was measured against the
percentage growth in expenses for their groups as measured against the
percentage growth in the Company's revenues and budgeted growth. If the
percentage in expense growth exceeded a targeted percentage below the growth in
the Company's revenues and budgeted growth, the bonus would be reduced by a
stated percentage.
The Committee retained the discretion to use its subjective assessment to award
or withhold bonuses under the plan for any or all of the executive officers. In
early 2000, the Committee reviewed the level of bonuses that would have been
awarded to each executive officer under the plan described above. Because the
Company did not attain the 1999 targets, no bonuses were awarded for 1999.
STOCK-BASED INCENTIVES. Stock Option Plans are intended to provide
incentives and rewards for a mid-term (3 years) to long-term (5 years) and to
provide a further means for aligning employees' and your interests in the
enhancement of stockholder value. In 1999, stock options were granted under the
1999 Stock Option Plan at 100% of the closing price of the stock on the date of
grant with a four year vesting schedule at 25% per year. In this way,
executives are rewarded only if the stock price goes up, which benefits both the
stockholder and the executive.
In determining the number and terms of exercise of options to be granted in
1999, including the number for Mr. Wilson, the Committee considered the
historical pattern of granting options under the previous plan, the 1989 Stock
Option Plan, as well as competitive levels needed to retain the respective
executive officer. In the Committee's subjective assessment, the number and
exercise price for options historically granted annually to the executive
officers has provided the appropriate incentive and rewards. Consequently,
for the options granted in 1999, the Committee determined that granting,
in most cases, approximately the same number of options as had previously
been granted would provide the appropriate level of incentive and reward for
the executive officers.
DEDUCTIBILITY CAP ON EXECUTIVE COMPENSATION. Beginning in 1994, the
federal tax laws disallow corporate deductibility for certain compensation paid
in excess of $1 million to the chief executive officer and the other four most
highly paid executive officers of publicly-held companies. "Performance-based
compensation", as defined in the tax law, is not subject to the deductibility
limitation, provided certain stockholder approval and other requirements are
met. During 1999, the deductibility cap had an immaterial impact on the
Company. At the present time, it is not known whether the deductibility cap
will have an impact on the Company in 2000, although it is possible. The
Company believes that the 1993 Long-Term Incentive Plan for Executives and the
Company's 1989 and 1999 Stock Option Plans satisfy the requirements as
performance-based compensation under the exception. Therefore, the Company
expects that any stock option compensation realized upon the exercise of stock
options granted under these plans will not be subject to the compensation
deduction limitation.
Compensation Committee
Joseph D. Sargent (Chairman)
Alfred R. Berkeley, III
Dr. John M. Palms
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, the Compensation Committee of the Board of Directors consisted of
Messrs. Sargent, and Berkeley and Dr. Palms. None of the Committee members are
or were previously employees or officers of PMSC or any of its subsidiaries.
COMPENSATION OF DIRECTORS
In 1999, non-employee directors received the following compensation:
- an annual fee of $18,000 (payable in cash and restricted stock pursuant to
the Restricted Stock Ownership Plan as discussed above);
- $2,000 for each Board meeting attended;
- $1,000 for each committee meeting attended in person (if not on a regular
Board meeting date);
- a $500 fee, plus $250 per hour for each additional hour or part thereof
for participation in meetings by telephone (not to exceed $1,000 per meeting);
- travel expenses of attending Board and committee meetings; and
- $1,000 per day for attending to Company business in person at non-Board or
committee meetings.
Directors who are also full-time employees of the Company do not receive
additional compensation for their services as directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table gives the compensation earned, including stock options
granted, by the Chief Executive Officer and the next four most highly
compensated executive officers for the years 1999, 1998 and 1997. We refer to
all of these officers as the "Executive Group."
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Awards
-----------------------------
Number of
Annual Compensation Restricted Securities
-------------------
Name and Stock Underlying All Other
PRINCIPAL POSITION YEAR Salary Bonus (1) AWARDS(2) Options Granted(3) Compensation(4)
------------------ ---- ------ --------- -------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
G. LARRY WILSON . . . .1999 $886,379 $ 0 $ 0 75,000 $10,845
President and Chief 1998 783,750 235,950 353,925 150,000 10,710
Executive Officer 1997 712,500 429,000 0 150,000 10,635
DAVID T. BAILEY . . . .1999 $429,929 $ 0 $ 0 35,000 $ 7,200
Executive Vice 1998 412,307 0 0 70,000 7,200
President. . . . . . . 1997 368,660 155,400 0 70,000 7,125
STEPHEN G. MORRISON . .1999 $557,818 $ 0 $ 0 35,000 $10,845
Executive Vice 1998 493,260 148,500 222,750 70,000 10,710
President, General . . 1997 448,469 270,000 0 70,000 10,635
Counsel, Secretary and
Chief Administrative
Officer
MICHAEL W. RISLEY . . .1999 $389,434 $ 0 $ 0 200,000 $ 7,200
Executive Vice 1998 271,371 67,931 101,897 20,694 7,200
President. . . . . . . 1997 224,795 43,775 0 20,000 6,432
TIMOTHY V. WILLIAMS . .1999 $412,628 $ 0 $ 0 35,000 $ 7,200
Executive Vice 1998 371,118 111,600 167,400 70,000 7,200
President and Chief. . 1997 343,994 207,000 0 70,000 7,125
Financial Officer
__________________________
<FN>
(1) Reflects amount earned in year indicated even though actually paid in following year.
(2) Shares of restricted stock awarded to the Executive Group in 1999 and the value of
such shares at December 31, 1999 were as follows: Wilson - 6731 ($172,061), Morrison - 4,236
($108,283), Risley - 1,938 ($49,540), and Williams - 3,184 ($81,391). The values set forth in
this column represent the portion of each executive officers' annual bonus for 1998 payable in
restricted stock, which awards were made on February 8, 1999 at $52.5813 per share. The
restricted shares vest in 20% increments on January 1 of each of the five calendar years
following the year in which the restricted shares are awarded. Restricted shares will
participate in dividends the same as other shares of common stock; however, the Company has
never declared cash dividends.
(3) Adjusted for the two-for-one stock split on June 1, 1998.
(4) Amounts shown are matching contributions from the Company under its 401(k) Retirement
Savings Plan and the Company's Employee Stock Purchase Plan.
</TABLE>
13
<PAGE>
The following table sets forth certain information regarding options for common
stock granted to the Executive Group during 1999. The table includes the
potential realizable value which would exist based on assumed annual compounded
rates of common stock price appreciation of five and ten percent over the full
ten-year term of the options.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN 1999
Individual Grants
---------------------------------------------
Percent
Number of Total Potential Realizable Value
Of Securities Options Exercise at Assumed Annual Rates
Underlying Granted to Price Expiration of Stock Price Appreciation
Options Employees Per Date of for Option Term (1)
-------------------
Name Granted in 1999 Share Options 5% 10%
---- ------- ------- ----- ------- --- ---
<S> <C> <C> <C> <C> <C> <C>
All Stockholders. . $895,002,412 (2) $2,268,109,833 (2)
G. Larry Wilson . . 75,000 (3)(5) 8.7% $40.125 May 11, 2009 $1,892,581 $ 4,796,167
David T. Bailey . . 35,000 (3)(5) 4.0% $40.125 May 11, 2009 $ 883,204 $ 2,238,211
Stephen G. Morrison 35,000 (3)(5) 4.0% $40.125 May 11, 2009 $ 883,204 $ 2,238,211
Michael W. Risley . 180,000 (3)(5) 20.8% $40.125 May 11, 2009 $4,542,194 $11,510,802
20,000 (4)(5) 2.3% $20.500 November 8, 2009 $ 257,847 $ 653,434
Timothy V. Williams 35,000 (3)(5) 4.0% $40.125 May 11, 2009 $ 883,204 $ 2,238,211
<FN>
(1) We have included this information to illustrate how the stockholders will have fared compared to each
of the named executives if the assumed appreciation is achieved based upon the option grant date of May 11,
1999.
(2) The potential realizable value for all stockholders is based on the number of shares of common stock
outstanding on May 11, 1999 (the date the options described in note 3 below were granted), and assumes the
stockholders purchased the common stock for $40.125 (which was the fair market value of the common stock on
May 11, 1999) and held the common stock until May 11, 2009.
(3) These options were granted pursuant to the 1999 Plan. The exercise price is the fair market value of
the common stock on May 11, 1999, which was the date of grant.
(4) These options were also granted pursuant to the 1999 Plan. The exercise price is the fair market
value of the common stock on November 8, 1999, which was the date of grant.
(5) The options become exercisable in one-fourth increments on each of the first four anniversary dates
of the grant date. All such options would become immediately exercisable in the event of a change in control
of the Company and the optionee would have the right to exercise such options for a period of ninety days
after termination of employment. In the event of a dissolution or liquidation of the Company or any merger
or combination in which the Company is not the surviving entity, each option granted shall automatically
become fully and immediately vested and exercisable.
</TABLE>
14
<PAGE>
The following table sets forth information for the Executive Group regarding
stock options exercised during 1999 and the value of "in-the-money" options.
"In-the-money" options have a positive difference between the exercise price of
such stock option and $25.5625, the closing price of the Company's common stock
on December 31, 1999.
AGGREGATED OPTIONS EXERCISED IN 1999
AND 1999 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Value of Unexercised
Acquired Unexercised Options In-the-Money Options
On Value at December 31, 1999* at December 31, 1999**
------------------------ -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. Larry Wilson . . 0 $ 0 1,372,500 352,500 $3,498,812 $289,312
David T. Bailey . . 0 $ 0 297,667 164,500 $ 312,444 $135,012
Stephen G. Morrison 0 $ 0 315,834 172,500 $1,611,352 $259,762
Michael W. Risley . 0 $ 0 81,790 238,600 $ 193,709 $200,565
Timothy V. Williams 47,384 $1,069,789 182,500 152,500 $ 376,387 $130,762
<FN>
* All shares adjusted for the two-for-one stock split on June 1, 1998.
** Value represents the aggregate excess of the market price of the common
stock on December 31, 1999, which was $25.5625, over the exercise price for the
options. All options included in the table have an exercise price equal to or
greater than the fair market value of the common stock on the dates of grant.
</TABLE>
DEFERRED COMPENSATION AGREEMENT. Mr. Wilson is covered by a Deferred
Compensation Agreement providing annual remuneration of $25,000 upon retirement,
death or total disability. The Agreement, which provides for monthly payments
over a fifteen-year period, is contingent primarily upon his continued
employment until such an event occurs, and the deferred benefits are not vested
until that time. Until or unless such a qualifying event occurs, Mr. Wilson is
not entitled to any payments under the Agreement. The Company owns life
insurance contracts covering Mr. Wilson, of which it is the beneficiary, in an
aggregate amount equal to or in excess of the total benefit.
EMPLOYMENT AGREEMENTS. The Company has an Employment Agreement with each
of Messrs. Wilson, Bailey, Morrison, Risley, and Williams, which set initial
annual salaries at their then current annual salary, subject to future increases
in accordance with the Company's practices. In the event of a change in control
of the Company (as defined in the Agreement), the executive's then base salary
will increase to 150% of the base salary in effect immediately prior to the
change in control.
The term of each executive officer's Employment Agreement continues until
December 31, 2005. The term is subject to annual twelve month extensions,
unless six months notice of non-extension is given. In the event of a change in
control, the term is extended automatically twelve months.
15
<PAGE>
The Employment Agreements may be terminated by the Company for cause. If the
executive is terminated for reasons other than for cause or if the executive
terminates for good reason, the executive will receive annual severance payments
for the remaining term of the Employment Agreement equal to base salary plus an
amount equal to either the highest annual bonus received in the two years
preceding termination or, if after a change in control, 150% of the highest
annual bonus during the two years preceding termination. Should such payments
be subject to an excise tax pursuant to Section 4999 of the Internal Revenue
Code, or similar law, additional compensation as is necessary to offset such tax
effects also will be paid to the executives. The severance payments under the
Employment Agreements would cease in the event of reasonable proof of any
violation of the non-competition, non-solicitation of employees, or
confidentiality provisions of the Employment Agreement.
The stock options of the executive officers named in the Summary Compensation
Table above would become immediately exercisable in the event of a change in
control. In no event, however, may an optionee exercise such options after the
tenth anniversary date of the date of grant of such options.
PRINCIPAL STOCKHOLDERS
This table sets forth certain information,as of August 14, 2000, regarding
beneficial owners of more than five percent of the Company's common stock.
<TABLE>
<CAPTION>
Common Stock Percentage
Name and Address Beneficially Owned of Class(1)
------------------ ------------------- --------------
<S> <C> <C>
CAPITAL GROUP INTERNATIONAL, INC. ("CGI") 1,853,200 (2) 5.20%
11100 Santa Monica Boulevard
Los Angeles, California 90025
THE REGENTS OF THE UNIVERSITY . . . . . . 2,706,400 (3) 7.60%
OF CALIFORNIA ("REGENTS")
1111 Broadway, 14th Floor
Oakland, California 94607
WESTPORT ASSET MANAGEMENT, INC. . . . . . 4,106,750 (4) 11.54%
("WESTPORT")
253 Riverside Avenue
Westport, Connecticut 06880
___________________
<FN>
(1) Determined using the number of shares of common stock outstanding on
August 14, 2000 which was 35,585,504.
(2) Of the shares reported, CGI has sole voting power for 1,529,900 of the
shares, shared voting power for none of the shares, shared dispositive power for
none of the shares and sole dispositive power for all of the shares. This
information is based on information contained in the Schedule 13G filed by CGI
with the SEC on July 10, 2000.
(3) Of the shares reported, Regents has sole voting and dispositive power
for all of the shares. This information is based on information contained in the
Schedule 13G filed by Regents with the SEC on February 11, 2000.
(4) We have reason to believe that Westport beneficially owns 4,106,750
shares, of which Westport has sole voting power for 691,750 of the shares,
shared voting power for 2,628,800 of the shares, sole dispositive power for
691,750 of the shares and shared dispositive power for 3,415,000 of the shares.
</TABLE>
16
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of August 14, 2000, beneficial ownership of
common stock by each director and executive officer named in the Summary
Compensation Table above, and by all directors and all executive officers as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF BENEFICIAL SHARES SUBJECT PERCENTAGE
OF BENEFICIAL OWNER OWNERSHIP (1) TO OPTION (2) OF CLASS(3)
--------------------- ----------------- ----------------- ----------
---
<S> <C> <C> <C>
Alfred R. Berkeley, III. . . 32,148 30,000 *
Donald W. Feddersen. . . . . 32,106 30,000 *
Dr. John M. Palms. . . . . . 28,598 25,000 *
Joseph D. Sargent. . . . . . 78,982 68,334 *
John P. Seibels. . . . . . . 76,657 70,000 *
Richard G. Trub. . . . . . . 28,148 25,000 *
G. Larry Wilson. . . . . . . 1,713,801 1,426,250 4.6%
David T. Bailey. . . . . . . 375,519 369,417 1.0%
Stephen G. Morrison. . . . . 395,710 381,584 1.1%
Michael W. Risley. . . . . . 170,533 145,590 *
Timothy V. Williams. . . . . 250,938 246,250 *
Directors and all executive
officers as a group
(13 in number) . . . . . . 3,262,478 2,888,246 8.5%
____________________
<FN>
(1) Each individual has sole voting power and sole dispositive power, except
that for the following unvested shares awarded under the Restricted Stock
Ownership Plan, the respective individual does not have dispositive power for
the number of shares indicated: Berkeley - 1,956; Feddersen - 1,956; Palms -
1,956; Sargent - 1,956; Seibels - 465; Trub - 1,956; Wilson - 5,385; Morrison -
3,389; Risley - 1,551; Williams - 2,548; and all other executive officers - 680.
(2) These shares, which are included in the "Amount and Nature of Beneficial
Ownership" column, are subject to option on or before October 14, 2000, pursuant
to the Company's various stock option plans.
(3) Where indicated by asterisk, beneficial ownership represents less than
one percent of the sum of the total number of shares of common stock outstanding
on August 14, 2000 (which was 35,585,504), plus the total shares subject to
option.
</TABLE>
17
<PAGE>
STOCK PERFORMANCE
This graph compares the cumulative total stockholder return on the common stock
during the five years ended December 31, 1999 with the cumulative total return
on the Standard & Poor 500 Index and the Standard & Poor Computer Software and
Services Index. The comparison assumes $100 was invested on the last trading day
of 1994 in our common stock and also in each of the indices and assumes
reinvestment of all dividends that may have been paid. The performance shown in
the graph is not necessarily indicative of future performance.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PMSC. . . . . . . . . . . . . 100.00 113.39 109.82 165.62 240.48 121.72
S&P 500 Index . . . . . . . . 100.00 137.58 169.17 225.60 290.08 351.12
Computer (Software & Svc) . . 100.00 140.53 218.48 304.34 551.44 1,019.77
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We believe, during 1999, that all required filings with the SEC of reports of
stock ownership (and changes thereto) by our directors, officers and 10%
stockholders were timely made.
STOCKHOLDER PROPOSALS
While we do not believe that any other business will be presented at the
meeting, should other business properly and lawfully come before the meeting,
Mr. Seibels and Dr. Palms will vote in accordance with their best judgment.
If you would like to present a stockholder proposal at the annual stockholders
meeting in 2001 and have it included in the proxy statement and proxy card for
such meeting, it must be received by us no later than December 12, 2000. .
You should mail any such proposal to the attention of the Company's Secretary at
the following address: Post Office Box Ten, Columbia, South Carolina 29202.
Pursuant to SEC Rule 14a-4c(1) and the 90 days advance notice requirement in our
Bylaws, unless we receive notice by February 9, 2001, of any shareholder
proposal, management's proxies shall be permitted to use their discretionary
authority at the 2001 annual stockholders meeting if such proposal is raised at
the meeting.
STOCKHOLDER NOMINEES FOR DIRECTORS. Although we have no formal procedure
whereby nominations for directors are solicited from stockholders, the Board's
Corporate Governance Committee will consider candidates for directors
recommended by stockholders if such recommendations are delivered to us no later
than: (a) with respect to an election to be held at an annual stockholders
meeting, ninety days prior to such meeting; and (b) with respect to an election
to be held at a special stockholders meeting for the election of directors, the
close of business on the seventh day following the date on which notice of such
meeting is first given. Each recommendation shall include: (a) the names and
addresses of the stockholder intending to make the nomination and the person(s)
to be nominated; (b) a representation that the stockholder is a holder of
record of our common stock entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person(s) specified
in the recommendation; (c) a description of all arrangements or understandings
between the stockholder and each nominee and any other person(s) (naming them)
pursuant to which the nomination(s) are to be made by the stockholder; (d) such
other information regarding each nominee proposed by such stockholder as would
be required to be included in a proxy statement, had the nominee been or
intended to be nominated by the Board of Directors; and (e) the consent of each
nominee to serve as a director, if elected.
Stephen G. Morrison
Secretary
18
<PAGE>
APPENDIX A
POLICY MANAGEMENT SYSTEMS CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. PURPOSE:
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing: the financial reports
and other financial information provided by the Company to any governmental body
or the public; the Company's systems of internal controls regarding finance and
accounting that management and the Board have established; and the Company's
auditing, accounting and financial reporting processes generally. Consistent
with this function, the Audit Committee should encourage continuous improvement
of, and should foster adherence to, the Company's policies, procedures and
practices at all levels. The Audit Committee's primary duties and
responsibilities are to:
Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
Review and appraise the audit efforts of the Company's independent
accountants and internal auditing department.
Provide an open avenue of communication among the independent accountants,
financial and senior management, the internal auditing department, and the Board
of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION:
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent directors and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a Committee member. No Director
who is an employee of the Company or one of its affiliates may serve on the
Committee until three years following termination of such employment, nor may a
Director who is employed as an executive of another corporation where any of the
Company's executives serves on that company's compensation committee serve on
the Audit Committee. A Director who is a partner, controlling shareholder or
executive of an organization that has a business relationship with the Company
or who has a direct business relationship with the Company may serve on the
Audit Committee only if the Board of Director determines in its business
judgment that the relationship does not interfere with the Director's exercise
of independent judgment. Each member of the Committee shall have, or shall
acquire within a reasonable period of time, as determined by the Board, after
his or her appointment to the Committee, a working familiarity with basic
finance and accounting practices, and at least one member of the Committee shall
have accounting or related financial management expertise. Committee members
may enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Company or an outside consultant.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board and shall serve until their successors shall
be duly elected and qualified. Unless a Chairman is elected by the full Board,
the members of the Committee may designate a Chairman by majority vote of the
full Committee membership.
19
<PAGE>
III. MEETINGS:
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. The Committee will meet quarterly with appropriate
global management, the director of the internal auditing department and the
independent accountants in separate executive sessions to discuss any matters
that the Committee or any of these groups believes should be discussed
privately. In addition, the Committee or at least its Chairman will meet with
the independent accountants and management quarterly to review the Company's
financials consistent with IV.4. below. The Chairman also will meet with
independent accountants at their office at least once a year.
IV. RESPONSIBILITIES AND DUTIES:
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review the Company's annual financial statements and any material reports
or other financial information submitted to any governmental body, or the
public, including any certification, report, opinion, or review rendered by the
independent accountants.
3. Review the regular internal reports to management prepared by the
internal auditing department and management's response.
4. Review with financial management and the independent accountants each
Form l0-Q prior to its filing or prior to the release of earnings. The Chairman
of the Committee may represent the entire Committee for purposes of this review.
5. Prepare a report for inclusion in the Company's annual Proxy Statements
that describes the Committee's responsibilities and how they were discharged and
that otherwise meets the requirements of all relevant rules and regulations
promulgated by the Securities and Exchange Commission.
INDEPENDENT ACCOUNTANTS
6. Have ultimate authority and responsibility to, and shall, recommend to
the Board of Directors the selection of the independent accountants, considering
independence and effectiveness and approve the fees and other compensation to be
paid to the independent accountants and review the performance of the
independent accountants and recommend to the Board any proposed discharge of the
independent accountants when circumstances warrant.
7. On at least an annual basis, the Committee shall require the independent
accountants to submit to the Committee a formal written statement delineating
all relationships the accountants have with the Company and review and discuss
this statement with the accountants to determine the accountants' independence
and if necessary, recommend that the Board of Directors take appropriate action
in response to the accountants' written statement to satisfy itself of the
accountants' independence.
8. Periodically consult with the independent accountants out of the presence
of management about internal controls and the fullness and accuracy of the
Company's financial statements.
20
<PAGE>
FINANCIAL REPORTING PROCESSES
9. In consultation with the independent accountants and the internal
auditing department, review the integrity of the Company's financial reporting
processes, including the surrounding internal control structure.
10. Consider the independent accountants' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
11. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the independent
accountants, management, or the internal auditing department.
PROCESS IMPROVEMENT
12. Establish regular and separate systems of reporting to the Audit
Committee by each of management, the independent accountants and the internal
auditing department regarding any significant judgments made in management's
preparation of the financial statements and the view of each as to the
appropriateness of such judgments.
13. Following completion of the annual audit, review separately with each of
management, the independent accountants and the internal auditing department any
significant difficulties encountered during the course of the audit, including
any restrictions on the scope of work or access to required information.
14. Review any significant disagreement among management and the independent
accountants or the internal auditing department in connection with the
preparation of the financial statements.
15. Review with the independent accountants, the internal auditing
department and management the extent to which changes or improvements in
financial or accounting practices, as approved by the Audit Committee or the
Board, have been implemented.
16. Review activities, organizational structure, and qualifications of the
internal auditing department.
17. Review, with the Company's counsel, legal compliance matters including
corporate securities trading policies.
18. Review, with the Company's counsel, any legal matter that could have a
significant impact on the Company's financial statements.
19. The Committee shall have the power to conduct or authorize investigation
into any matters within the Committee's scope of responsibilities. The
Committee shall be empowered to retain independent counsel, accountants, or
others to assist it in the conduct of any investigation.
20. Perform any other activities consistent with this Charter, the Company's
By laws and governing law, as the Committee or the Board deems necessary or
appropriate.
21
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
POLICY MANAGEMENT SYSTEMS CORPORATION
d/b/a Mynd Corporation
ONE PMSC CENTER
BLYTHEWOOD, SOUHTH CAROLINA 29016
The undersigned hereby appoints John P. Seibels and Dr. John M. Palms proxies
with full power of substitution and revocation to vote on the undersigned's
behalf at the Annual Meeting of the Stockholders of Policy Management Systems
Corporation d/b/a Mynd Corporation, to be held at 11:00 a.m., September 27,
2000, at the Company's executive offices located at One Mynd Center, Blythewood,
South Carolina, and at all adjournments thereof, upon all business as may
properly come before the Meeting, including the following as more fully
described in the Notice of Annual Meeting and Proxy Statement, receipt of which
is hereby acknowledged. PROXIES WILL BE VOTED IN ACCORDANCE WITH ANY
INSTRUCTIONS INDICATED ON THE REVERSE. IF NO SPECIFICATION IS MADE, PROXIES
WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS, FOR APPROVAL OF AN AMENDMENT TO
COMPANY"S ARTICLES OF INCORPORATION TO CHANGE THE COMPANY"S NAME TO MYND
CORPORATION AND FOR RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITIORS.
THIS PROXY IS REVOCABLE ANY TIME PRIOR TO ITS USE.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE
22
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
POLICY MANAGEMENT SYSTEMS CORPORATION
D/B/A MYND CORPORATION
SEPTEMBER 27, 2000
Please Detach and Mail in the Envelope Provided
X Please mark your
------ votes as in this
example.
FOR all nominees WITHHOLD AUTHORITY
named at right to vote for all nominees
(except as marked to named at right
the contrary below)
1. ELECTION OF
DIRECTORS _______ _______
Nominees: Alfred R. Berkeley, III
Donald W. Feddersen
Richard G. Trub
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee write that nominee's name in the space
provided below.)
____________________________________________
FOR AGAINST ABSTAIN
2. APPROVAL OF AN AMENDMENT TO
COMPANY'S ARTICLES OF INCORPORATION
TO CHANGE THE COMPANY'S NAME TO
MYND CORPORATION
_____ _____ _____
3. RATIFICATION OF THE SELECTION
OF PRICEWATERHOUSECOOPERS
LLP AS INDEPENDENT AUDITORS
FOR THE COMPANY.
_____ _____ _____
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
SIGNATURE ____________________________________________ Date ______________1999.
NOTE: (Signature should agree with name on stock, as shown hereon. Officers,
fiduciaries, etc., so indicate. When shares are held in the names of more than
one person, each person should sign the proxy.)
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