<PAGE>
As filed with the Securities and Exchange Commission on October 9, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
STERLING COMMERCE, INC.
(Exact name of registrant as specified in its charter)
300 CRESCENT COURT, SUITE 1200
DALLAS, TEXAS 75201
(214) 981-1100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
DELAWARE 75-2623341
(State of incorporation) (I.R.S. Employer
Identification Number)
STERLING COMMERCE, INC. DEFERRED COMPENSATION PLAN
(Full title of the plan)
ALBERT K. HOOVER, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
STERLING COMMERCE, INC.
4600 LAKEHURST COURT
DUBLIN, OH 43016-2000
(614) 793-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
WITH A COPY TO:
JAMES E. O'BANNON, ESQ.
JONES, DAY, REAVIS & POGUE
2300 TRAMMELL CROW CENTER
2001 ROSS AVENUE
DALLAS, TEXAS 75201
(214) 220-3939
------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Amount Offering Aggregate Amount of
Securities to to be Price per Offering Registration
be Registered Registered Obligation Price (1) Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred Compensation Obligations (2). . . . . . . . $20,000,000 100% $20,000,000 $6,061
====================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee.
(2) The Deferred Compensation Obligations are unsecured obligations of Sterling
Commerce, Inc. to pay deferred compensation in the future in accordance
with the terms of the Sterling Commerce, Inc. Deferred Compensation Plan.
================================================================================
<PAGE>
PART I
The information called for by Part I of this Registration Statement on Form
S-8 (the "Registration Statement") is included in the description of the
Sterling Commerce, Inc. Deferred Compensation Plan (the "Plan") to be delivered
to persons eligible to participate in the Plan. Pursuant to the Note to Part I
of Form S-8, this information is not being filed with or included in this
Registration Statement.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Sterling Commerce, Inc. (the "Company") hereby incorporates by reference
into this Registration Statement (i) the Company's Annual Report on Form 10-K
for the period ended September 30, 1996, as amended, (ii) the Company's
Quarterly Reports on Form 10-Q for the three-month periods ended December 31,
1996, March 31, 1997 and June 30, 1997, and (iii) the Company's Current Reports
on Form 8-K dated September 30, 1996, December 18, 1996, May 7, 1997 and June
30, 1997.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended, prior to
the termination of the offering made hereby, shall be deemed to be incorporated
by reference in this Registration Statement and to be a part of this
Registration Statement from the date of the filing of such reports.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Registration
Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Under the Plan, the Company will provide directors, eligible employees and
certain consultants (each, an "eligible person") the opportunity to defer a
specified percentage of their cash compensation. The obligations of the Company
under the Plan (the "Deferred Compensation Obligations") will be unsecured
general obligations of the Company to pay the deferred compensation and any
earnings thereon in the future in accordance with the terms of the Plan, and
will rank pari passu with other unsecured and unsubordinated indebtedness of the
Company from time to time outstanding. The following description of the Plan is
qualified in its entirety by reference to the Plan, a copy of which is filed as
an exhibit to this Registration Statement.
The amount of compensation to be deferred by each eligible person who
elects to participate in the Plan (a "participant") will be determined in
accordance with the Plan based on elections by the participant. Each Deferred
Compensation Obligation will be payable in accordance with the terms of the
Plan. Under the Plan, the Company will deposit the amount of each participant's
deferred compensation in a trust that qualifies as a grantor trust under the
Internal Revenue Code of 1986, as amended (the "Code"). The Administrative
Committee appointed by the Board to administer the Plan (the "Committee") will
direct the trustee to invest an amount equal to each participant's deferred
compensation, as elected by the participant, in one or more investment funds
selected by the Committee. Each participant's account will be credited with
compensation that the participant elects to defer, and any gains (or losses)
deemed to be incurred thereon. All payments to participants in respect of their
Deferred Compensation Obligations will be subject to withholding for applicable
taxes.
A participant's right or the right of any other person to the Deferred
Compensation Obligations cannot be alienated, anticipated, commuted, pledged,
encumbered or assigned. The Deferred Compensation Obligations
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<PAGE>
are not subject to the debts, contracts, liabilities, engagements or torts of
any person entitled to receive benefits under the Plan.
The Committee may amend, modify, suspend or terminate the Plan at any time;
provided however, that no Plan amendment, modification, suspension or
termination may (i) retroactively deprive any participant of any benefit vested
under the Plan, (ii) materially and adversely affect the interests of
participants without prior consent of at least 75% of the participants, (iii)
cause any participant's account to be distributed earlier than the time
contemplated by the Plan and the participant's elections without the prior
consent of the participant, or (iv) for a period of two years following a Change
in Control (as defined in the Plan), be effected without the prior consent of at
least 75% of the participants. Notwithstanding the foregoing, the Company may
unilaterally (i) amend, modify or suspend the Plan in the event that the Company
determines that such action is required in order to comply with the Code and
(ii) amend the Plan at any time to cause the cessation of deferrals of
compensation or to change the manner or terms of future deferrals by the
participants in any future year; provided however, that no such amendment may be
effected for a period of two years following a Change in Control.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that the personal
liability of directors of the Company to the Company is eliminated to the
maximum extent permitted by Delaware law. The Company's Certificate of
Incorporation and Bylaws provide for the indemnification of the directors,
officers, employees and agents of the Company and its subsidiaries to the
fullest extent that may be permitted by Delaware law from time to time, and the
Bylaws provide for various procedures relating thereto. Certain provisions of
the Company's Certificate of Incorporation protect the Company's directors
against personal liability for monetary damages resulting from breaches of their
fiduciary duty of care, except as set forth below. Under Delaware law, absent
these provisions, directors could be held liable for gross negligence in the
performance of their duty of care, but not for simple negligence. The Company's
Certificate of Incorporation absolves directors of liability for negligence in
the performance of their duties, including gross negligence. However, the
Company's directors remain liable for breaches of their duty of loyalty to the
Company and its stockholders, as well as for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law and
transactions from which a director derives improper personal benefit. The
Company's Certificate of Incorporation also does not absolve directors of
liability under Section 174 of the Delaware General Corporation Law, which makes
directors personally liable for unlawful dividends or unlawful stock repurchases
or redemptions in certain circumstances and expressly sets forth a negligence
standard with respect to such liability.
Under Delaware law, directors, officers, employees and other individuals
may be indemnified against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement in connection with specified actions,
suits or proceedings, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation -- a "derivative
action") if they acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful. A similar standard of care is applicable in the case of a
derivative action, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with defense or settlement of
such an action and Delaware law requires court approval before there can be any
indemnification of expenses where the person seeking indemnification has been
found liable to the Company.
As authorized by the Company's Certificate of Incorporation, the Company
has entered into indemnification agreements with each of its directors and
officers. These indemnification agreements provide for, among other things, (i)
the indemnification by the Company of the indemnitees thereunder to the extent
described above, (ii) the advancement of attorneys' fees and other expenses, and
(iii) the establishment, upon
-3-
<PAGE>
approval by the Board, of trusts or other funding mechanisms to fund the
Company's indemnification obligations thereunder.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
4.1 Sterling Commerce, Inc. Deferred Compensation Plan.
5.1 Opinion of Jones, Day, Reavis & Pogue.
23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1 Powers of Attorney.
ITEM 9. UNDERTAKINGS
A. The Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of a prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
-4-
<PAGE>
B. The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on October 9, 1997.
STERLING COMMERCE, INC.
By: /s/ WARNER C. BLOW
----------------------------------------
Warner C. Blow
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on October 9, 1997.
Signatures Title
---------- -----
/s/ Warner C. Blow Chief Executive Officer and President; Director
- ----------------------- (Principal Executive Officer)
Warner C. Blow
Steven P. Shiflet* Senior Vice President and Chief Financial Officer
- ----------------------- (Principal Financial and Accounting Officer)
Steven P. Shiflet
Sterling L. Williams* Chairman of the Board; Director
- -----------------------
Sterling L. Williams
Sam Wyly* Director
- -----------------------
Sam Wyly
Charles J. Wyly, Jr.*
- ----------------------- Director
Charles J. Wyly, Jr.
Evan A. Wyly* Director
- -----------------------
Evan A. Wyly
Robert E. Cook* Director
- -----------------------
Robert E. Cook
Honor R. Hill* Director
- -----------------------
Honor R. Hill
*The undersigned, by signing his name hereto, does sign and execute this
Registration Statement pursuant to the Powers of Attorney executed on behalf of
the above-named officers and directors and filed herewith.
/s/ ALBERT K. HOOVER
----------------------------
Albert K. Hoover
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
4.1 Sterling Commerce, Inc. Deferred Compensation Plan.
5.1 Opinion of Jones, Day, Reavis & Pogue.
23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
24.1 Powers of Attorney.
<PAGE>
Exhibit 4.1
-----------
STERLING COMMERCE, INC.
DEFERRED COMPENSATION PLAN
(EFFECTIVE FEBRUARY 1, 1997)
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I.
TITLE AND DEFINITIONS
1.1 Title..................................................... 1
1.2 Definitions............................................... 2
ARTICLE II.
PARTICIPATION
2.1 Participation............................................. 5
ARTICLE III.
DEFERRAL ELECTIONS
3.1 Elections to Defer Compensation........................... 6
3.2 Investment Elections...................................... 7
3.3 Match Funding............................................. 7
ARTICLE IV.
ACCOUNTS
4.1 Participant Accounts...................................... 8
4.2 Quarterly Statements...................................... 9
ARTICLE V.
VESTING
5.1 Account................................................... 9
ARTICLE VI.
DISTRIBUTIONS
6.1 Form and Time of Payment.................................. 9
6.2 Death Benefits............................................ 11
6.3 Unscheduled Early Distributions........................... 11
6.4 Scheduled Early Distributions............................. 11
6.5 Change in Control Withdrawals............................. 12
6.6 Financial Hardship Withdrawals............................ 12
(i)
<PAGE>
6.7 Inability To Locate Participant........................... 13
6.8 Directors and Consultants................................. 13
6.9 Claims Procedure.......................................... 14
ARTICLE VII.
ADMINISTRATION
7.1 Committee................................................. 15
7.2 Committee Action.......................................... 15
7.3 Powers and Duties of the Committee........................ 15
7.4 Construction and Interpretation........................... 16
7.5 Information............................................... 17
7.6 Compensation, Expenses and Indemnity...................... 17
ARTICLE VIII.
MISCELLANEOUS
8.1 Unsecured General Creditor............................... 17
8.2 Restriction Against Assignment........................... 18
8.3 Withholding.............................................. 18
8.4 Amendment, Modification, Suspension or Termination....... 18
8.5 Governing Law............................................ 20
8.6 Receipt or Release....................................... 20
8.7 Payments on Behalf of Persons Under Incapacity........... 20
8.8 Successors and Assigns................................... 20
8.9 No Employment Rights..................................... 20
8.10 Headings, etc. Not Part of Agreement..................... 21
(ii)
<PAGE>
STERLING COMMERCE, INC.
DEFERRED COMPENSATION PLAN
The Sterling Commerce, Inc. Deferred Compensation Plan (the "Plan") is
adopted by Sterling Commerce, Inc. (the "Company"), acting on behalf of itself
and its designated subsidiaries.
RECITALS
1. The Plan is being established as an unfunded supplemental retirement
plan for the benefit of selected highly compensated employees, directors and
consultants and their respective beneficiaries. Benefits under the Plan will be
paid by the Company from its general assets or from the assets of the trust
hereinafter described.
2. Concurrently with the establishment of the Plan, the Company has
entered into a trust agreement with First American Trust Company, as trustee, to
establish a trust (the "Trust") to hold and manage certain assets contributed by
the Company in connection with the Plan. The Trust is intended to qualify as a
"grantor trust" under the Internal Revenue Code of 1986, as amended, with the
principal and income of the Trust to be treated as assets and income of the
Company for federal and state income tax purposes.
3. The assets of the Plan held in the Trust will at all times be subject
to the claims of the general creditors of the Company.
NOW THEREFORE, the Company does hereby establish the Plan as follows:
ARTICLE I.
TITLE AND DEFINITIONS
1.1 Title.
-----
This Plan shall be known as the Sterling Commerce, Inc. Deferred
Compensation Plan.
<PAGE>
1.2 Definitions.
-----------
Whenever the following words and phrases are used in this Plan, with the
first letter capitalized, they shall have the meanings specified below.
(a) "Account" means for each Participant the bookkeeping account maintained
-------
by the Committee on the books of the Company that is credited with amounts equal
to (i) the portion of the Participant's Compensation that he or she elects to
defer, and (ii) the deemed earnings on such deferred Compensation that are
credited pursuant to Section 4.1(ii).
(b) "Beneficiary" or "Beneficiaries" means the beneficiary or beneficiaries
----------- -------------
last designated in writing by a Participant, in accordance with procedures
established by the Committee, to receive benefits under the Plan in the event of
the Participant's death. No beneficiary designation shall become effective
unless and until it is filed with the Committee during the Participant's
lifetime.
(c) "Board of Directors" or "Board" means the Board of Directors of
------------------ -----
Sterling Commerce, Inc. Any determination or other action specified in this
Plan to be made, taken or effectuated by the Board may be made, taken or
effectuated by the Executive Committee of the Board.
(d) "Change in Control" means the occurrence of any of the following
-----------------
events:
(i) the Company is merged, consolidated or reorganized into or with
another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than two-thirds of the combined voting
power of the then-outstanding securities entitled to vote generally in the
election of directors ("Voting Stock") of such corporation or person
immediately after such transaction are held in the aggregate by the holders
of Voting Stock of the Company immediately prior to such transaction;
(ii) the Company sells or otherwise transfers all or substantially all
of its assets to another corporation or other legal person, and as a result
of such sale or transfer less than two-thirds of the combined voting power
of the then-outstanding Voting Stock of such corporation or person
immediately after such sale or transfer is held in the aggregate by the
holders of Voting Stock of the Company immediately prior to such sale or
transfer;
(iii) there is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act of 1934 (the "Exchange Act"), disclosing that
any person (as the term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under
2
<PAGE>
the Exchange Act) of securities representing 20% or more of the combined
voting power of the then-outstanding Voting Stock of the Company;
(iv) the Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in response
to Form 8-K or Schedule 14A (or any successor schedule, form or report or
item therein) that a change in control of the Company has occurred or will
occur in the future pursuant to any then-existing contract or transaction;
or
(v) if, during any period of two consecutive years, individuals who at
the beginning of any such period constitute the directors of the Company
cease for any reason to constitute at least a majority thereof; provided,
however, that for purposes of this clause (v) each director who is first
elected, or first nominated for election by the Company's stockholders, by
a vote of at least two-thirds of the directors of the Company (or a
committee thereof) then still in office who were directors of the Company
at the beginning of any such period will be deemed to have been a director
of the Company at the beginning of such period.
Notwithstanding the foregoing provisions of clauses (iii) or (iv) above, unless
otherwise determined in a specific case by majority vote of the Board, a "Change
in Control" will not be deemed to have occurred for purposes of clause (iii) or
clause (iv) above solely because (A) the Company, (B) an entity in which the
Company directly or indirectly beneficially owns 50% or more of the outstanding
Voting Stock (a "Subsidiary"), or (C) any Company-sponsored employee stock
ownership plan or any other employee benefit plan of the Company or any
Subsidiary either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of shares of Voting Stock
of the Company, whether in excess of 20% or otherwise, or because the Company
reports that a change in control of the Company has occurred or will occur in
the future by reason of such beneficial ownership or any increase or decrease
thereof.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
----
(f) "Committee" means the Administrative Committee appointed to administer
---------
the Plan in accordance with Article VII.
(g) "Company" means Sterling Commerce, Inc., a Delaware corporation, any
-------
successor corporation to Sterling Commerce, Inc. satisfying the requirements of
Section 8.8 and any entity that is directly or indirectly controlled by Sterling
Commerce, Inc. or in which Sterling Commerce, Inc. has a significant equity or
investment interest, as determined by the Board.
(h) "Compensation" means the following items of remuneration payable to an
------------
Eligible Individual for services rendered to the Company during a calendar year:
Salary, Incentive Bonus, annual retainer and meeting fees payable to members of
the Board and
3
<PAGE>
fees payable to consultants. An Eligible Individual's Compensation shall be
computed before giving effect to the Eligible Individual's salary reduction
elections under Code Sections 125 or 401(k) and the Eligible Individual's
deferral election under Section 3.1 of this Plan.
(i) "Distributable Amount" means the balance of a Participant's Account at
--------------------
any given time.
(j) "Effective Date" means February 1, 1997.
--------------
(k) "Eligible Individual" for a Plan Year means (i) a common law employee
-------------------
of the Company whose Compensation is paid on a United States payroll in United
States dollars and whose Compensation equaled or exceeded the Threshold Amount
in the immediately preceding calendar year or, in the case of an employee
employed only during a portion of such prior calendar year, whose annualized
Compensation would have equaled or exceeded the Threshold Amount, (ii) a member
of the Board of Directors who is not a common law employee of the Company or
(iii) a consultant who is not a common law employee of the Company and who is
designated by the Committee as eligible to participate in the Plan. An
individual's status as an Eligible Individual for a Plan Year shall be
determined prior to the first day of such Plan Year. Notwithstanding the
foregoing, the Committee may in its discretion determine in writing that an
otherwise Eligible Individual may not participate in this Plan for one or more
Plan Years. An individual who is classified by the Company as an independent
contractor whose compensation for services is reported by the Company on a form
other than Form W-2 or any successor form for reporting wages paid to employees
will not be an Eligible Individual, unless the Committee specifically designates
such individual by name as an Eligible Individual pursuant to clause (iii)
above.
(l) "Fund" or "Funds" means one or more of the investment funds or
---- -----
contracts selected by the Committee pursuant to Section 7.3(i).
(m) "Incentive Bonus" means any cash incentive compensation payable to a
---------------
Participant in addition to the Participant's Salary.
(n) "Initial Election Period" means (i) for an Eligible Individual who is a
-----------------------
member of the Board of Directors, but who is not a common law employee of the
Company, the 30-day period ending February 27, 1997, and (ii) for any other
Eligible Individual, the 30-day period ending January 27, 1997.
(o) "Interest Rate" means, for any Fund and for any month, an amount
-------------
expressed as a percentage equal to the net rate of gain or loss on the assets of
such Fund during such month.
(p) "Participant" means any Eligible Individual who elects to defer
-----------
Compensation in accordance with Section 3.1.
4
<PAGE>
(q) "Plan" means the Sterling Commerce, Inc. Deferred Compensation Plan set
----
forth herein, as amended from time to time in accordance with Section 8.4.
(r) "Plan Year" means the 12-consecutive month period beginning January 1
---------
and ending December 31 of each year, provided that the first Plan Year shall be
a short year beginning February 1, 1997 and ending December 31, 1997.
(s) "Salary" means for any calendar year (i) in the case of an employee of
------
the Company whose compensation from the Company does not include commission
income, the employee's base salary during the calendar year and (ii) in the case
of an employee of the Company whose compensation from the Company includes
commission income, the total of the employee's base salary plus commissions
during the calendar year. Salary excludes any other form of compensation such
as Incentive Bonuses, restricted stock, income from stock options or stock
appreciation rights, severance payments, moving expenses, car or other special
allowances, reimbursements for taxes or any other remuneration for personal
services included in an Eligible Individual's taxable income.
(t) "Threshold Amount" means, for the first Plan Year, the sum of $140,000
----------------
and, for any subsequent Plan Year, such other amount as may be determined by the
Committee pursuant to Section 7.3.
(u) "Trust" means the trust established by the Trust Agreement.
-----
(v) "Trust Agreement" means the Sterling Commerce, Inc. Deferred
---------------
Compensation Plan Trust Agreement dated as of February 1, 1997, by and between
the Company and First American Trust Company, as Trustee.
(w) "Trustee" means First American Trust Company or any successor trustee
-------
appointed pursuant to the Trust Agreement.
ARTICLE II.
PARTICIPATION
2.1 Participation.
-------------
An Eligible Individual shall become a Participant in the Plan for a Plan
Year by electing to defer all or a portion of his or her Compensation for such
Plan Year in accordance with Section 3.1, by completing all required
applications for life insurance (as determined by the Committee in its
discretion), and by complying with any applicable medical underwriting
requirements of the issuer of any policy of insurance on the life of the
Eligible Individual.
5
<PAGE>
ARTICLE III.
DEFERRAL ELECTIONS
3.1 Elections to Defer Compensation.
-------------------------------
(a) Elections. For the first Plan Year, each Eligible Individual may elect
---------
to defer Compensation by filing with the Committee an election that conforms to
the requirements of this Section 3.1, on a form provided by the Committee (an
"Election Form"), no later than the last day of the Initial Election Period. For
each subsequent Plan Year, an Eligible Individual may make an election to defer
Compensation by filing an Election Form with the Committee on or before the
December 31 preceding the Plan Year for which the election is to be effective.
An Eligible Individual who does not elect to defer Compensation for a Plan Year
may become a Participant with respect to a subsequent Plan Year by filing an
Election Form with the Committee on or before the December 31 preceding the Plan
Year for which the election is to be effective.
(b) General Rule. Subject to the limitations set forth in subsection (c)
------------
below, an Eligible Individual may elect to defer any whole percentage of his or
her Compensation up to 100%; provided, however, that if an Eligible Individual's
deferral election would reduce the Compensation paid to the Eligible Individual
to an amount that is less than (i) the amount necessary to satisfy the Eligible
Individual's portion of applicable employment taxes for the Plan Year, (ii)
amounts necessary to satisfy any other benefit plan elections or loan repayments
for the Plan Year under any other plan sponsored by the Company and (iii) any
income taxes payable with respect to taxable compensation that is not eligible
for deferral, then the Participant must remit to the Company, at the time or
times requested by the Company, any amounts necessary to permit the Company to
satisfy its obligation to withhold such taxes, implement such benefit plan
elections or deduct such loan repayments. In addition, a deferral election made
by an Eligible Individual will not be effective unless and until the Eligible
Individual completes all required applications for life insurance (as determined
by the Committee in its discretion).
(c) Minimum Deferrals. For each Plan Year during which an Eligible
-----------------
Individual is a Participant, the minimum dollar amount of Compensation that may
be deferred by the Eligible Individual under the Plan is $5,000. To the extent
that a Participant's actual deferrals in a Plan Year are less than $5,000, such
deferrals, together with earnings or loss thereon through the last day of such
Plan Year, will be refunded as promptly as practicable after the end of such
Plan Year.
(d) Duration of Compensation Deferral Election. Any deferral election made
------------------------------------------
under this Section 3.1 shall be irrevocable and shall apply only to the
Compensation payable with respect to services performed during the Plan Year for
which the election is made. Such election shall be first effective (i) with
respect to Salary or consultant fees earned during the first pay period
beginning after the end of the Initial Election Period
6
<PAGE>
or, for Plan Years beginning after 1997, the pay period beginning on the first
day of the Plan Year, (ii) with respect to director fees earned on or after the
last day of the Initial Election Period or, for Plan Years beginning after 1997,
earned during the pay period beginning on the first day of the Plan Year and
(iii) with respect to Incentive Bonuses payable for the Company's fiscal year
ending within the Plan Year (or for any fiscal quarters within such fiscal year)
for which the election is made.
3.2 Investment Elections.
--------------------
(a) The Committee shall provide each Participant with a list of multiple
Funds available for hypothetical investment. Each Participant may designate, on
a form provided by the Committee, one or more Funds in which his or her Account
will be deemed to be invested for purposes of determining the amount of earnings
to be credited to the Account. The list shall consist of at least five Funds,
collectively offering a wide range of investment options (domestic and
international) with a spectrum of risk and return potential (from conservative,
low risk/low return potential to aggressive, high risk/high return potential),
comparable as a whole to the initial list of Funds attached hereto as Exhibit A.
The Committee may in its discretion change from time to time the Funds available
for hypothetical investment, provided Participants are given at least 90 days'
prior written notice of the effective date of such change. The Interest Rate of
each Fund shall be used to determine the amount of earnings to be credited to
Participants' Accounts under Section 4.1(ii).
(b) In making the investment designation pursuant to this Section 3.2, the
Participant may specify that all, or any whole percentage, of his or her Account
will be deemed to be invested in one or more of the Funds designated by the
Committee (with a minimum of 5% of the Account balance deemed to be invested in
any one Fund and all such designations in the aggregate not to exceed 100% of
the Participant's Account balance). Effective as of the beginning of any
calendar quarter, a Participant may change the Fund designations made under this
Section 3.2 by filing a new designation, on a form provided by the Committee, at
least 15 days prior the end of the immediately preceding quarter.
(c) If a Participant fails to elect a Fund under this Section 3.2, or if
the Participant's investment designation is less than 100% of his or her Account
balance, for any portion of the Account for which no investment designation has
been made he or she shall be deemed to have designated the Fund that the
Committee determines in its sole judgment to have the least risk of loss of
principal.
3.3 Match Funding.
-------------
To the extent authorized by the Committee in its discretion, and in such
case to the fullest extent practicable, the Company shall match fund (in terms
of both timing and amount) all of its obligations to Participants under the Plan
by acquiring and contributing to the Trust, or by causing the Trustee to acquire
or maintain on behalf of the Trust, life insurance investments ("Matching
Investments") corresponding as closely
7
<PAGE>
as possible to amounts from time to time allocated to the Investment Fund
Subaccounts (as hereinafter defined) of all Participants. To the extent that
the Company wishes to prefund Matching Investments for a given Plan Year, such
Matching Investments shall be maintained in the Fund offering the least risk of
loss of principal, or a conservative money market fund, until such Matching
Investments are periodically allocated to investment options corresponding to
the periodic deferral amounts of the Participants. Notwithstanding the
foregoing, the Company and the Trustee may maintain cash reserves in an amount
reasonably necessary to pay benefits under and administer this Plan.
While the Plan is in existence the Company shall at all times comply with
its duties and obligations under the Trust Agreement, and all Participants and
their beneficiaries are expressly acknowledged by the Company to be bona fide
third party beneficiaries under the Trust Agreement.
ARTICLE IV.
ACCOUNTS
4.1 Participant Accounts.
--------------------
The Committee shall establish and maintain an Account for each Participant
under the Plan. Each Participant's Account shall be further divided into
separate subaccounts ("Investment Fund Subaccounts"), each of which corresponds
to a Fund elected by the Participant pursuant to Section 3.2. A Participant's
Account shall be debited and credited as follows:
(i) As of the last day of each month, the Committee shall credit the
Investment Fund Subaccounts of the Participant's Account with an amount
equal to any Compensation deferred by the Participant during all pay
periods ending in that month in accordance with the Participant's election;
that is, the portion of the Participant's deferred Compensation that the
Participant has elected to be deferred and deemed to be invested in a
certain Fund shall be credited to the Investment Fund Subaccount
corresponding to that Fund.
(ii) As of the last day of each month, each Investment Fund Subaccount
of a Participant's Account shall be credited with earnings in an amount
determined by multiplying the balance credited to such Investment Fund
Subaccount as of the last day of the preceding month by the Interest Rate
for the corresponding Fund for the then current month. To the extent any
such Interest Rate is negative in any month (due to a net loss in the
applicable Fund), the applicable Investment Fund Subaccount will be debited
in the same manner.
8
<PAGE>
(iii) As of the first day of each calendar quarter, each Investment
Fund Subaccount will be debited or credited to appropriately reflect any
change in Fund designations made by Participants pursuant to Section 3.2.
4.2 Quarterly Statements.
--------------------
Under procedures established by the Committee, a Participant shall receive
a statement with respect to such Participant's Account on a quarterly basis.
ARTICLE V.
VESTING
5.1 Account. A Participant's interest in his or her Account shall be 100%
-------
vested at all times.
ARTICLE VI.
DISTRIBUTIONS
6.1 Form and Time of Payment.
------------------------
(a) Forms of Payment. A Participant's Distributable Amount will be paid
----------------
either in quarterly installments over a period of 5, 10, 15 or 20 years, as the
Participant shall elect, or in a lump sum payment. All Participants will be
required to elect a form of payment; however, a Participant electing to have the
portion of the Distributable Amount attributable to any Plan Year paid in
quarterly installments will be so paid with respect to such amount only if the
Participant terminates employment with the Company (i) at or after attaining age
55; (ii) after having completed at least ten years of service; (iii) as a result
of a long-term disability as defined in the Company's then-existing long-term
disability plan in which the Participant is eligible to participate; or (iv) as
a result of the Participant's death. The Distributable Amount payable to
Participants in all other circumstances will be paid in a lump sum payment,
unless the Participant requests in writing within 30 days after such termination
that the Committee permit the payment of his or her Distributable Amount in
quarterly installments over a period of 5, 10, 15 or 20 years. The Committee
shall have the full discretion and authority to grant or deny any such request.
(b) Payment Election. Each Participant shall elect, at the time of his or
----------------
her election to defer Compensation under the Plan for a Plan Year, to have that
portion of his or her Distributable Amount attributable to such Plan Year paid
in installments as described in subsection (a) above or in a lump sum payment.
A Participant's installment
9
<PAGE>
payment election will be honored only if the Participant is eligible for
installment payments at his or her termination of employment or as permitted by
the Committee, all as provided in subsection (a) above. In the event a
Participant fails to make a payment election with respect to a Plan Year as
provided in this subsection (b) and is otherwise eligible for installment
payments at termination of employment, the Participant's Distributable Amount
attributable to such Plan Year will be paid to the Participant (or the
Participant's Beneficiary, if the Participant terminates employment by reason of
death) in quarterly installments payable over a period of 10 years.
(c) Payment Commencement Date. Unless a Participant receives an early
-------------------------
distribution with respect to the Distributable Amount for a Plan Year pursuant
to Section 6.3, Section 6.4, Section 6.5 or Section 6.6, such Distributable
Amount (or remaining portion thereof) will be paid after the Participant
terminates employment with the Company. Lump sum payments will be paid as soon
as practicable following the Participant's termination of employment but in no
event later than 90 days after the date of such termination. Installment
payments will begin on the first business day of the second month of the
calendar quarter following the calendar quarter in which the Participant
terminates employment and will continue to be made on the second business day of
each subsequent calendar quarter until the applicable portion of the
Distributable Amount has been fully distributed. Each installment payment will
be made pro rata from the Participant's Investment Fund Subaccounts according to
the balances in such subaccounts. During the period in which quarterly
installment payments are being made, the Participant's Account will continue to
be credited monthly with earnings pursuant to Section 4.1(ii) of the Plan, the
Participant (or his or her Beneficiary) may continue to change Fund designations
pursuant to Section 3.2 of the Plan, and subsequent installment payments will be
adjusted annually to reflect earnings, gains and losses until all amounts
credited to his or her Account under the Plan have been distributed. To the
fullest extent practicable, but subject to such annual adjustments, quarterly
installment payments shall be comparable in amount over the entire distribution
period.
(d) Change in Payment Election. A Participant who has not terminated
--------------------------
employment with the Company may change his or her form of payment with respect
to the portion of the Distributable Amount attributable to one or more Plan
Years to one of the payment forms permitted by the Plan, provided the
Participant files a written election with the Committee to change such payment
form at least one year prior to the date that payment of his or her
Distributable Amount would otherwise be made. In addition, a Participant who
has elected scheduled early distributions pursuant to Section 6.4 may defer the
scheduled distribution dates in accordance with Section 6.4. A Participant's
payment election with respect to a given Plan Year may not be changed after
payment of that portion of the Distributable Amount attributable to such Plan
Year has been made or has begun.
(e) Exception for Small Benefits. Notwithstanding the foregoing provisions
----------------------------
of this Section 6.1 or of Section 6.2, if a Participant's Distributable Amount
does not exceed $25,000, the Distributable Amount shall automatically be
distributed in the form of a lump sum payment.
10
<PAGE>
6.2 Death Benefits. If a Participant dies while employed by the Company, or
--------------
after termination of employment, the Participant's Distributable Amount shall be
paid to the Participant's Beneficiary in the same form and in accordance with
the same payment schedule under which the Distributable Amount was being or
would have been paid to the Participant.
6.3 Unscheduled Early Distributions. Subject to paragraph (vi) below,
-------------------------------
Participants shall be permitted to request to withdraw amounts from their
Accounts at any time ("Early Distributions"). Upon receiving a withdrawal
request, the Committee shall determine, in its sole discretion, whether to
permit any such withdrawal and the amount, if any, to be withdrawn, subject to
the following restrictions:
(i) The election to take an Early Distribution shall be made by filing
a form provided by and filed with the Committee.
(ii) The maximum amount payable to a Participant in connection with an
Early Distribution shall in all cases equal 90% of the amount requested by
the Participant (which requested amount must be not less than $10,000 or
the entire Distributable Amount if less than $10,000); provided, however,
that the maximum amount payable to a Participant in connection with an
Early Distribution shall be 90% of the Distributable Amount as of the end
of the calendar month in which the Early Distribution request is received
by the Committee.
(iii) The amount described in paragraph (ii) above shall be paid in a
single lump sum by the end of the calendar month next following the
calendar month in which the Early Distribution request is received by the
Committee. A distribution pursuant to this Section 6.3 of less than the
Participant's entire interest in the Plan will be made pro rata from his or
her Investment Fund Subaccounts according to the balances in such
subaccounts.
(iv) If a Participant receives an Early Distribution, the remaining
portion of the requested or approved amount, as applicable, in excess of
the amount payable under paragraph (ii) above (i.e., 10% of such amount),
----
shall be permanently forfeited and the Company shall have no obligation to
the Participant or his or her Beneficiary with respect to such forfeited
amount.
(v) If a Participant receives an Early Distribution, the Participant
shall be ineligible to participate in the Plan for the balance of the Plan
Year in which the Early Distribution occurs and for the immediately
following Plan Year.
(vi) A Participant shall be limited to a maximum of two Early
Distributions during all of his or her periods of Plan participation.
6.4 Scheduled Early Distributions. With respect to Compensation deferred
-----------------------------
during a given Plan Year, Participants may elect on an Election Form to be paid
a lump sum amount during a given Plan Year on a future date while still
employed, provided the
11
<PAGE>
payment date is at least 2 years after the date such Plan Year commences. This
election shall apply to the Compensation deferred for the Plan Year specified by
the Participant on his or her Election Form and the earnings credited thereto
until the payment date. A Participant may elect a different payment date for
the Compensation deferred for each Plan Year. In addition, payment dates
elected pursuant to this Section 6.4 may be deferred by at least one year, by
filing with the Committee written notice at least 12 months prior to the payment
date to be deferred. A distribution pursuant to this Section 6.4 of less than
the Participant's entire interest in the Plan shall be made pro rata from his or
her Investment Fund subaccounts according to the balances in such Subaccounts.
Notwithstanding the foregoing, if a Participant terminates employment with the
Company for any reason prior to the date on which a payment is scheduled to be
made pursuant to this Section 6.4, the Participant's entire Distributable Amount
will be paid pursuant to the provisions of Section 6.1.
6.5 Change in Control Withdrawals. At any time up to one year after a Change
-----------------------------
in Control of the Company, a Participant may elect in writing to receive a
payment of his or her entire Account balance without penalty and without regard
to whether the Participant has terminated employment with the Company or whether
installment payments have commenced. The requested payment will be made as soon
as practicable following the receipt by the Committee of the Participant's
election and will be made in a lump sum payment or in quarterly installments
over 5, 10, 15 or 20 years, as elected by the Participant. A Participant's
election pursuant to this Section 6.5 will supersede any prior payment election.
A Participant who elects to receive payment under this Section 6.5 will, upon
receipt of the Participant's election by the Committee, cease to participate in
the Plan for the balance of the Plan Year in which such receipt occurs.
6.6 Financial Hardship Withdrawals. The Committee may, pursuant to rules or
------------------------------
policies from time to time adopted by it and applied in a consistent manner,
accelerate the date of distribution of all or any portion of a Participant's
Account balance because of a financial hardship. A financial hardship means an
unforeseeable, severe financial emergency resulting from (a) a sudden and
unexpected illness or accident of the Participant or his or her dependents (as
defined in Section 152(a) of the Code); (b) loss of the Participant's property
due to casualty; or (c) other similar extraordinary and unforeseeable
circumstances arising out of events beyond the control of the Participant, which
may not be relieved through other available resources of the Participant, as
determined by the Committee in accordance with such rules and policies. A
distribution pursuant to this Section 6.6 of less than the Participant's entire
interest in the Plan shall be made pro rata from his or her Investment Fund
Subaccounts according to the balances in such subaccounts. Subject to the
foregoing, payment of any amount with respect to which a Participant has filed a
request under this Section 6.6 shall be made as soon as practicable after
approval of such request by the Committee. Distributions made pursuant to this
Section 6.6 shall be without penalty.
12
<PAGE>
6.7 Inability To Locate Participant.
-------------------------------
(a) Forfeiture of Account. In the event that the Committee is unable to
---------------------
locate a Participant or, with respect to a Participant who has died, any
Beneficiary within two years following the date on which any payment of the
Participant's Distributable Amount is scheduled to be made or begin, the amount
allocated to the Participant's Account shall be forfeited. Following the date
of forfeiture, the Participant's Account which is forfeited shall be invested in
the Fund offering the least risk of loss of principal or conservative money
market funds. If, after such forfeiture and prior to the escheat of the
Participant's Account as provided in Section 6.7(b), the Participant or
Beneficiary later claims such benefit and establishes to the reasonable
satisfaction of the Committee such Participant's or Beneficiary's right to
receive same, such Account shall be reinstated at its balance at the date of
forfeiture without additional interest, earnings, gains or losses from the date
of forfeiture through the date of reinstatement. The Participant's restored
Account balance will be invested in the manner that the Participant or
Beneficiary elects pursuant to Section 3.2 and will be distributed to the
Participant or Beneficiary in accordance with the Participant's payment
elections made pursuant to this Article VI. In addition, any installment
payments that were scheduled to have been made during the period in which the
Participant or Beneficiary could not be located will be made to the Participant
or Beneficiary in a lump sum catch-up payment as soon as administratively
practicable.
(b) Escheat of Account. The Committee, in its discretion, may escheat, or
------------------
may cause the Trustee to escheat, to the state of Texas (or such other state as
the Committee, in its discretion, determines is appropriate) any Participant's
Account which was forfeited if either (i) the Committee has been unable to
locate the Participant or Beneficiary for a period of five years following the
date on which any payment of the Participant's Distributable Amount is scheduled
to be made or begin or (ii) the Plan is terminated and the Committee has been
unable to locate the Participant or Beneficiary for a period of two years
following the date on which any payment of the Participant's Distributable
Amount is scheduled to be made or begin. Upon the escheat of the Participant's
Account, the Participant or Beneficiary shall have no further right to any
benefits or payments under the Plan, and neither the Company, the Committee nor
the Trustee shall have any liability to such Participant or Beneficiary for the
amount of the Participant's Account.
6.8 Directors and Consultants. For purposes of the preceding sections of this
-------------------------
Article VI, a Participant who is a member of the Board or a consultant, but who
is not an employee of the Company, will be deemed to be employed by the Company
as long as he or she is a director or is engaged as a consultant and will be
deemed to have terminated employment when he or she is no longer a director or
is no longer engaged as a consultant and is not then an employee of the Company.
13
<PAGE>
6.9 Claims Procedure.
----------------
(a) Claim for Benefits. If a Participant or Beneficiary does not receive
------------------
the benefits which the Participant or Beneficiary believes he or she is entitled
to receive under the Plan, the Participant or Beneficiary may file a claim for
benefits with the Committee. All claims shall be made in writing and shall be
signed by the claimant. If the claimant does not furnish sufficient information
to enable the Committee to process the claim, the Committee will indicate to the
claimant any additional information which is required.
(b) Notification by the Committee. Each claim will be approved or
-----------------------------
disapproved by the Committee within 90 days following the receipt of the
information necessary to process the claim. In the event the Committee denies a
claim for benefits in whole or in part, the Committee will notify the claimant
in writing of the denial of the claim. Such notice by the Committee will also
set forth, in a manner calculated to be understood by the claimant, the specific
reason for such denial, the specific Plan provisions on which the denial is
based, a description of any additional material or information necessary for the
claim to be approved, if possible, with an explanation of why such material or
information is necessary, and an explanation of the Plan's claim review
procedure as set forth in subsection (c). If no action is taken by the
Committee on a claim within such 90 day period, the claim will be deemed to be
denied for purposes of the review procedure.
(c) Review Procedure. A claimant may appeal a denial of his or her claim
----------------
by requesting a review of the decision by the Committee or a person designated
by the Committee. An appeal must be submitted in writing within 60 days after
receipt by the claimant of written notification of the denial and must (i)
request a review of the claim for benefits under the Plan, (ii) set forth all of
the grounds upon which the claimant's request for review is based and any facts
in support thereof, and (iii) set forth any issues or comments which the
claimant deems pertinent to the appeal. The Committee or the person designated
by the Committee will make a full and fair review of each appeal and any written
materials submitted in connection with the appeal. The Committee or the person
designated by the Committee will act upon each appeal within 60 days after
receipt thereof unless special circumstances require an extension of the time
for processing, in which case a decision will be rendered as soon as possible
but not later than 120 days after the appeal is received. The claimant will be
given the opportunity to review documents or materials directly pertinent to the
appeal upon submission of a reasonable written request to the Committee or
person designated by the Committee, provided the Committee or person designated
by the Committee in its reasonable judgment finds the requested documents or
materials are directly pertinent to the appeal. On the basis of its review, the
Committee or person designated by the Committee will make an independent
determination of the claimant's eligibility for benefits under the Plan. The
decision of the Committee or person designated by the Committee on any claim for
benefits will be final and conclusive upon all parties thereto. In the event
the Committee or person designated by the Committee denies an appeal in whole or
in part, it will give written notice of the decision to the claimant, which
notice will set forth in a
14
<PAGE>
manner calculated to be understood by the claimant the specific reasons for such
denial and which will make specific reference to the pertinent Plan provisions
on which the decision was based.
ARTICLE VII.
ADMINISTRATION
7.1 Committee.
---------
The Committee for the Plan shall be appointed by, and serve at the pleasure
of, the Board. The number of members comprising the Committee shall be
determined by the Board which may from time to time vary the number of members.
A member of the Committee may resign by delivering a written notice of
resignation to the Board. The Board may remove any member with or without cause
by delivering a certified copy of its resolution of removal to such member.
Vacancies in the membership of the Committee shall be filled as soon as
practicable by the Board.
7.2 Committee Action.
----------------
The Committee shall act at meetings by affirmative vote of a majority of
the members of the Committee. Any action permitted to be taken at a meeting may
be taken without a meeting if, prior to such action, a written consent to the
action is signed by all members of the Committee and such written consent is
filed with the minutes of the proceedings of the Committee. A member of the
Committee shall not vote or act upon any matter which relates solely to himself
or herself as a Participant. Any two members of the Committee may execute any
certificate or other written direction on behalf of the Committee.
7.3 Powers and Duties of the Committee. The Committee shall administer the
----------------------------------
Plan in accordance with its terms and shall have all powers, authority and
discretion necessary to accomplish its purposes, including, but not by way of
limitation, the authority and discretion to:
(i) select the Funds and change the Funds from time to time pursuant
to Section 3.2;
(ii) appoint a plan administrator or any other agent, and delegate to
them such powers and duties in connection with the administration of the
Plan as the Committee may from time to time prescribe;
(iii) resolve all questions relating to the eligibility of employees,
directors and consultants to be or become Eligible Individuals or
Participants;
15
<PAGE>
(iv) determine the Threshold Amount applicable to any Plan Year after
the first Plan Year;
(v) determine the amount of benefits payable to Participants or their
Beneficiaries under this Plan, and determine the time and manner in which
such benefits are to be paid;
(vi) authorize and direct all disbursements by the Trustee from the
Trust;
(vii) engage any administrative, legal, accounting, clerical, or
other services it deems appropriate in administering the Plan or the Trust
Agreement;
(viii) construe and interpret this Plan and the Trust Agreement,
supply omissions from, correct deficiencies in, and resolve ambiguities in
the language of this Plan and the Trust Agreement, and adopt rules for the
administration of this Plan and the Trust Agreement that are not
inconsistent with the terms of such documents;
(ix) compile and maintain all records it determines to be necessary,
appropriate or convenient in connection with the administration of this
Plan and of benefit payments hereunder;
(x) determine the disposition of assets in the Trust in the event
this Plan is terminated;
(xi) review the performance of the Trustee with respect to the
Trustee's administrative duties, responsibilities and obligations under
this Plan and the Trust Agreement, report to the Board regarding such
administrative performance of the Trustee, and recommend to the Board, if
necessary, the removal of the Trustee and the appointment of a successor
Trustee; and
(xii) resolve all questions relating to any matter for which it has
administrative responsibility.
7.4 Construction and Interpretation.
-------------------------------
The Committee shall have full authority and discretion to construe and
interpret the terms and provisions of this Plan, which interpretation or
construction shall be final and binding on all parties, including but not
limited to the Company and any Eligible Individual, Participant or Beneficiary.
The Committee shall administer the Plan in a consistent and nondiscriminatory
manner and in full accordance with any and all laws applicable to the Plan.
16
<PAGE>
7.5 Information.
-----------
To enable the Committee to perform its functions, the Company shall supply
full and timely information to the Committee on all matters relating to the
Compensation of all Participants, their death or other cause of termination, and
such other pertinent facts as the Committee may reasonably require.
7.6 Compensation, Expenses and Indemnity.
------------------------------------
(a) Expenses. The members of the Committee shall serve without
--------
compensation for their services hereunder. All expenses and fees incurred in
connection with the administration of the Plan and the Trust shall be paid by
the Company.
(b) Indemnification. To the fullest extent permitted by applicable law,
---------------
the Company shall indemnify and save harmless the Committee and each member
thereof, the Board and any delegate of the Committee who is an employee of the
Company against any and all expenses, liabilities and claims, including legal
fees to defend against such liabilities and claims, arising out of their
discharge in good faith of responsibilities under or incident to the Plan, other
than expenses and liabilities arising out of willful misconduct. Without
limiting the generality of the foregoing, the Company shall, promptly upon
request, advance funds to persons entitled to indemnification hereunder to the
extent necessary to defray legal and other expenses incurred in the defense of
such liabilities and claims, as and when incurred. This indemnity shall not
preclude such further indemnities as may be available under insurance purchased
by the Company or provided by the Company under any bylaw, agreement or
otherwise.
ARTICLE VIII.
MISCELLANEOUS
8.1 Unsecured General Creditor.
--------------------------
Participants and their Beneficiaries, heirs, successors, and assigns shall
have no legal or equitable rights, claims, or interests in any Matching
Investments or in any other property or assets of the Company or the Trust. No
assets of the Company shall be held as collateral security for the obligations
of the Company under this Plan. Any and all assets of the Trust shall be and
shall remain unpledged and unencumbered. The Company's obligation under the
Plan shall be merely that of an unfunded and unsecured promise of the Company to
pay money in the future, and the rights of the Participants and Beneficiaries
shall be no greater than those of unsecured general creditors. The Company
shall maintain the Trust at all times during the term of the Plan. All assets
of the Company and the Trust shall be subject to the claims of the Company's
creditors.
17
<PAGE>
8.2 Restriction Against Assignment.
------------------------------
The Company or the Trustee shall pay all amounts payable hereunder only to
the person or persons designated pursuant to the Plan and not to any other
person or entity. No part of a Participant's Account shall be liable for the
debts, contracts, or engagements of any Participant, his or her Beneficiary, or
successors in interest, nor shall a Participant's Account be subject to
execution by levy, attachment, or garnishment or by any other legal or equitable
proceeding, nor shall any such person have any right to alienate, anticipate,
commute, pledge, encumber, or assign any benefits or payments hereunder in any
manner whatsoever, without the prior written consent of the Committee, which may
be withheld in its sole discretion. If any Participant, Beneficiary or
successor in interest is adjudicated bankrupt or purports to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge any distribution or
payment from the Plan, voluntarily or involuntarily, the Committee, in its
discretion, may cancel such distribution or payment (or any part thereof) to or
for the benefit of such Participant, Beneficiary or successor in interest in
such manner as the Committee shall direct.
8.3 Withholding.
-----------
There shall be deducted from each payment made under the Plan all taxes
which are required to be withheld by the Company in respect to such payment.
8.4 Amendment, Modification, Suspension or Termination.
--------------------------------------------------
(a) The Committee may amend, modify, suspend or terminate the Plan in whole
or in part, provided that (i) no amendment, modification, suspension or
termination shall have any retroactive effect that would directly or indirectly
reduce any amounts allocated to a Participant's Account or otherwise deprive any
Participant of any benefits already vested under the Plan; (ii) any amendment,
modification, suspension or termination of the Plan that will significantly
increase costs to the Company shall be approved by the Board; (iii) no
amendment, modification, suspension or termination of the Plan shall have the
effect of causing any Participant's Account to be distributed earlier than the
time contemplated by the Plan and the Participant's elections without the prior
written consent of the Participant; (iv) no amendment or modification shall
materially and adversely affect the interests of Participants without the prior
written consent of at least 75% of the Participants (such percentage to be
determined by the number of Participants and not by their percentage interest in
all Account balances); and (v) for a period of two years following a Change in
Control, the Plan may not be amended, modified, suspended or terminated without
the prior written consent of at least 75% of the Participants (such percentage
to be determined by the number of Participants and not by their percentage
interest in all Account balances).
(b) Without limiting the generality of Section 8.4(a)(iv) above, any
amendment or modification which directly or indirectly has any of the following
effects shall be deemed to materially and adversely affect the interests of
Participants: (i) any amendment or modification to the defined term "Change in
Control" or any amendment
18
<PAGE>
or modification of the consequences under the Plan resulting from a Change in
Control; (ii) any amendment or modification that would eliminate or reduce the
Company's obligations under Sections 3.2 or 3.3; (iii) any amendment or
modification that would adversely affect the timing or circumstances under which
Participants may receive vested benefits under the Plan; or (iv) any amendment
or modification of this Section 8.4.
(c) Notwithstanding clauses (iii) and (iv) of Section 8.4(a) above, the
Company shall have the right (i) to unilaterally amend, modify or suspend the
Plan in the event that the Company determines in good faith that such action is
required in order to maintain or qualify the Trust as a grantor trust under
Section 671 of the Code or to maintain or qualify the Plan as an unfunded plan
maintained primarily to provide deferred compensation for a select group of
management or highly compensated employees as described in Section 201(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), provided,
however, that the Company shall amend, modify or suspend the Plan in such manner
as will have the least onerous overall effect on the vested interests of the
Participants; and (ii) to unilaterally terminate the Plan in the event that the
Company determines in good faith that continued compliance with the Code and
ERISA, as generally contemplated in clause (i) above, is not practicable or, if
practicable, would have a material adverse effect on the Participants.
(d) Notwithstanding anything to the contrary in this Section 8.4, the
Company may unilaterally amend the Plan at any time to cause the cessation of
deferrals of Compensation by the Participants in any future Plan Year or to
change the manner or terms of future deferrals in any such future Plan Year;
provided, however, that no such amendment under this Section 8.4(d) may be
effected for a period of two years following any Change in Control.
(e) As a condition precedent to the effectiveness of any amendment,
modification, suspension or termination of this Plan, the Trustee and the
Committee shall have received a written opinion of counsel (which counsel and
which opinion shall be satisfactory to each) to the effect that such action is
being validly and properly effected in accordance with the requirements of this
Section 8.4.
(f) In the event that this Plan is terminated in accordance with this
Section 8.4, the balance of each Participant's Account shall be distributed to
the Participant (or, in the event of the death of the Participant, to the
Participant's Beneficiary) in a lump sum payment as soon as administratively
feasible and in any event within 90 days of such termination.
19
<PAGE>
8.5 GOVERNING LAW.
-------------
THE PLAN WILL BE CONSTRUED AND GOVERNED IN ALL RESPECTS IN ACCORDANCE WITH
APPLICABLE FEDERAL LAW AND, TO THE EXTENT NOT PREEMPTED BY SUCH FEDERAL LAW, IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO, INCLUDING WITHOUT LIMITATION, THE
OHIO STATUTE OF LIMITATIONS, BUT WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAWS OF SUCH STATE.
8.6 Receipt or Release.
------------------
Any payment to a Participant or the Participant's Beneficiary in accordance
with the provisions of the Plan shall, to the extent thereof, be in full
satisfaction of all claims against the Committee and the Company with respect to
the amount paid. The Committee may require such Participant or Beneficiary, as
a condition precedent to such payment, to execute a receipt and release to such
effect.
8.7 Payments on Behalf of Persons Under Incapacity.
----------------------------------------------
In the event that any amount becomes payable under the Plan to a person
who, in the sole judgment of the Committee, is considered by reason of physical
or mental condition to be unable to give a valid receipt therefor, the Committee
may direct that such payment be made to any person found by the Committee, in
its sole judgment, to have assumed the care of such person. Any payment made
pursuant to such determination shall, to the extent thereof, constitute a full
release and discharge of the Committee and the Company with respect to the
amount paid.
8.8 Successors and Assigns.
----------------------
The Company may not assign its obligations under this Plan, whether by
contract, merger, operation of law or otherwise, unless the assignment is to an
assignee or successor entity (in either case, hereafter called a "Successor")
that has stockholders' equity or the closest equivalent thereto (as measured by
the most recent audited financial statements of such Successor) equal to or
greater than the stockholders' equity of the Company (as measured immediately
prior to the event that causes such entity to become a Successor to the
Company). The provisions of this Section 8.8 shall be binding upon each and
every Successor to the Company.
8.9 No Employment Rights.
--------------------
Participation in this Plan shall not confer upon any person any right to be
employed by the Company nor any other right not expressly provided hereunder.
20
<PAGE>
8.10 Headings, etc. Not Part of Agreement.
------------------------------------
Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the
provisions hereof.
IN WITNESS WHEREOF, the Company has caused this document to be executed by
its duly authorized officer as of the 1st day of February, 1997.
STERLING COMMERCE, INC.
By: /s/ Albert K. Hoover
----------------------------------------
Albert K. Hoover
Title: Vice President, Legal
21
<PAGE>
EXHIBIT A
Fidelity VIP Equity Income Portfolio
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Short-Term Bond Portfolio
Janus Aspen Worldwide Growth Portfolio
Maverick Fund USA, Ltd.
<PAGE>
Exhibit 5.1
-----------
[Letterhead of Jones, Day, Reavis & Pogue Appears Here]
October 9, 1997
Sterling Commerce, Inc.
300 Crescent Court
Suite 1200
Dallas, Texas 75201
Re: Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
We are acting as special counsel to Sterling Commerce, Inc., a Delaware
corporation (the "Company"), in connection with the registration of the deferred
compensation payment obligations ("Deferred Compensation Obligations") arising
under the Sterling Commerce, Inc. Deferred Compensation Plan (the "Plan").
We have examined such documents, records, and matters of law as we have
deemed necessary for purposes of this opinion. Based on such examination and on
the assumptions set forth below, we are of the opinion that (i) when issued in
accordance with the provisions of the Plan, the Deferred Compensation
Obligations will be valid and binding obligations of the Company, enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
subject to general equity principles and, (ii) the terms of the Plan comply with
the applicable provisions of Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
For purposes of the foregoing opinion, we have assumed, without having made
any independent investigation, that all of the employees eligible to participate
in the Plan constitute a select group of management or highly compensated
employees and the Plan will therefore be exempt from the provisions of ERISA,
except for the provisions of Title I of ERISA relating to reporting and
disclosure and to administration and enforcement. In rendering the foregoing
opinion, we have relied as to certain factual matters upon certificates of
officers of the Company and public officials, and we have not independently
checked or verified the accuracy of the statements contained therein. In
addition, our examination of matters of law has been limited to the laws of the
State of Ohio, the General Corporation Law of the State of Delaware and the
federal laws of the United States of America, in each case as in effect on the
date hereof.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Company's Registration Statement on Form S-8 with respect to the Deferred
Compensation Obligations.
Very truly yours,
Jones, Day, Reavis & Pogue
<PAGE>
Exhibit 23.2
------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) of Sterling Commerce, Inc. (the "Company"), in connection with the
Sterling Commerce, Inc. Deferred Compensation Plan of our report dated November
20, 1996, with respect to the consolidated financial statements and schedule of
the Company included in its Annual Report (Form 10-K) for the year ended
September 30, 1996, as amended, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Dallas, Texas
October 8, 1997
<PAGE>
Exhibit 24.1
------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, on behalf of Sterling
Commerce, Inc., a Delaware corporation (the "Corporation"), hereby constitutes
and appoints Robert L. Estep, James E. O'Bannon and Sina R. Hekmat the true and
lawful attorney-in-fact, with full power of substitution and resubstitution, for
the Corporation to sign on the Corporation's behalf one or more Registration
Statements on Form S-8 or any other appropriate form (the "Registration
Statement"), pursuant to the Securities Act of 1933, as amended, with respect to
the Sterling Commerce, Inc. Deferred Compensation Plan and to sign any or all
amendments and any or all post-effective amendments to the Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney or attorneys-in-fact, each of them with or without the
others, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as it might or could do in person, hereby ratifying and
confirming all that said attorney or attorneys-in-fact or any of them or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
STERLING COMMERCE, INC.
By: /s/ Warner C. Blow
-------------------------------------
Warner C. Blow,
Chief Executive Officer and President
Dated: July 10, 1997
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Jeannette P. Meier, Albert K. Hoover, Robert L. Estep, James E.
O'Bannon and Sina R. Hekmat the true and lawful attorney-in-fact, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, to sign on his or her behalf, as a director or officer, or
both, as the case may be, of Sterling Commerce, Inc., a Delaware corporation
(the "Corporation"), one or more Registration Statements on Form S-8 or any
other appropriate form (the "Registration Statement"), pursuant to the
Securities Act of 1933, as amended, with respect to the Sterling Commerce, Inc.
Deferred Compensation Plan and to sign any or all amendments and any or all
post-effective amendments to the Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney or attorneys-in-
fact, each of them with or without the others, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorney or
attorneys-in-fact or any of them or their substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
Dated: July 10, 1997
/s/ Warner C. Blow /s/ Charles J. Wyly, Jr.
- ------------------------------ --------------------------------
Warner C. Blow Charles J. Wyly, Jr.
/s/ Steven P. Shiflet /s/ Evan A. Wyly
- ------------------------------ ----------------------------------
Steven P. Shiflet Evan A. Wyly
/s/ Sterling L. Williams /s/ Robert E. Cook
- ------------------------------ ----------------------------------
Sterling L. Williams Robert E. Cook
/s/ Sam Wyly /s/ Honor R. Hill
- ------------------------------ ----------------------------------
Sam Wyly Honor R. Hill
