<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): JUNE 30, 1997
STERLING SOFTWARE, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-8465 75-1873956
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
300 CRESCENT COURT, SUITE 1200, DALLAS, TEXAS 75201
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (214) 981-1000
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 30, 1997 (the "Closing Date"), Sterling Software, Inc. (the
"Company") and certain of its subsidiaries completed the acquisition (the
"Acquisition") of certain assets (including the capital stock of certain foreign
subsidiaries) of Texas Instruments Incorporated ("Texas Instruments") pursuant
to an Asset Purchase Agreement, dated April 18, 1997 (the "Asset Purchase
Agreement"), as amended pursuant to Amendment Nos. 1 and 2 thereto (the
"Amendments"). Such assets constitute substantially all of the assets formerly
used by Texas Instruments' Software Division in connection with its business of
developing, marketing, licensing, supporting and maintaining applications
development software and providing related consulting services. The cash
purchase price paid for such assets was approximately $165.0 million, which was
funded from the Company's existing cash balances, together with the assumption
of certain liabilities.
The purchase price and other terms of the Acquisition were determined by
arm's-length negotiations among the parties. The terms of the Acquisition are
set forth in the Asset Purchase Agreement and the Amendments, copies of which
are filed as Exhibits 2.1 and 2.2, respectively, hereto and incorporated herein
by this reference. In addition, the Company's press release announcing the
completion of the Acquisition is filed as Exhibit 99.1 hereto and incorporated
herein by this reference.
The Company expects to incur costs directly associated with the Acquisition
of approximately $45.0 million to $55.0 million, which will be accounted for as
additional purchase price. The resulting aggregate purchase price of
approximately $210.0 million to $220.0 million will be allocated to the net
assets acquired and purchased research and development costs, with the remainder
recorded as goodwill. The Company expects that approximately $100.0 million to
$120.0 million of the aggregate purchase price will be allocated to purchased
research and development costs, which will be charged to expense in the third
fiscal quarter of 1997 in accordance with purchase accounting guidelines.
The Company's results of operation for the third fiscal quarter of 1997 are
also expected to include a charge of approximately $75.0 million to $90.0
million related to the reorganization of the Company's operations in connection
with the Acquisition and the termination of the Company's International
Distributor Agreement with Sterling Commerce, Inc. ("Sterling Commerce") as more
fully described in Item 5 of this Report. Such costs include the elimination of
duplicate facilities and employee terminations, as well as the write-down of
certain software and goodwill.
The statements contained in the two prior paragraphs are forward-looking
statements. Such statements reflect the current views of the Company with
respect to future events and are subject to certain risks and uncertainties,
including uncertainties relating to the Company's estimates of the amounts of
costs and expenses that will ultimately be incurred in connection with the
Acquisition, the Sterling Commerce transaction and related reorganization
activities and to assumptions and judgments made in applying generally accepted
accounting principles thereto. Actual results may vary significantly from those
contemplated herein.
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<PAGE>
ITEM 5. OTHER EVENTS.
Pursuant to a Termination Agreement, dated June 30, 1997 (the "Termination
Agreement"), by and between Sterling Software International, Inc. ("Sterling
International"), a subsidiary of the Company, and Sterling Commerce B.V.
("SCBV"), a subsidiary of Sterling Commerce, the Company terminated the
International Distributor Agreement, dated March 4, 1996, by and between
Sterling International and SCBV (as successor by assignment to Sterling Commerce
International, Inc.), as amended (the "Distributor Agreement").
Contemporaneously with the termination of the Distributor Agreement, Sterling
International and its subsidiaries sold to SCBV and its subsidiaries certain of
the assets formerly used by Sterling International and its subsidiaries in
connection with the marketing, licensing, installation, maintenance and support
of certain Sterling Commerce products outside the United States and Canada
pursuant to the Distributor Agreement. In addition, Sterling International and
SCBV entered into certain short-term transitional arrangements relating to
facilities sharing and administrative and other services.
In consideration of the termination of the Distributor Agreement and the
sale of assets described above, SCBV and its subsidiaries (i) paid to Sterling
International and its subsidiaries approximately $5.2 million on June 30, 1997,
(ii) are obligated to pay to Sterling International and its subsidiaries an
amount equal to the net book value of the acquired assets, including accounts
receivable, and (iii) assumed certain liabilities of Sterling International and
its subsidiaries.
The terms of the transactions and arrangements described above are set
forth in the Termination Agreement, a copy of which is filed as Exhibit 2.3
hereto and incorporated herein by this reference. In addition, the Company's
press release announcing such transactions and arrangements is filed as Exhibit
99.2 hereto and incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired. Financial statements for
the business acquired pursuant to the Acquisition described in Item 2 of this
Report will be filed by an amendment hereto no later than August 14, 1997.
(b) Pro Forma Financial Information. Pro forma financial information
giving effect to the Acquisition described in Item 2 of this Report will be
filed by an amendment hereto no later than August 14, 1997.
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<PAGE>
(c) Exhibits:
Exhibit
Number Exhibit
------ -------
2.1 Asset Purchase Agreement, dated April 18, 1997, by and
between Texas Instruments Incorporated and Sterling
Software, Inc. (incorporated by reference to Exhibit 2.1 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997)
2.2 Amendment No. 1 to Asset Purchase Agreement, dated June 19,
1997, and Amendment No. 2 to Asset Purchase Agreement, dated
June 28, 1997
2.3 Termination Agreement, dated June 30, 1997, by and between
Sterling Software International, Inc. and Sterling Commerce
B.V.
99.1 Press release, dated July 1, 1997, issued by Sterling
Software, Inc.
99.2 Press release, dated July 1, 1997, issued by Sterling
Software, Inc.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
----------------------------
Don J. McDermett, Jr.
Senior Vice President and
General Counsel
Dated: July 1, 1997
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<PAGE>
INDEX TO EXHIBITS
-----------------
EXHIBIT
NUMBER EXHIBIT
------- -------
2.1 Asset Purchase Agreement, dated April 18, 1997, by and between
Texas Instruments Incorporated and Sterling Software, Inc.
(incorporated by reference to Exhibit 2.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1997)
2.2 Amendment No. 1 to Asset Purchase Agreement, dated June 19, 1997,
and Amendment No. 2 to Asset Purchase Agreement, dated June 28,
1997
2.3 Termination Agreement, dated June 30, 1997, by and between
Sterling Software International, Inc. and Sterling Commerce B.V.
99.1 Press release, dated July 1, 1997, issued by Sterling Software,
Inc.
99.2 Press release, dated July 1, 1997, issued by Sterling Software,
Inc.
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<PAGE>
EXHIBIT 2.2
AMENDMENT NO. 1 TO
ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT (this "Amendment No. 1"),
is made and entered into this 19th day of June, 1997, by and among Texas
Instruments Incorporated, a Delaware corporation with its principal offices in
Dallas, Texas ("Seller"), Sterling Software, Inc., a Delaware corporation with
its principal offices in Dallas, Texas ("Buyer"), Sterling Software (Cayman
Islands), Inc., a Cayman Islands company with its principal offices in Grand
Cayman, British West Indies ("Sterling Cayman"), Sterling Software (U.S.), Inc.,
a Delaware corporation with its principal offices in Dallas, Texas ("Sterling
U.S."), and Sterling Software (Southern), Inc., a Georgia corporation with its
principal offices in Dallas, Texas ("Sterling Southern").
WHEREAS, Seller and Buyer have entered into an Asset Purchase Agreement,
dated April 18, 1997 (the "Asset Purchase Agreement");
WHEREAS, Seller and Buyer desire to reflect the participation of Sterling
Cayman, Sterling U.S. and Sterling Southern as parties to the Asset Purchase
Agreement and to provide for the other matters set forth herein, and Sterling
Cayman, Sterling U.S. and Sterling Southern desire to be designated as parties
to the Asset Purchase Agreement and to provide for the other matters set forth
herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, it is hereby agreed
among Seller, Buyer, Sterling Cayman, Sterling U.S. and Sterling Southern as
follows:
Section 1. Certain Definitions. Except as otherwise defined herein,
-------------------
terms used herein with initial capital letters are so used with the respective
meanings ascribed to such terms in the Asset Purchase Agreement.
Section 2. Sale and Purchase of Assets; Assumption of Liabilities. On
------------------------------------------------------
the terms and subject to the conditions of the Asset Purchase Agreement
(including the provisions of Sections 1.2, 1.3, 3.1 and 3.2 thereof), as amended
by this Amendment No. 1, at the Closing:
(a) Seller shall sell, transfer and assign to Buyer, or, as
applicable, cause the Assigning Subsidiaries to sell, transfer and assign
to Buyer, and Buyer shall purchase and acquire, all of Seller's or, as
applicable, the Assigning Subsidiaries' right, title and interest in, to
and under the Patents and the Copyrights and Marks;
<PAGE>
(b) Seller shall sell, transfer and assign to Sterling Cayman, or, as
applicable, cause the Assigning Subsidiaries to sell, transfer and assign
to Sterling Cayman, and Sterling Cayman shall purchase and acquire, all of
Seller's or, as applicable, the Assigning Subsidiaries' right, title and
interest in, to and under the rights to market, license, install, maintain
and support the Software in locations outside of the United States of
America and Canada (such rights being collectively referred to as the
"International Distribution Rights");
(c) Seller shall sell, transfer and assign to Sterling U.S., and
Sterling U.S. shall purchase and acquire, all of Seller's right, title and
interest in, to and under the Contract referred to on Schedule 5.4(b) to
the Asset Purchase Agreement as the "MDP Contract," and Sterling U.S. shall
assume and thereafter pay, perform or otherwise discharge, as and when the
same shall become due and payable, all liabilities and obligations of
Seller under the MDP Contract, other than payment and performance of
obligations payable or dischargeable prior to the Closing;
(d) Seller shall sell, transfer and assign to Sterling Southern, and
Sterling Southern shall purchase and acquire, all of Seller's right, title
and interest in, to and under all of the Purchased Assets, save and except
for the Patents, the Copyrights and Marks, the International Distribution
Rights and the MDP Contract, and Sterling Southern shall assume and
thereafter pay, perform or otherwise discharge, as and when the same shall
become due and payable, all liabilities and obligations of Seller that
constitute Assumed Liabilities, save and except for the liabilities and
obligations of Seller under the MDP Contract; and
(e) Seller shall cause each Assigning Subsidiary to sell, transfer and
assign to the subsidiary of Sterling Southern designated opposite the name
of such Assigning Subsidiary on Schedule 2(e) hereto (each, an "Assignee
Subsidiary," and, collectively, the "Assignee Subsidiaries") all of such
Assigning Subsidiary's right, title and interest in, to and under the
Purchased Assets, save and except for the Patents, the Copyrights and Marks
and the International Distribution Rights and (ii) the Assignee Subsidiary
so designated shall assume and thereafter pay, perform or otherwise
discharge, as and when the same shall become due and payable, all
liabilities and obligations of such Assigning Subsidiary that constitute
Assumed Liabilities.
Section 3. Reaffirmation of the Asset Purchase Agreement. To the
---------------------------------------------
extent that any provision hereof conflicts with any provision of the Asset
Purchase Agreement, the provisions hereof shall control. Except as expressly
modified hereby, the Asset Purchase Agreement shall remain in full force
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<PAGE>
and effect in accordance with its original terms. Without limiting the
generality of the foregoing, none of the modifications set forth in Section 2
hereof shall relieve Buyer of any of its obligations under the Asset Purchase
Agreement.
Section 4. Successors and Assigns. This Amendment No. 1 shall inure to
----------------------
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
Section 5. Counterparts. This Amendment No. 1 may be executed in one
------------
or more counterparts for the convenience of the parties hereto, all of which
together shall constitute one and the same instrument.
Section 6. Headings. The headings of the sections of this Amendment
--------
No. 1 are inserted for convenience only and shall not be deemed to constitute
part of this Amendment No. 1 or to affect the construction hereof.
Section 7. Choice of Law. This Amendment No. 1 shall be governed by
-------------
and construed in accordance with the laws of the State of Texas, without regard
to principles of conflicts of laws.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
as of the date first above written.
SELLER:
TEXAS INSTRUMENTS INCORPORATED
By: /s/ David D. Martin
---------------------------------
Name: DAVID D. MARTIN
Title: Executive Vice President
BUYER:
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
---------------------------------
Name: DON J. McDERMETT, Jr.
Title: Senior Vice President
STERLING CAYMAN:
STERLING SOFTWARE (CAYMAN ISLANDS), INC.
By: /s/ R. Logan Wray
---------------------------------
Name: R. LOGAN WRAY
Title: President
STERLING U.S.:
STERLING SOFTWARE (U.S.), INC.
By: /s/ Jeannette P. Meier
---------------------------------
Name: JEANNETTE P. MEIER
Title: Vice President
STERLING SOUTHERN:
STERLING SOFTWARE (SOUTHERN), INC.
By: /s/ Don J. McDermett, Jr.
---------------------------------
Name: DON J. McDERMETT, JR.
Title: Vice President
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<PAGE>
AMENDMENT NO. 2 TO
ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT (this "Amendment No. 2"),
is made and entered into this 28th day of June, 1997, by and among Texas
Instruments Incorporated, a Delaware corporation with its principal offices in
Dallas, Texas ("Seller"), Sterling Software, Inc., a Delaware corporation with
its principal offices in Dallas, Texas ("Buyer"), Sterling Software (Cayman
Islands), Inc., a Cayman Islands company with its principal offices in Grand
Cayman, British West Indies ("Sterling Cayman"), Sterling Software (U.S.), Inc.,
a Delaware corporation with its principal offices in Dallas, Texas ("Sterling
U.S."), and Sterling Software (Southern), Inc., a Georgia corporation with its
principal offices in Dallas, Texas ("Sterling Southern").
WHEREAS, Seller, Buyer, Sterling Cayman, Sterling U.S. and Sterling
Southern have entered into an Asset Purchase Agreement, dated April 18, 1997, as
amended by Amendment No. 1 thereto (the "Asset Purchase Agreement");
WHEREAS, the parties to the Asset Purchase Agreement desire to modify
certain provisions of the Asset Purchase Agreement and to provide for the other
matters set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, it is hereby agreed
among Seller, Buyer, Sterling Cayman, Sterling U.S. and Sterling Southern as
follows:
Section 1. Certain Definitions. Except as otherwise defined herein,
-------------------
terms used herein with initial capital letters are so used with the respective
meanings ascribed to such terms in the Asset Purchase Agreement.
Section 2. Purchase Price. On the terms and subject to the conditions
--------------
set forth in the Asset Purchase Agreement, at the Closing, in consideration of
the conveyance to Buyer of the Purchased Assets, Buyer shall deliver to Seller
and the Assigning Subsidiaries (in lieu of the U.S. $165,000,000 referred to in
Section 2.1 of the Asset Purchase Agreement and the "Purchase Price" referred to
in Section 4.2(b) of the Asset Purchase Agreement), in the manner provided in
Section 2.1 of the Asset Purchase Agreement, an aggregate cash amount equal to
U.S. $164,870,000. As promptly as practicable following the receipt of all
consents and approvals of Governmental Authorities required in connection
therewith, (i) Seller shall cause Texas Instruments India Limited ("TI India")
to sell, transfer and assign to Buyer or the applicable Assignee Subsidiary the
portion of the Purchased Assets relating primarily to the conduct of the
Business in India and (ii) Buyer shall deliver, or cause the applicable Assignee
Subsidiary to deliver, to Seller or TI India,
<PAGE>
in the manner provided in Section 2.1 of the Asset Purchase Agreement, an
aggregate cash amount equal to U.S. $130,000.
Section 3. Timing of Employment Offers. All obligations of Buyer
---------------------------
pursuant to Section 9.4(a) of the Asset Purchase Agreement to extend offers of
employment on or prior to the Closing Date to employees of the Business who are
employed on the Closing Date (other than certain employees specified in such
Section 9.4(a)) shall be deemed satisfied if Buyer or any subsidiary thereof, in
any particular instance, communicates to the applicable individual, prior to
11:59 p.m. (local time, in each applicable jurisdiction) on July 1, 1997 with
respect to employees of the Business in the United States and Europe, or 11:59
p.m. (local time, in each applicable jurisdiction) on July 2, 1997 with respect
to all other employees of the Business, an offer of employment with Buyer or
such subsidiary (or, where applicable, confirmation that Buyer or such
subsidiary deems such individual's employment to have been transferred to Buyer
or such subsidiary). All such offers or confirmations shall be at salary and
benefit levels that Buyer believes are comparable in the aggregate to those
currently enjoyed by employees of the Business employed in the U.S. or, with
respect to employees employed outside the U.S., on terms and conditions of
employment which are required by applicable Laws, collective bargaining
agreements, employment agreements, works councils or other applicable
requirements. If any employee of the Business (other than any such employee who
is employed by an Asian Subsidiary (as hereinafter defined)) shall decline to
accept an offer of employment with, or, as applicable, a transfer of employment
to, Buyer or a subsidiary thereof and, as a result thereof, Seller or any
Assigning Subsidiary incurs any expense for such employee's base compensation or
benefits relating to the period between 11:59 p.m. (Dallas, Texas time) on June
30, 1997 and (i) 11:59 p.m. (local time, in each applicable jurisdiction) on
July 1, 1997 with respect to employees of the Business in the United States and
Europe or (ii) 11:59 p.m. (local time, in each applicable jurisdiction) on July
2, 1997 with respect to all other employees of the Business, Buyer or a
subsidiary thereof will reimburse Seller or such Assigning Subsidiary for such
actual expense (excluding any administrative and overhead costs and expenses);
provided that such reimbursement obligation under this Section 3 shall apply
only to the extent such base compensation and benefits are consistent with
normal ongoing employment and shall in no event include severance, special
bonuses or similar benefits.
Section 4. Employee Services Arrangement. Seller shall cause each of
-----------------------------
Texas Instruments Australia Limited, a Subsidiary of Seller organized under the
laws of New South Wales, Texas Instruments Korea Limited, a Subsidiary of Seller
organized under the laws of Korea, and Texas Instruments Japan Limited, a
Subsidiary of Seller organized under the laws of Japan (collectively, the "Asian
Subsidiaries"), to continue the employment by such Asian Subsidiary of each of
the employees of the Business employed by such Asian Subsidiary in Australia,
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<PAGE>
Japan and Korea, respectively, on the Closing Date (each, a "Services Employee")
during the period (the "Services Period") from and including the Closing Date to
and including the earlier to occur of (a) the date on which such employee
accepts an offer of employment by Buyer or (b) 11:59 p.m. (local time, in the
applicable jurisdiction) on July 16, 1997 or such later date to which the
parties may agree. During the Services Period applicable to any particular
Services Employee, Seller shall cause the applicable Asian Subsidiary to (x)
continue to provide to such Services Employee the same base compensation and
benefits consistent with normal ongoing employment, including existing
allowances, and (y) make available to Buyer or a subsidiary thereof the
services, skills and specialized knowledge of such Services Employee on a
substantially similar basis as such Services Employee provided the same to such
Asian Subsidiary immediately prior to the Closing. Promptly after receipt of
an invoice accompanied by substantiating documentation in reasonable detail,
Buyer will (or will cause a subsidiary of Buyer to) reimburse Seller or the
applicable Asian Subsidiary for all costs and expenses (excluding administrative
and overhead costs and expenses) actually incurred by Seller or such Assigning
Subsidiary in performing its obligations under the provisions of this Section 4;
provided that such reimbursement obligation under this Section 4 shall in no
event apply to severance, special bonuses or similar benefits. Unless otherwise
specified, reimbursements required to be made to any Asian Subsidiary shall be
made in the local currency of such Asian Subsidiary.
Section 5. Facilities Leases. Notwithstanding anything to the contrary
-----------------
contained in the Asset Purchase Agreement:
(a) all contracts, leases, licenses and other agreements of Seller or any
Subsidiary of Seller under which Seller or any Subsidiary has a
leasehold or other occupancy right or interest in any of the
facilities listed on Schedule 5(a) hereto shall be deemed to be
Contracts;
(b) all contracts, leases, licenses and other agreements of Seller or any
Subsidiary of Seller (the "Retained Facilities Leases") under which
Seller or any such Subsidiary has a leasehold or other occupancy right
or interest in any facilities other than those listed on Schedule 5(a)
hereto (including without limitation those facilities listed on
Schedule 5(b) hereto) shall be deemed not to be Contracts;
(c) all of Seller's or any Assigning Subsidiary's right, title and
interest in, to and under the Retained Facilities Leases shall be
deemed to be Excluded Assets; and
(d) all liabilities and obligations of Seller or any Assigning Subsidiary
under the Retained Facilities Leases shall be deemed to be Retained
Liabilities.
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<PAGE>
Section 6. Closing. Notwithstanding the contrary provisions of Section
-------
4.1 of the Asset Purchase Agreement, the Closing shall take place at the offices
of Buyer's counsel, Jones, Day, Reavis & Pogue, 2300 Trammell Crow Center, 2001
Ross Avenue, Dallas, Texas (or at such other place as the parties may
designate), before the close of business (Dallas, Texas time) on June 30, 1997
or such later date as the conditions specified in Articles X and XI of the Asset
Purchase Agreement are fulfilled (or waived by the party entitled to waive any
unfulfilled condition), and (ii) the Closing, once it shall have occurred, will
be deemed effective for tax, accounting and similar computational purposes as of
11:59 p.m. (local time, in each applicable jurisdiction) on the Closing Date.
Section 7. Post-Closing Payments. Within ten business days after the
---------------------
Closing Date, Buyer shall deliver to Seller (a) a schedule setting forth, as of
the Closing, (i) the aggregate cash balance of each Transferred Subsidiary, (ii)
all outstanding checks, drafts, overdrafts or similar known charges payable from
such cash balance, (iii) all checks or similar amounts received prior to the
Closing but not yet reflected in such cash balance, and (iv) the aggregate cash
balance of each Transferred Subsidiary, after subtracting the amounts specified
in clause (ii) and adding the amounts specified in clause (iii) (such amount,
aggregated for the Transferred Subsidiaries collectively, the "Seller Receivable
Amount"), and (b) a schedule setting forth the aggregate amount due to Buyer
from Seller pursuant to Schedule 9.4(m) to the Asset Purchase Agreement plus the
sum of U.S. $1,000,000 as consideration for the reclassification of the
PeerLogic assets described in Section 8 hereof as Excluded Assets for all
purposes of the Asset Purchase Agreement (collectively, the "Buyer Receivable
Amount"). Within two business days after the delivery to Seller of the
schedules referred to in the immediately preceding sentence, (x) Buyer will
deliver to Seller, by wire transfer of immediately available funds to an account
designated by Seller for such purpose, cash in an amount equal to the amount by
which the Seller Receivable Amount exceeds the Buyer Receivable Amount, or (y)
Seller will deliver to Buyer, by wire transfer of immediately available funds to
an account designated by Buyer for such purpose, cash in an amount equal to the
amount by which the Buyer Receivable Amount exceeds the Seller Receivable
Amount, as applicable. Within 30 days after the Closing Date, Buyer shall
deliver to Seller, or otherwise make available to Seller and its
representatives, Buyer's work papers (and such other substantiating
documentation as Seller may reasonably request) supporting Buyer's computation
of the Seller Receivable Amount. Seller will have 30 days after delivery by
Buyer of its work papers and other substantiating documentation to notify Seller
that it disagrees with or disputes Buyer's computation of the Seller Receivable
Amount. If Seller fails to so notify Buyer within such 30 day time period, the
Seller Receivable Amount set forth on the schedule delivered pursuant to the
first sentence of this Section 7 will be final and binding on the parties. If
Seller notifies Buyer within such 30 day time period that it disagrees with or
disputes Buyer's computation of
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<PAGE>
the Seller Receivable Amount, Seller and Buyer will commence to negotiate in
good faith a resolution of such dispute. If the parties are unable to reach
agreement within 15 days after the notice of objection is given, the dispute
shall be referred for resolution by an independent "Big 6" accounting firm
mutually agreed upon by the parties, whose determination shall be final and
binding on the parties. The fees and expenses of such "Big 6" accounting firm
shall be borne equally by the parties. Within five business days following
resolution of any dispute (whether by a "Big 6" accounting firm or otherwise),
Buyer will promptly deliver to Seller, or Seller will promptly deliver to Buyer,
by wire transfer of immediately available funds to an account designated by the
recipient for such purpose, any additional amounts in respect of the matters
provided for in this Section 7 that are determined to be due to Seller or Buyer,
as the case may be.
Section 8. Excluded Assets. Notwithstanding anything to the contrary
---------------
contained in the Asset Purchase Agreement, the Purchased Assets shall not
include any stock, warrants or promissory notes of PeerLogic owned by Seller or
any Assigning Subsidiary (such stock, warrants and promissory notes, together
with the rights, properties and assets described in Section 1.2 of the Asset
Purchase Agreement, being "Excluded Assets" for all purposes of the Asset
Purchase Agreement).
Section 9. Reaffirmation of the Asset Purchase Agreement. To the
---------------------------------------------
extent that any provision hereof conflicts with any provision of the Asset
Purchase Agreement, the provisions hereof shall control. Except as expressly
modified hereby, the Asset Purchase Agreement shall remain in full force and
effect in accordance with its original terms.
Section 10. Successors and Assigns. This Amendment No. 2 shall inure to
----------------------
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
Section 11. Counterparts. This Amendment No. 2 may be executed in one
------------
or more counterparts for the convenience of the parties hereto, all of which
together shall constitute one and the same instrument.
Section 12. Headings. The headings of the sections of this Amendment
--------
No. 2 are inserted for convenience only and shall not be deemed to constitute
part of this Amendment No. 2 or to affect the construction hereof.
Section 13. Choice of Law. This Amendment No. 2 shall be governed by
-------------
and construed in accordance with the laws of the State of Texas, without regard
to principles of conflicts of laws.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2
as of the date first above written.
SELLER:
TEXAS INSTRUMENTS INCORPORATED
By: /s/ David D. Martin
------------------------------------
Name: DAVID D. MARTIN
Title: Executive Vice President
BUYER:
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
------------------------------------
Name: DON J. McDERMETT, Jr.
Title: Senior Vice President
STERLING CAYMAN:
STERLING SOFTWARE (CAYMAN ISLANDS), INC.
By: /s/ R. Logan Wray
------------------------------------
Name: R. LOGAN WRAY
Title: President
STERLING U.S.:
STERLING SOFTWARE (U.S.), INC.
By: /s/ Jeannette P. Meier
------------------------------------
Name: JEANNETTE P. MEIER
Title: Vice President
STERLING SOUTHERN:
STERLING SOFTWARE (SOUTHERN), INC.
By: /s/ Don J. McDermett, Jr.
------------------------------------
Name: DON J. McDERMETT, JR.
Title: Vice President
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<PAGE>
EXHIBIT 2.3
================================================================================
TERMINATION AGREEMENT
BETWEEN
STERLING SOFTWARE INTERNATIONAL, INC.
AND
STERLING COMMERCE B.V.
June 30, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
I. TERMINATION OF DISTRIBUTOR AGREEMENT........................... 2
1.1. Termination............................................ 2
1.2. Effects of Termination................................. 2
1.3. Termination Obligations................................ 2
1.4. Certain Related Matters................................ 3
II. PURCHASE AND SALE OF ASSETS.................................... 3
2.1. Purchase and Sale of Assets............................ 3
2.1.1. Tangible Personal Property................... 3
2.1.2. Accounts Receivable.......................... 3
2.1.3. Subdistributor Agreements.................... 4
2.1.4. Product Contracts............................ 4
2.1.5. Financing Documents.......................... 4
2.1.6. Other Contracts.............................. 4
2.1.7. Prepaid Expenses............................. 5
2.1.8. Employee Receivables......................... 5
2.1.9. Books and Records............................ 5
2.1.10. Claims....................................... 5
2.2. Excluded Assets........................................ 5
2.2.1. Ordinary Course of Business Dispositions..... 5
2.2.2. Excluded Contract Rights..................... 5
2.2.3. Other Excluded Assets........................ 6
2.3. Nonassignable Contracts and Other Contract Matters..... 6
2.3.1. Nonassignability............................. 6
2.3.2. Parties to Use Commercially
Reasonable Efforts......................... 6
2.3.3. If Waivers or Consents Cannot Be
Obtained................................... 6
2.3.4. Other Contract Matters....................... 7
2.3.5. Identification of Tangible Personal
Property................................... 9
2.3.6. Identification of Miscellaneous
Contracts.................................. 9
2.4. Procedures for Assets Not Transferrable................ 9
III. PAYMENTS TO SELLER............................................. 11
3.1. Payments to Seller..................................... 11
3.1.1. Closing Payment Amount....................... 11
3.1.2. Deferred Payment Amount...................... 11
3.1.3. Net Book Value............................... 12
3.1.4. Dispute Resolution........................... 13
3.2. Allocation of Payments for Tax Purposes................ 13
3.3. Transfer Taxes and Similar Charges..................... 13
IV. ASSUMPTION OF LIABILITIES...................................... 14
4.1. Assumed Liabilities.................................... 14
4.1.1. Liabilities Under Contracts.................. 14
4.1.2. Balance Sheet Liabilities.................... 14
4.1.3. Other Liabilities............................ 14
(i)
<PAGE>
4.2. Retained Liabilities................................... 15
V. REPRESENTATIONS AND WARRANTIES................................. 15
5.1. Representations and Warranties of Seller............... 15
5.1.1. Corporate Matters............................ 15
5.1.2. Authorization and Effect of Agreement........ 15
5.1.3. No Restrictions Against Sale of the
Purchased Assets........................... 16
5.1.4. Contracts.................................... 16
5.1.5. Accounts Receivable.......................... 17
5.1.6. Title to Purchased Assets.................... 17
5.1.7. Closing Date Balance Sheet................... 17
5.1.8. Compliance with Law.......................... 17
5.1.9. Litigation................................... 18
5.1.10. Employee Benefit Plans....................... 18
5.1.11. Distributor Agreement........................ 18
5.1.12. Tangible Personal Property................... 18
5.1.13. Certain Events............................... 18
5.1.14. Dedicated Employee Obligations............... 19
5.1.15. Reliance 19
5.2. Representations and Warranties of Purchaser............ 19
5.2.1. Corporate Matters............................ 19
5.2.2. Authorization and Effect of Agreement........ 19
5.2.3. No Restrictions Against Purchase of
the Purchased Assets....................... 19
5.2.4. Cash Consideration........................... 20
5.2.5. Reliance..................................... 20
VI. COVENANTS...................................................... 20
6.1. Investigation by Purchaser............................. 20
6.2. Regulatory Approvals................................... 21
6.3. Operation of the Business.............................. 21
6.4. Notices................................................ 23
6.5. Satisfaction of Conditions............................. 23
6.6. Employee Matters....................................... 24
6.6.1. Employment................................... 24
6.6.2. Past Service Credit.......................... 25
6.6.3. Vacation..................................... 26
6.6.4. Welfare Plans................................ 26
6.6.5. Health Plans................................. 26
6.6.6. Other Benefit Plans.......................... 26
6.6.7. Employee Plans............................... 27
6.7. Non-Solicitation or Hire of Employees and
Contract Workers..................................... 27
6.8. Uncollected Accounts Receivable........................ 29
6.9. Repurchases under Financing Documents.................. 30
6.10. Press Releases......................................... 31
VII. THE CLOSING................................................... 31
7.1. Conditions Precedent to Obligations of
Purchaser and Seller................................. 31
(ii)
<PAGE>
7.2. Additional Conditions Precedent to
Obligations of Purchaser............................. 32
7.2.1. Accuracy of Representations and Warranties... 32
7.2.2. Compliance with Covenants.................... 32
7.2.3. No Litigation; Etc........................... 32
7.2.4. Delivery of Documents by or on
Behalf of Seller........................... 32
7.3. Additional Conditions Precedent to
Obligations of Seller................................ 32
7.3.1. Accuracy of Representations and
Warranties................................. 32
7.3.2. Compliance with Covenants.................... 32
7.3.3. No Litigation; Etc........................... 33
7.3.4. Delivery of Documents by or on
Behalf of Purchaser........................ 33
7.4. The Closing............................................ 33
7.5. Termination............................................ 34
VIII. TRANSITIONAL MATTERS......................................... 35
8.1. General................................................ 35
8.2. Transition Services.................................... 35
8.3. Facilities Sharing Arrangement......................... 36
8.4. Related Matters........................................ 37
8.5. Payments, Correspondence and Communications............ 39
IX. SURVIVAL AND INDEMNIFICATION................................. 39
9.1. Survival of Representations, Warranties and
Covenants............................................ 39
9.2. Indemnification by Purchaser........................... 40
9.3. Indemnification by Seller.............................. 40
9.4. Notice of Claim; Right to Participate in and
Defend Third Party Claim............................. 41
9.5. Exclusive Remedy....................................... 42
X. MISCELLANEOUS PROVISIONS..................................... 42
10.1. Notices................................................ 42
10.2. Expenses............................................... 43
10.3. Successors and Assigns................................. 43
10.4. Waiver................................................. 43
10.5. Entire Agreement....................................... 44
10.6. Amendments, Supplements, Etc........................... 44
10.7. Rights of the Parties.................................. 44
10.8. Further Assurances..................................... 44
10.9. Applicable Law; Venue.................................. 44
10.10. Titles and Headings.................................... 45
10.11. Deemed Time of Closing................................. 45
10.12. Certain Interpretive Matters and Definitions........... 45
10.13. Execution in Counterparts.............................. 46
(iii)
<PAGE>
SCHEDULES
- ---------
Schedule 2.1.1 Tangible Personal Property
Schedule 2.1.6(a) Other Contracts -- Facility Contracts
Schedule 2.1.6(b) Other Contracts -- Miscellaneous Contracts
Schedule 2.2.3 Other Excluded Assets
Schedule 5.1.1 Assigning Subsidiaries
Schedule 5.1.3 Restrictions Against Sale of the Assets
Schedule 5.1.4 Subdistributor Agreements and Financing Documents; Other
Contract Matters
Schedule 5.1.6 Certain Permitted Liens
Schedule 5.1.9 Certain Litigation
Schedule 5.1.10 Employee Benefit Arrangements
Schedule 5.1.11 Compliance with Distributor Agreement
Schedule 5.1.13 Certain Events
Schedule 5.2.3 Restrictions Against Purchase of the Assets
Schedule 6.3 Conduct other than in Ordinary Course
Schedule 6.6.1 Dedicated Employees
Schedule 7.1 Approvals, Consents, Clearances, Waivers and Actions as
Conditions to Closing
Schedule 8.2 Transition Services
Schedule 8.3(a) Shared Facilities
Schedule 8.3(b) Shared Facilities Terminating Prior to December 31, 1997
<PAGE>
TERMINATION AGREEMENT
---------------------
This Termination Agreement, dated as of June 30, 1997 (this
"Agreement"), is made and entered into by and between Sterling Software
International, Inc., a Delaware corporation ("Seller"), and Sterling Commerce
B.V., a private limited liability company organized and existing under the laws
of The Netherlands ("Purchaser").
RECITALS
--------
A. Seller and Purchaser (as the assignee of all right, title and
interest of Sterling Commerce International, Inc., a Delaware corporation ("SC
International"), therein, thereto and thereunder) are parties to an
International Distributor Agreement made and entered into by and between Seller
and SC International as of March 4, 1996 and amended by Seller and Purchaser as
of January 31, 1997 (as amended, the "Distributor Agreement");
B. Except as otherwise defined herein, terms used herein with initial
capital letters have the respective meanings ascribed thereto in the Distributor
Agreement;
C. Seller and Purchaser desire to terminate the Distributor Agreement
on the terms and subject to the conditions set forth herein;
D. Contemporaneously with the termination of the Distributor
Agreement pursuant to this Agreement, Seller desires to sell to Purchaser or the
Purchasing Subsidiaries (as hereinafter defined), or, as applicable, cause the
Assigning Subsidiaries (as hereinafter defined) to sell to Purchaser or the
Purchasing Subsidiaries, and Purchaser desires to purchase or, as applicable,
cause the Purchasing Subsidiaries to purchase, certain rights, properties and
assets used by Seller or the Assigning Subsidiaries in connection with the
marketing, licensing, installation, maintenance and support of the Products
(which, for purposes of this Agreement, shall include both Products (as such
term is defined in the Distributor Agreement) and all other automated file
transfer and communication or message handling or mailboxing software and EDI
translation software and related user manuals and documentation (including all
updates and revisions thereof) heretofore marketed, licensed, installed,
maintained and/or supported by Seller or any of its affiliates on behalf of
Purchaser, its affiliates or their respective predecessors) in the Territory
(the "Business"); and
E. Contemporaneously with the termination of the Distributor
Agreement pursuant to this Agreement, Seller wishes to delegate to Purchaser or,
as applicable, the Purchasing Subsidiaries or, as applicable, cause the
Assigning Subsidiaries to delegate to Purchaser or, as applicable, the
Purchasing Subsidiaries, and Purchaser desires to assume or, as applicable,
<PAGE>
cause the Purchasing Subsidiaries to assume, the Assumed Liabilities (as
hereinafter defined).
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
I. TERMINATION OF DISTRIBUTOR AGREEMENT
------------------------------------
1.1. Termination. Effective as of the Closing (as hereinafter
-----------
defined), the Distributor Agreement shall terminate as between Seller and
Purchaser, with such termination having the effects set forth in Section 1.2.
1.2. Effects of Termination. (a) As between Seller and its
----------------------
affiliates on the one hand and Purchaser and its affiliates on the other hand,
from and after the termination of the Distributor Agreement pursuant to Section
1.1, neither Seller nor Purchaser, nor any of their respective affiliates, will
have any rights or obligations under or with respect to the Distributor
Agreement (or any agreements pursuant to which any SSW Subdistributor shall have
been appointed a Subdistributor or shall have agreed to be bound by any
provision of the Distributor Agreement) other than their respective rights and
obligations, if any, under the following provisions thereof: (i) Section 6
(insofar as such provisions relate to royalties payable by Seller to Purchaser
in respect of revenues that shall have been accrued prior to the Closing); (ii)
Section 10 (other than the provisions of Section 10(e)); (iii) Section 11(a)
(other than the last sentence thereof); (iv) Section 14; (v) Section 15; (vi)
Sections 16(a) and 16(c); and (vii) Section 24.
(b) The rights and obligations of Third-Party Subdistributors under
the Subdistributor Agreements (as hereinafter defined), including any provisions
of the Distributor Agreement incorporated by reference in any such
Subdistributor Agreement or otherwise applicable to any such Third-Party
Subdistributor, will not be affected by the terms of this Agreement (including
Section 1.1) and will remain in full force and effect.
(c) The rights and obligations of customers under the Product
Contracts (as hereinafter defined) will not be affected by the terms of this
Agreement (including Section 1.1) and will remain in full force and effect.
1.3. Termination Obligations. At or as promptly as reasonably
-----------------------
practicable after the Closing, Seller will (and, as applicable, will cause each
SSW Subdistributor to):
(a) Pay to Purchaser all outstanding amounts that were due and
payable to Purchaser under the Distributor Agreement prior to the Closing;
<PAGE>
(b) Purge from its computer systems, storage media and other files
and, at Purchaser's option, destroy or deliver to Purchaser or its designee all
Products within Seller's or such SSW Subdistributor's possession or control,
including any Demonstration Products and all copies of source codes for the
Products;
(c) At Purchaser's option, destroy or deliver to Purchaser or its
designee all items within Seller's or such SSW Subdistributor's possession or
control that contain any Information or bear a Mark;
(d) Deliver details of its customer records and billing
procedures (to the extent the same relate to the Business); and
(e) Deliver to Purchaser an officer's certificate which certifies
that Seller and each Assigning Subsidiary has complied with its obligations
under this Section 1.3.
1.4. Certain Related Matters. Effective as of the Closing, the
-----------------------
arrangement between Seller and Comfirst S.A., a company organized under the laws
of France ("Comfirst"), with respect to services performed by Seller or any
Assigning Subsidiary for the benefit of Comfirst shall, without further action,
be terminated.
II. PURCHASE AND SALE OF ASSETS
---------------------------
2.1. Purchase and Sale of Assets. On the terms and subject to the
---------------------------
conditions set forth herein, at the Closing, Seller will or, as applicable, will
cause the Assigning Subsidiaries to sell, transfer, grant, convey, assign and
deliver ("Transfer") to Purchaser or, as applicable, the Purchasing
Subsidiaries, and Purchaser will or, as applicable, cause the Purchasing
Subsidiaries to, purchase and accept from Seller, or, as applicable, the
Assigning Subsidiaries, all of the right, title and interest of Seller and the
Assigning Subsidiaries in, to and under the rights, properties and assets
described in this Section 2.1 (collectively, the "Purchased Assets"):
2.1.1. Tangible Personal Property. Subject to Section 2.3.5, the
--------------------------
tangible personal property listed or described on Schedule 2.1.1 (the "Tangible
--------------
Personal Property");
2.1.2. Accounts Receivable. Subject to the penultimate sentence
-------------------
of Section 3.1.3, all accounts receivable of Seller or any Assigning Subsidiary
existing as of the Closing, but only to the extent that such accounts receivable
shall have arisen out of the conduct of the Business and not out of the conduct
of any other business conducted by Seller or any of its affiliates
(collectively, the "Accounts Receivable");
2.1.3. Subdistributor Agreements. All agreements pursuant to which
-------------------------
any Third-Party Subdistributor (which, for purposes of this Agreement, shall
include Third-Party
<PAGE>
Subdistributors (as such term is defined in the Distributor Agreement) and all
other persons or entities, other than Seller or any of its affiliates,
heretofore appointed or authorized by Seller or any of its affiliates to market,
license, install, maintain and/or support any of the Products) shall have been
appointed or authorized by Seller or any of its affiliates to market, license,
install, maintain and/or support any of the Products or shall have agreed to be
bound by any provision of the Distributor Agreement or any similar agreement
entered into between Seller and any predecessor of Purchaser prior to the date
of the Distributor Agreement (including any related agreements between Seller or
any Assigning Subsidiary and any such Third-Party Subdistributor) in effect as
of the Closing (collectively, the "Subdistributor Agreements"), but only to the
extent such Subdistributor Agreements relate to the marketing, licensing,
installation, maintenance and/or support of the Products;
2.1.4. Product Contracts. All Product Use Contracts and all other
-----------------
software license and/or maintenance agreements (including any related agreements
between Seller or any Assigning Subsidiary and any customer under any such
Product Use Contract or other software license and/or maintenance agreement) in
effect as of the Closing (collectively, the "Product Contracts"), but only to
the extent such Product Contracts relate to the licensing, installation,
maintenance and/or support of the Products;
2.1.5. Financing Documents. All contracts and agreements in effect
-------------------
as of the Closing (collectively, the "Financing Documents") relating to the
purchase of accounts receivable of Seller or the Assigning Subsidiaries arising
under Product Contracts by certain financing providers (collectively, the
"Financing Providers"), but only to the extent such Financing Documents relate
to the purchase of accounts receivable arising out of the marketing, licensing,
installation, maintenance and/or support of the Products;
2.1.6. Other Contracts. The agreements listed or described on
---------------
Schedule 2.1.6(a) and in effect as of the Closing ("Facility Contracts") and,
- -----------------
subject to Section 2.3.6, the contracts, leases, licenses and other agreements
-------------
listed or described on Schedule 2.1.6(b) and in effect as of the Closing
-----------------
(collectively, the "Miscellaneous Contracts" and, together with the Facility
Contracts, the "Other Contracts") (the Subdistributor Agreements, the Product
Contracts, the Financing Documents and the Other Contracts, collectively, being
the "Contracts");
2.1.7. Prepaid Expenses. All rights, properties and assets arising
----------------
out of any prepaid expenses, but only to the extent that such prepaid expenses
relate to the conduct of the Business and not to the conduct of any other
business conducted by Seller or any of its affiliates and are reflected on the
Closing Date Balance Sheet (as hereinafter defined);
<PAGE>
2.1.8. Employee Receivables. All amounts due to Seller or any
--------------------
Assigning Subsidiary from any Dedicated Employee (as hereinafter defined) who
accepts employment or retention by Purchaser prior to the delivery to Purchaser
of the computation of the Net Book Value pursuant to Section 3.1.3 that are
reflected on the Closing Date Balance Sheet; and
2.1.9. Books and Records. All financial, accounting and operating
-----------------
data, including customer lists and files and related billing records, sales,
marketing and promotional data, advertising and marketing materials, credit
information, cost and pricing information, vendor and distributor lists and
files, payroll and personnel records, and other documents, books and records of
Seller or any Assigning Subsidiary relating primarily to the Purchased Assets,
the Assumed Liabilities or the Business (subject to the redaction therefrom of
any information to the extent relating to rights, properties, assets,
liabilities or businesses of Seller or any of its affiliates other than the
Purchased Assets, the Assumed Liabilities or the Business and the retention by
Seller and the Assigning Subsidiaries of copies of any of the foregoing that do
not relate exclusively to the Purchased Assets, the Assumed Liabilities or the
Business (subject to the redaction therefrom of any information to the extent
relating to the Purchased Assets, the Assumed Liabilities or the Business)) and
all other items within the possession or control of Seller or any Assigning
Subsidiary that contain any Information or bear a Mark, together with the
originals of all Contracts (other than Multi-Product Contracts (as hereinafter
defined), as to which only copies shall be included), and copies of such other
items that are similar to, but not otherwise included in, the foregoing that
relate to the Purchased Assets, the Assumed Liabilities or the Business as may
reasonably be requested by Purchaser (subject in each case to redaction as
aforesaid).
2.1.10. Claims. All rights with respect to claims, demands, causes
------
of action, judgments and pending litigation against third parties (i.e., parties
----
other than the parties hereto and their respective affiliates), but only to the
extent such claims relate to the marketing, licensing, installation, maintenance
and/or support of the Products or have arisen out of the conduct of the
Business.
2.2. Excluded Assets. Notwithstanding anything to the contrary
---------------
contained herein, the following rights, properties and assets (collectively, the
"Excluded Assets") will not be included in the Purchased Assets:
2.2.1. Ordinary Course of Business Dispositions. Any Tangible
----------------------------------------
Personal Property that is sold, consumed or otherwise disposed of by Seller or
any Assigning Subsidiary prior to the Closing in the conduct of the Business in
the Ordinary Course (as hereinafter defined);
2.2.2. Excluded Contract Rights. All right, title and interest of
------------------------
Seller and the Assigning Subsidiaries in, to or under
<PAGE>
the Subdistributor Agreements, Product Contracts and Financing Documents, to the
extent such Subdistributor Agreements and Product Contracts relate to, and such
Financing Documents relate to the purchase of accounts receivable arising out
of, the marketing, licensing, installation, maintenance and/or support of
software or products other than the Products; and
2.2.3. Other Excluded Assets. All rights, properties and assets of
---------------------
Seller or any of its affiliates of every kind, character and description,
wherever located and whether real or personal or fixed or contingent, not
specifically included in the definition of "Purchased Assets," together with all
rights, properties and assets listed or described on Schedule 2.2.3.
--------------
2.3. Nonassignable Contracts and Other Contract Matters.
--------------------------------------------------
2.3.1. Nonassignability. To the extent that any Contract to be
----------------
assigned (in whole or in part) pursuant to the terms of Section 2.1.3, 2.1.4,
2.1.5 or 2.1.6 is not capable of being so assigned without the consent, approval
or waiver of a third person or entity, including any domestic or foreign court,
government, governmental agency, authority, entity or instrumentality
("Governmental Authority"), or if such assignment or attempted assignment would
constitute a breach thereof or a violation of any Law (as hereinafter defined)
(any such Contract being a "Nonassignable Contract"), nothing in this Agreement
will constitute or require an assignment thereof (in whole or in part) prior to
the time at which all consents, approvals and waivers necessary for such
assignment shall have been obtained. For purposes of this Section 2.3, Multi-
Product Contracts will be deemed to constitute Nonassignable Contracts unless
such Multi-Product Contracts permit a partial assignment thereof as contemplated
by this Agreement.
2.3.2. Parties to Use Commercially Reasonable Efforts.
----------------------------------------------
Notwithstanding anything to the contrary contained herein, neither Seller nor
any Assigning Subsidiary will be obligated to assign to Purchaser or any
Purchasing Subsidiary any rights in, to or under any Nonassignable Contract
without first having obtained all consents, approvals and waivers necessary for
such assignment; provided, however, that Seller (and any Assigning Subsidiary,
if applicable) and Purchaser (and any Purchasing Subsidiary, if applicable) will
jointly use commercially reasonable efforts to obtain all such consents,
approvals and waivers prior to the Closing and, if the Closing occurs first,
will jointly use commercially reasonable efforts after the Closing Date to
obtain all such consents, approvals and waivers; provided, however, that neither
Seller (nor any Assigning Subsidiary, if applicable) nor Purchaser (nor any
Purchasing Subsidiary, if applicable) will be required to pay any consideration
in connection therewith.
2.3.3. If Waivers or Consents Cannot Be Obtained. To the extent and
-----------------------------------------
for so long as all consents, approvals and waivers required for the assignment
(in whole or in part) of any Nonassignable Contract shall not have been obtained
after the
<PAGE>
Closing, Seller will, and will cause the Assigning Subsidiaries to, use
commercially reasonable efforts to (i) provide to Purchaser and, as applicable,
the Purchasing Subsidiaries, the benefits of such Nonassignable Contract (or the
applicable portion thereof) and (ii) enforce, at the request of Purchaser, for
the account of Purchaser and, as applicable, the Purchasing Subsidiaries, any
rights of Seller and, as applicable, any Assigning Subsidiary, arising from any
such Nonassignable Contract (or the applicable portion thereof). Purchaser and,
as applicable, the Purchasing Subsidiaries will use commercially reasonable
efforts to perform any portion of a Nonassignable Contract the benefits of which
are being provided to Purchaser and, as applicable, the Purchasing Subsidiaries
in accordance with clause (i) of the preceding sentence to the same extent
required of Seller and, as applicable, the Assigning Subsidiaries, under the
terms of such Contract (i.e., in the same manner and time, and with the same
quality, so required of Seller and, as applicable, the Assigning Subsidiaries).
Notwithstanding anything to the contrary contained herein, after the Closing,
Seller shall not, and Seller shall cause the Assigning Subsidiaries not to,
terminate, modify, amend, renew or waive any right under any Non-Assignable
Contract without the prior written consent of Purchaser, which consent shall not
be unreasonably withheld or delayed; provided, however, that the provisions of
this sentence shall not apply to any modification or amendment to or waiver
under any Multi-Product Contract that does not affect any of the terms and
conditions thereof relating to the Products or any services relating to the
Products or any related receivables subject to any Financing Documents, or
otherwise affect any right or obligation of Purchaser or any Purchasing
Subsidiary intended to be assigned to or assumed by Purchaser or any Purchasing
Subsidiary pursuant to this Agreement.
2.3.4. Other Contract Matters. (a) Without limiting the generality
----------------------
or effect of the preceding provisions of this Section 2.3, Seller and Purchaser
will jointly use commercially reasonable efforts to effect the bifurcation of
any Subdistributor Agreement, Product Contract or Financing Document that
relates in part to the marketing, licensing, installation, maintenance and/or
support of the Products (or, in the case of any Financing Document, to the
purchase of accounts receivable arising out of the foregoing activities) and in
part to the marketing, licensing, installation, maintenance and/or support of
software or products other than the Products (or, in the case of any Financing
Document, to the purchase of accounts receivable arising out of the foregoing
activities) (collectively, the "Multi-Product Contracts"). Except as may be
otherwise agreed upon by the parties hereto on a case-by-case basis, to the
fullest extent reasonably practicable, in effecting such bifurcation (i)
Purchaser will or will cause a Purchasing Subsidiary to enter into a new
agreement with the applicable Subdistributor, customer or Financing Provider
relating to the marketing, licensing, installation, maintenance and/or support
of the Products (or, in the case of any Financing Provider, relating to the
accounts receivable arising out of the foregoing activities) and (ii) Seller
will or, as applicable, cause the
<PAGE>
Assigning Subsidiaries to enter into a new agreement or amend the existing
Subdistributor Agreement, Product Contract or Financing Document to exclude the
Products from the software and/or products marketed, licensed, installed,
maintained and/or supported thereunder (or, in the case of any Financing
Document, to exclude the accounts receivable arising out of the marketing,
licensing, installation, maintenance and/or support of the Products therefrom).
(b) Promptly after the Closing, each of Seller and Purchaser will
instruct all Subdistributors and all customers under the Subdistributor
Agreements and Product Contracts (both in connection with the bifurcation of
Multi-Product Contracts and otherwise) to pay all amounts due and payable under
such Subdistributor Agreements and Product Contracts (and under any successor
agreements or contracts resulting from the bifurcation thereof) to Seller (or,
if applicable, to an Assigning Subsidiary), on the one hand, and/or to Purchaser
(or, if applicable, to a Purchasing Subsidiary), on the other hand, in
accordance with the respective right, title and interest therein to be
Transferred to Purchaser (or, if applicable, to a Purchasing Subsidiary)
pursuant to Section 2.1 and/or retained by Seller and the Assigning Subsidiaries
pursuant to Section 2.2 (which, with respect to amounts due and payable under
Product Contracts, shall be determined in the manner contemplated under the
Distributor Agreement and otherwise consistent with the manner in which revenues
under the affected or related Product Contracts were allocated as between
Products, on the one hand, and other software or products, on the other hand,
upon the inception or the most recent renewal or amendment as the case may be,
of such Product Contracts).
(c) In connection with seeking to procure consents, approvals and
waivers pursuant to Section 2.3.2 and seeking to effect the bifurcation of
Subdistributor Agreements, Product Contracts and Financing Documents pursuant to
Section 2.3.4(a), neither Seller nor Purchaser will, and neither Seller nor
Purchaser will permit their respective affiliates to, seek to alter the basic
business or economic arrangements that are in effect under the applicable
Contracts as of the date hereof or otherwise take any action with respect to the
applicable Contracts that would reasonably be expected to impede the procurement
of such consents, approvals and waivers or the effectuation of such bifurcation.
The provisions of the immediately preceding sentence will not limit the right of
any party to take such actions in respect of any Contract following the
procurement of all consents, approvals and waivers applicable thereto pursuant
to Section 2.3.2 and the bifurcation thereof, if applicable, pursuant to Section
2.3.4(a).
(d) Notwithstanding anything to the contrary contained herein, the
International Distributor Agreement (the "Brazil Distributor Agreement"), dated
as of October 1, 1995, between Condessa Gestao E Investimentos Ltda., a
Portuguese limited liability quota company and a Subsidiary of Sterling
Software, Inc. ("SSW Portugal"), and Sterling Software do Brasil Ltda.
<PAGE>
("SSW Brazil"), as amended by an Amendment, dated as of October 1, 1995, between
SSW Portugal and SSW Brazil, shall be deemed to constitute a Subdistributor
Agreement and SSW Brazil shall be deemed to constitute an SSW Subdistributor
thereunder. Effective as of the Closing, the terms of the Brazil Distributor
Agreement shall terminate, as between Seller and its affiliates on the one hand
and Purchaser and its affiliates on the other hand, in accordance with Section
1.2(a).
2.3.5. Identification of Tangible Personal Property. As soon as
--------------------------------------------
practicable, and in no event more than 25 calendar days after the Closing Date,
Seller will in good faith identify to Purchaser all tangible personal property
that is owned, held or used by Seller or the Assigning Subsidiaries primarily in
connection with the conduct of the Business. Seller and Purchaser will in good
faith thereafter jointly prepare, on or prior to the 29th day after the Closing
Date, a mutually agreeable list or description of the items of such tangible
personal property that are to be included in the Purchased Assets, which list or
description will thereafter constitute Schedule 2.1.1.
--------------
2.3.6. Identification of Miscellaneous Contracts. As soon as
-----------------------------------------
practicable, and in no event more than 25 calendar days after the Closing Date,
Seller will in good faith identify to Purchaser all contracts, leases, licenses
and other agreements (other than Subdistributor Agreements, Product Contracts,
Financing Documents and Facility Contracts) to which Seller or any Assigning
Subsidiary is a party that are in effect as of the Closing and that were entered
into by Seller or an Assigning Subsidiary primarily in connection with the
conduct of the Business, together with a list or description of such of the
foregoing that Seller proposes to include in the Purchased Assets, which list or
description, subject to Purchaser's prior review and approval (which approval
shall not be withheld in respect of any such contract, lease, license or
agreement unless it (i) is not used by Seller or an Assigning Subsidiary
primarily in connection with the conduct of the Business or (ii) contains terms
or conditions that were, on the date it or any amendment to it became effective,
commercially unreasonable and adverse to Seller or the Assigning Subsidiary
party thereto), will thereafter constitute Schedule 2.1.6(b).
-----------------
2.4. Procedures for Assets Not Transferrable. (a) If the condition
---------------------------------------
set forth in Section 7.1(b) shall not have been satisfied because Seller or
Purchaser shall not have procured or completed, as the case may be, all
approvals, consents, clearances, waivers and actions listed on Schedule 7.1, but
------------
all of the other conditions to the obligations of Seller and Purchaser under
this Agreement to consummate the transactions contemplated hereby shall have
been satisfied or waived, Seller and Purchaser shall proceed with the Closing in
respect of all jurisdictions in which such approvals, consents, clearances,
waivers and actions shall have been procured or completed, as the case may be
(or are not applicable), and the provisions of this Section 2.4 shall apply in
respect of all other jurisdictions
<PAGE>
(collectively, the "Deferred Conveyance Jurisdictions"). Without limiting the
generality or effect of the foregoing, (i) Purchaser shall deliver to Seller, at
the Closing, the full amount of the Closing Payment Amount due to Seller under
Section 3.1 and (ii) Purchaser shall deliver to Seller, when due, the full
amount of the Deferred Payment Amount due to Seller under Section 3.1, including
the portion thereof attributable to any Purchased Assets that are subject to a
Deferred Conveyance (as hereinafter defined).
(b) The transfer contemplated by Section 2.1 of the Purchased Assets
situated in, or primarily relating to the portion of the Business conducted in
(each such portion of the Business being a "Deferred Business Component"), any
Deferred Conveyance Jurisdiction will not be consummated on the Closing Date,
but will instead be deferred (each such deferred transfer being a "Deferred
Conveyance") until the second business day following the procurement or
completion, as the case may be, of all approvals, consents, clearances, waivers
and actions listed on Schedule 7.1 that are applicable thereto. Purchaser will,
------------
and will cause the Purchasing Subsidiaries to, use commercially reasonable
efforts (and Seller and the Assigning Subsidiaries will cooperate and assist in
such efforts) to cause all approvals, consents, clearances, waivers and actions
listed on Schedule 7.1 that are applicable to the consummation of any Deferred
------------
Conveyance to be procured and completed, as the case may be, as promptly as
practicable following the Closing. The existence of one or more Deferred
Conveyances shall not affect any of the actions of the parties to be taken at
the Closing or their respective obligations under this Agreement, except as
otherwise specifically provided in this Section 2.4.
(c) To the maximum extent permissible under applicable Law, the
economic interest in any Deferred Business Component shall be deemed to have
transferred from Seller or the applicable Assigning Subsidiary to Purchaser or
the applicable Purchasing Subsidiary, effective as of the Closing Date. During
the period between the Closing Date and consummation of the Deferred Conveyance
of the Purchased Assets related to any Deferred Business Component pursuant to
Section 2.4(b) (the "Interim Period"), Seller shall, or shall cause the
applicable Assigning Subsidiary to, hold the Purchased Assets subject to such
Deferred Conveyance and manage and operate such Deferred Business Component in
the manner herein provided (such actions being "Deferred Operations Services"),
with all gains, income, expenses, profits and losses generated thereby during
such Interim Period being for the account of Purchaser or the applicable
Purchasing Subsidiary. Promptly following the conclusion of each Interim
Period, Seller and Purchaser shall jointly prepare and agree upon an accounting
with respect to the gains, income, expenses, profits and losses generated by the
applicable Deferred Business Component and shall effect a cash settlement of all
amounts due and payable in respect thereof (it being understood that Purchaser
shall receive appropriate credit for the Transition Services Fee, the Space
Sharing Fee and the employee-related expenses borne by Purchaser or any
Purchasing
<PAGE>
Subsidiary pursuant to Sections 6.6.1(e) and 8.2(c) insofar as the foregoing
relate to the applicable Deferred Business Component). To the maximum extent
permissible under applicable Law, Purchaser shall direct the operation of each
Deferred Business Component during the applicable Interim Period. In all other
respects Seller shall, and shall cause each applicable Assigning Subsidiary to,
continue to operate each Deferred Business Component in the geographic areas in
which it was operated prior to the Closing in the ordinary course of business,
consistent with past practice, and otherwise at the direction of Purchaser.
Purchaser and the Purchasing Subsidiaries shall cooperate fully with Seller and
the Assigning Subsidiaries in connection with their performance of the Deferred
Operations Services, and shall provide to Seller and the Assigning Subsidiaries,
without charge, such technical or other assistance and resources as Seller may
reasonably request in connection therewith.
(d) Except to the extent otherwise provided under applicable Law, the
occurrence of the Closing shall not affect the employment status of any
Dedicated Employee in any Deferred Conveyance Jurisdiction until such time as
the related Deferred Conveyance shall have been consummated.
III. PAYMENTS TO SELLER
------------------
3.1. Payments to Seller.
------------------
3.1.1. Closing Payment Amount. In consideration of the termination
----------------------
of the Distributor Agreement in accordance with Section 1 hereof, at the
Closing, Purchaser, for itself and as agent for the Purchasing Subsidiaries,
will deliver to Seller, for itself and as agent for the Assigning Subsidiaries,
by wire transfer of immediately available funds to such account as shall have
been designated by Seller to Purchaser for such purpose prior to the Closing, an
amount equal to $5,226,000 (the "Closing Payment Amount").
3.1.2. Deferred Payment Amount. Within 10 business days after the
-----------------------
delivery by Seller to Purchaser of Seller's computation of the Net Book Value
(as hereinafter defined), Purchaser will deliver to Seller, by wire transfer of
immediately available funds to such account as shall have been designated by
Seller to Purchaser for such purpose contemporaneously with the delivery of
Seller's computation of the Net Book Value, an amount equal to the Net Book
Value (other than any portion thereof that is then being disputed by Purchaser
in good faith and in accordance with the provisions of Section 3.1.4), together
with Accrued Interest on the Net Book Value (or, if applicable, the undisputed
portion thereof). For purposes of this Agreement, the term "Accrued Interest,"
when used with respect to any amount payable to Seller pursuant to this Section
3.1.2 and any amount payable to Seller pursuant to Section 3.1.4 (collectively,
the "Deferred Payment Amount") means interest at a rate of five percent (5%) per
annum, computed with respect to the period from and including the Closing Date
to but excluding the date on which
<PAGE>
such amount is so paid. In designating the account to which the payment to
Seller required under this Section 3.1.2 and any payment to Seller required
under Section 3.1.4 are to be delivered, Seller shall be acting as agent for
each of the Assigning Subsidiaries and shall have exclusive responsibility for
the delivery to each Assigning Subsidiary of such portions of such payments to
which such Assigning Subsidiary may be entitled.
3.1.3. Net Book Value. As soon as practicable, and in no event more
--------------
than 31 calendar days after the Closing Date, Seller will deliver to Purchaser a
computation of the Net Book Value, together with copies of Seller's work papers
and other reasonable supporting documentation (but only to the extent the
foregoing relate to Purchased Assets and/or Assumed Liabilities taken into
account in determining Net Book Value). For purposes of this Agreement, (a) the
term "Net Book Value" means the difference that results from subtracting (i) the
Balance Sheet Assumed Liabilities Amount from (ii) the Balance Sheet Purchased
Assets Amount, (b) the term "Balance Sheet Assumed Liabilities Amount" means the
sum of all amounts reflected on the Closing Date Balance Sheet in respect of the
Assumed Liabilities described in Section 4.1.2, (c) the term "Balance Sheet
Purchased Assets Amount" means the sum of all amounts reflected on the Closing
Date Balance Sheet in respect of Purchased Assets (net of any related
accumulated depreciation or amortization), and (d) the term "Closing Date
Balance Sheet" means the balance sheets of Sterling Software Inc.'s
International Group and Asia Pacific Group as of the Closing Date, prepared from
the books and records of such International Group and Asia Pacific Group, using
the same accounting principles, policies, practices and procedures as are used
in preparing the balance sheets of such International Group and Asia Pacific
Group, consistently applied, which accounting principles, policies, practices
and procedures are hereby represented and warranted by Seller to be in
accordance with generally accepted accounting principles in the United States
("GAAP"). All accounts receivable of Seller or any Assigning Subsidiary
existing as of the Closing shall be allocated, for purposes of determining
whether they shall have arisen out of the conduct of the Business, on the one
hand, or out of the conduct of any other business conducted by Seller or any of
its affiliates, on the other hand, in the manner contemplated by the Distributor
Agreement and otherwise consistently with the manner in which the related
revenues shall have been allocated upon the inception or the most recent renewal
or amendment, as the case may be, of the applicable Product Contract. Following
Seller's delivery of the computation of the Net Book Value pursuant to this
Section 3.1.3, Seller shall as promptly as practicable provide Purchaser with
such information as it reasonably requests, and make available representatives
of Seller knowledgeable with respect to the preparation of the Closing Date
Balance Sheet, in order for Purchaser to satisfy itself as to the accuracy of
the determination of the Net Book Value; provided, however, that Seller and its
representatives shall be required to provide only such information as relates to
Purchased Assets and/or Assumed Liabilities taken into account in determining
Net Book Value.
<PAGE>
3.1.4. Dispute Resolution. If, within 15 business days after the
------------------
date of Seller's delivery of the computation of the Net Book Value pursuant to
Section 3.1.3, Purchaser determines in good faith that such computation was not
properly made in accordance with Section 3.1.3, Purchaser will give notice to
Seller within such 15 business day period specifying in reasonable detail
Purchaser's basis for its disagreement with Seller's computation. The failure
by Purchaser so to express its disagreement within such 15 business day period
will constitute Purchaser's acceptance of Seller's computation of the Net Book
Value. If Purchaser and Seller are unable to resolve any disagreement between
them within 30 calendar days after the giving of notice of such disagreement,
the items in dispute will be referred for determination to Ernst & Young LLP
("EY") as promptly as practicable. If for any reason EY declines to accept such
assignment, Purchaser and Seller shall select another mutually acceptable,
nationally recognized accounting firm to resolve such disagreement. As used in
this Agreement, EY or such other accounting firm, is referred to as the
"Accountants." The Accountants will make a determination as to each of the
items in dispute, which determination will be (a) in writing, (b) furnished to
each of the parties hereto as promptly as practicable after the items in dispute
have been referred to the Accountants, (c) made in accordance with this
Agreement, and (d) if so made, conclusive and binding upon each of the parties
hereto. The fees, costs and expenses of the Accountants will be borne equally
by Purchaser and Seller. Within three business days after the earlier of (i)
the date on which Purchaser and Seller themselves resolve all items in dispute
or (ii) the date on which the Accountants furnish to the parties hereto such
firm's written determination of the items in dispute, Purchaser will pay to
Seller an amount equal to any previously unpaid portion of the Net Book Value,
as adjusted to take into account the resolution of any disputed items in
accordance with this Section 3.1.4, together with Accrued Interest thereon, in
the manner specified in the first sentence of Section 3.1.2.
3.2. Allocation of Payments for Tax Purposes. The Closing Payment
---------------------------------------
Amount and Deferred Payment Amount will be allocated by Purchaser and Seller for
purposes of preparing their respective Tax Returns (as hereinafter defined),
including the Tax Returns of any consolidated group of which either of them is a
member, in a manner that values the Purchased Assets reflected on the Closing
Date Balance Sheet consistently with the valuation thereof used in the final
computation of Net Book Value and that is otherwise reasonably satisfactory to
both Purchaser and Seller; provided, however, that nothing in this Section 3.2
shall be deemed to obligate either Purchaser or Seller to agree on such
allocation (except with respect to the valuation of the Purchased Assets
reflected on the Closing Date Balance Sheet as aforesaid).
3.3. Transfer Taxes and Similar Charges. All registration,
----------------------------------
recordation, transfer, documentary, excise, sales, withholding, value added,
use, stamp, conveyance or other similar taxes, duties or governmental charges,
and all notarial, recording or filing fees or similar costs, imposed or levied
by reason of, in
<PAGE>
connection with or attributable to this Agreement and the transactions
contemplated hereby, including the Transfer of the Purchased Assets and the
assumption of the Assumed Liabilities, will be borne by Purchaser. Seller and
the Assigning Subsidiaries will reasonably cooperate with Purchaser and the
Purchasing Subsidiaries to minimize such taxes, duties, charges, fees and other
costs; provided that neither Seller nor any Assigning Subsidiary shall be
required to incur any obligation or liability to any Governmental Authority in
connection therewith.
IV. ASSUMPTION OF LIABILITIES
-------------------------
4.1. Assumed Liabilities. At the Closing, Purchaser and, as
-------------------
applicable, the Purchasing Subsidiaries will assume and thereafter pay, perform
or otherwise discharge, as and when the same shall become due and payable, the
following obligations and liabilities of Seller and its affiliates
(collectively, the "Assumed Liabilities"):
4.1.1. Liabilities Under Contracts. Subject to Section 2.3, all
---------------------------
liabilities and obligations of Seller and the Assigning Subsidiaries under the
terms of the Contracts, excluding any liability or obligation arising solely out
of the Transfer of any Contract pursuant to this Agreement, but, in the case of
Multi-Product Contracts, only to the extent such Multi-Product Contracts relate
to, or relate to the purchase of accounts receivable arising out of, the
marketing, licensing, installation, maintenance and/or support of the Products,
together with all liabilities and obligations of Sterling Software, Inc. as
guarantor of any of the foregoing liabilities and obligations of Seller and the
Assigning Subsidiaries;
4.1.2. Balance Sheet Liabilities. All liabilities (including all
-------------------------
deferred revenue) of Seller or any Assigning Subsidiary that shall have been
accrued on the Closing Date Balance Sheet, but only to the extent the same shall
have arisen out of the conduct of the Business and not out of the conduct of any
other business conducted by Seller or any of its affiliates; and
4.1.3. Other Liabilities. All liabilities and obligations of Seller
-----------------
or any Assigning Subsidiary, whether fixed or contingent or known or unknown,
resulting or arising from or incurred in connection with (a) any product
liability or warranty claims relating to the marketing, licensing, installation,
support and/or use of the Products, (b) any claim that any Product or any
brochure, promotional literature or other materials furnished or authorized by
Purchaser or its predecessors, or the use thereof in connection with the
marketing, licensing, installation, support and/or use of the Products, embodied
or constituted an infringement, misappropriation or misuse of any patent,
trademark, copyright or other intellectual property (except to the extent that
such claim results or arises from any modification of such Product by Seller or
any affiliate of Seller or the use by Seller or any affiliate
<PAGE>
of Seller of any brochure, promotional literature or other material that, in
either case, shall not have been authorized by Purchaser or its predecessors),
and (c) any liability or obligation that is deemed to be an Assumed Liability
pursuant to Section 6.6.
4.2. Retained Liabilities. All liabilities and obligations of Seller
--------------------
or any Assigning Subsidiary that are not expressly Assumed Liabilities will
continue after the Closing to be liabilities and obligations of Seller or such
Assigning Subsidiary and will be "Retained Liabilities" for purposes of this
Agreement. Notwithstanding anything to the contrary contained herein, all
liabilities and obligations of Seller or any Assigning Subsidiary resulting or
arising from or incurred in connection with any Taxes arising out of the conduct
of the Business attributable to taxable periods ending on or prior to the
Closing Date or to the pre-Closing portion of any taxable period that includes
but does not end on the Closing Date, will be "Retained Liabilities" for
purposes of this Agreement.
V. REPRESENTATIONS AND WARRANTIES
------------------------------
5.1. Representations and Warranties of Seller. Seller
----------------------------------------
represents and warrants to Purchaser as follows:
5.1.1. Corporate Matters. Each of Seller and each subsidiary of
-----------------
Seller listed on Schedule 5.1.1 (collectively, the "Assigning Subsidiaries") is
--------------
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each of Seller and each
Assigning Subsidiary has the requisite corporate power and authority to own,
lease or otherwise hold the Purchased Assets owned, leased or otherwise held by
it and to conduct the Business as presently conducted by it. Except as the
result of the direct or indirect ownership of capital stock of Seller or one or
more Assigning Subsidiaries, no affiliate of Seller (other than the Assigning
Subsidiaries) conducts any portion of the Business.
5.1.2. Authorization and Effect of Agreement. Seller and, as
-------------------------------------
applicable, the Assigning Subsidiaries have the requisite corporate power to
execute and deliver this Agreement and to perform the transactions contemplated
hereby to be performed by them. The execution and delivery by Seller of this
Agreement and the performance by Seller and, as applicable, the Assigning
Subsidiaries of their respective obligations hereunder have been duly authorized
by all necessary action on the part of Seller and the Assigning Subsidiaries,
Seller's and the Assigning Subsidiaries' boards of directors and, if applicable,
Seller's and the Assigning Subsidiaries' stockholders. This Agreement has been
duly executed and delivered by Seller and, assuming the due execution and
delivery of this Agreement by Purchaser, constitutes a valid and binding
obligation of Seller enforceable in accordance with its terms.
<PAGE>
5.1.3. No Restrictions Against Sale of the Purchased Assets. Except
-----------------------------------------------------
as disclosed on Schedule 5.1.3, the execution and delivery of this Agreement by
--------------
Seller does not, and the consummation by Seller and the Assigning Subsidiaries
of the transactions contemplated hereby will not conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under, (a) the
certificate of incorporation or bylaws of or comparable governing documents of
Seller and, as applicable, the Assigning Subsidiaries, (b) any Law or judgment,
order or award to which Seller, the Assigning Subsidiaries or any of the
Purchased Assets is subject, or (c) any Contract or any other contract or
agreement by which Seller or any of the Assigning Subsidiaries is bound or to
which any of the Purchased Assets is subject, except, in the case of clause (b)
above, for such conflicts or violations that, in the aggregate, would not have a
material adverse effect on the operations, financial condition or results of
operations of the Business (a "Material Adverse Effect"). Except as disclosed on
Schedule 5.1.3, no consent, approval, order or authorization of, or
- --------------
registration, declaration or filing with, any Governmental Authority is required
to be obtained or made by or with respect to Seller or any Assigning Subsidiary
under any applicable Law in connection with the execution and delivery of this
Agreement by Seller or the consummation by Seller and the Assigning Subsidiaries
of the transactions contemplated hereby, except for such consents, approvals,
orders, authorizations, registrations, declarations, or filings that, if not
obtained or made, individually or in the aggregate, would not have a Material
Adverse Effect.
5.1.4. Contracts. Seller has previously provided Purchaser with
---------
true, correct and complete copies of all Contracts (other than the Product
Contracts and the Miscellaneous Contracts) as in effect on the date hereof. All
Subdistributor Agreements and Financing Documents in effect as of the date
hereof are listed or described on Schedule 5.1.4. Except as disclosed on
--------------
Schedule 5.1.4, each of the Contracts is in full force and effect and is a
- --------------
legal, valid and binding obligation of Seller and/or each Assigning Subsidiary
that is a party thereto and, to the knowledge of Seller, of each other party
thereto, subject as to enforceability to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Except to the
extent specified on Schedule 5.1.4, all of the Contracts are written and not
--------------
oral. Except to the extent specified on Schedule 5.1.4, neither Seller nor any
--------------
Assigning Subsidiary or, to the knowledge of Seller, any other party to any
Contract is in breach or default (with or without the giving of notice or lapse
of time or both) thereunder. Seller and each of the Assigning Subsidiaries have
performed all obligations required to be performed by them to date under the
Contracts.
<PAGE>
5.1.5. Accounts Receivable. The Accounts Receivable reflected on
-------------------
the Closing Date Balance Sheet (a) will be so reflected in accordance with the
accounting principles, policies, practices and procedures used by Sterling
Software, Inc.'s International Group and Asia Pacific Group in preparing their
respective balance sheets, consistently applied, which accounting principles,
policies, practices and procedures are in accordance with GAAP, (b) will have
arisen from bona fide transactions in the conduct of the Business in the
Ordinary Course, and (c) will not be subject to any valid discount, set off or
counterclaim. The Accounts Receivable will constitute all accounts receivable
of Seller and the Assigning Subsidiaries existing as of the Closing that have
arisen out of the conduct of the Business and that have not been collected or
otherwise sold pursuant to a Financing Document.
5.1.6. Title to Purchased Assets. Seller or, as applicable, the
-------------------------
Assigning Subsidiaries have title to all of the Purchased Assets free and clear
of all liens, mortgages, security interests or other encumbrances ("Liens")
other than (a) Liens listed or described on Schedule 5.1.6, (b) Liens for taxes
--------------
and other governmental charges and assessments which are not yet due and
payable, (c) Liens of landlords and Liens of carriers, warehousemen, mechanics
and materialmen and similar Liens for obligations which are not yet due and
payable, and (d) other Liens or imperfections which do not materially detract
from the value or materially impair the existing use of the property affected
thereby (collectively, "Permitted Liens"). Subject to Section 2.3, at the
Closing, Seller will Transfer to Purchaser or, if applicable, the Purchasing
Subsidiaries, by appropriate instruments of transfer, title to all of the
Purchased Assets free and clear of all Liens other than Permitted Liens and any
Liens that may arise out of or result from the actions or omissions of
Purchaser.
5.1.7. Closing Date Balance Sheet. The amounts reflected on the
--------------------------
Closing Date Balance Sheet in respect of the Purchased Assets and the Assumed
Liabilities described in Section 4.1.2 will be derived from the accounting
records of Sterling Software, Inc.'s International Group and Asia Pacific Group
and will be so reflected in conformity with the accounting principles, policies,
practices and procedures used by Sterling Software, Inc.'s International Group
and Asia Pacific Group in the preparation of their respective balance sheets as
of April 30, 1997, which accounting principles, policies, practices and
procedures are in accordance with GAAP.
5.1.8. Compliance with Law. The Purchased Assets and the use thereof
-------------------
by Seller and the Assigning Subsidiaries comply in all material respects with,
and in connection with the conduct of the Business, Seller and each of the
Assigning Subsidiaries is in, and at all times since March 13, 1996 has been in,
compliance in all material respects with, all applicable laws, statutes, rules,
ordinances and regulations ("Laws").
<PAGE>
5.1.9. Litigation. Except as disclosed on Schedule 5.1.9, there
---------- --------------
are no legal, administrative, arbitration, investigatory or other actions,
suits, claims or proceedings pending or, to Seller's knowledge, threatened
against Seller or any of the Assigning Subsidiaries arising out of or resulting
from the conduct of the Business, or otherwise pertaining to or affecting the
Business or any of the Purchased Assets. Neither Seller nor any Assigning
Subsidiary is subject to or in default under any judgment, order or decree of
any Governmental Authority applicable to it relating to the ownership or use of
the Purchased Assets or the conduct of the Business.
5.1.10. Employee Benefit Plans. Subject to Section 6.6.7, Schedule
---------------------- --------
5.1.10 sets forth a true and correct list or description of employee benefit
- ------
plans, agreements (other than employee agreements) or arrangements which Seller
or any affiliate maintains or to which Seller or any affiliate makes or has an
obligation to make contributions or under which Seller or any affiliate is
liable for compensation or benefit payments with respect to any Dedicated
Employee (the "Employee Plans"). Each Employee Plan (and, to Seller's knowledge,
each related trust, insurance contract and fund) complies in all material
respects with applicable Law, and has been administered by Seller and the
Assigning Subsidiaries (to the extent applicable) in compliance in all material
respects with its terms and applicable Law. All employer and employee
contributions and any insurance premiums required to be paid or accrued with
respect to each Employee Plan under the terms thereof or applicable Law prior to
the Closing Date will either be reflected on the Closing Date Balance Sheet
(whether or not required to be so reflected by GAAP) or will have been or will
be paid by Seller or an Assigning Subsidiary.
5.1.11. Distributor Agreement. Except to the extent disclosed on
---------------------
Schedule 5.1.11, Seller and each SSW Subdistributor have performed and complied
- ---------------
with all covenants contained in the Distributor Agreement to be performed and
complied with by Seller or such SSW Subdistributor to date and neither Seller
nor any SSW Distributor is in breach or default (with or without the giving of
notice or the lapse of time or both) under the Distributor Agreement.
5.1.12. Tangible Personal Property. The Tangible Personal Property
--------------------------
is in good operating condition and repair, subject to normal wear and tear, and
is adequate and sufficient for the use to which it is put in connection with the
conduct of the Business as now conducted.
5.1.13. Certain Events. Except as set forth on Schedule 5.1.13,
-------------- ---------------
since December 31, 1996 through the date hereof, neither Seller nor any
Assigning Subsidiary has (a) (i) increased in any manner the rate of
compensation of any of the Dedicated Employees, (ii) made or agreed to make any
payment pursuant to any Employee Plan, including any payment of any pension,
retirement allowance, severance or other employee benefit, for the benefit of
the Dedicated Employees, (iii) adopted or entered into any additional Employee
Plan, or employment or consulting
<PAGE>
agreement, for the benefit of or with any of the Dedicated Employees, or (iv)
terminated the employment of any employee engaged primarily in the conduct of
the Business prior to December 31, 1996 (otherwise than for cause), except, in
the case of any matter described in the preceding clauses (i) through (iv), as
required by Law or in accordance with the terms of any agreement or any Employee
Plan in effect as of the date hereof, or (b) modified or amended its accounting
policies, practices and procedures or the manner in which the books, records and
financial statements of Seller pertaining to the Purchased Assets or the
Business were prepared and maintained.
5.1.14. Dedicated Employee Obligations. All obligations to Dedicated
------------------------------
Employees (including without limitation obligations under all Employee Plans of
Seller or any Assigning Subsidiary) will be reflected on the Closing Date
Balance Sheet in accordance with GAAP to the extent required under GAAP to be so
reflected.
5.1.15. Reliance. The representations and warranties of Purchaser
--------
contained in this Agreement constitute the sole and exclusive representations
and warranties of Purchaser to Seller in connection with this Agreement and the
transactions contemplated hereby, and Seller acknowledges that all other
representations and warranties are specifically disclaimed and may not be relied
upon or serve as a basis for a claim against Purchaser.
5.2. Representations and Warranties of Purchaser.
-------------------------------------------
Purchaser represents and warrants to Seller as follows:
5.2.1. Corporate Matters. Purchaser is a private limited liability
-----------------
company duly organized, validly existing and in good standing under the laws of
The Netherlands.
5.2.2. Authorization and Effect of Agreement. Purchaser has the
-------------------------------------
requisite power to execute and deliver this Agreement and to perform the
transactions contemplated hereby to be performed by Purchaser. The execution
and delivery by Purchaser of this Agreement and the performance by Purchaser
and, as applicable, the Purchasing Subsidiaries, of their respective obligations
hereunder have been duly authorized by all necessary action on the part of
Purchaser and the Purchasing Subsidiaries, Purchaser's and the Purchasing
Subsidiaries' boards of directors and, if applicable, Purchaser's and Purchasing
Subsidiaries' members or stockholders. This Agreement has been duly executed
and delivered by Purchaser and, assuming the due execution and delivery of this
Agreement by Seller, constitutes a valid and binding obligation of Purchaser
enforceable in accordance with its terms.
5.2.3. No Restrictions Against Purchase of the Purchased Assets.
--------------------------------------------------------
Except as specified on Schedule 5.2.3, the execution and delivery of this
--------------
Agreement by Purchaser does not, and the consummation by Purchaser of the
transactions contemplated hereby will not conflict with, or result in any
<PAGE>
violation of, or constitute a default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under, (a) the governing
documents of Purchaser, (b) any Law or judgment, order or award to which
Purchaser or any of its rights, properties or assets is subject, or (c) any
contract or agreement by which Purchaser is bound or to which any of its rights,
properties or assets is subject, except in the case of clauses (b) and (c)
above, for such conflicts, violations, defaults, terminations, cancellations or
accelerations that, in the aggregate, would not have a material adverse effect
on the financial condition or results of operations of Purchaser. Except as
disclosed on Schedule 5.2.3, no consent, approval, order or authorization of, or
--------------
registration, declaration or filing with, any Governmental Authority is required
to be obtained or made by or with respect to Purchaser under any applicable Law
in connection with the execution and delivery of this Agreement by Purchaser or
the consummation by Purchaser of the transactions contemplated hereby, except
for such consents, approvals, orders, authorizations, registrations,
declarations or filings that, if not obtained or made, in the aggregate, would
not have a material adverse effect on the financial condition or results of
operations of Purchaser.
5.2.4. Cash Consideration. Purchaser shall, at the Closing, have
------------------
available sufficient cash to enable it to deliver the Closing Payment Amount and
the Deferred Payment Amount to Seller in accordance with Section 3.1.
5.2.5. Reliance. The representations and warranties of Seller
--------
contained in this Agreement constitute the sole and exclusive representations
and warranties of Seller to Purchaser in connection with this Agreement and the
transactions contemplated hereby, and Purchaser acknowledges that all other
representations and warranties are specifically disclaimed and may not be relied
upon or serve as a basis for a claim against Seller. PURCHASER ACKNOWLEDGES
THAT SELLER DISCLAIMS ALL WARRANTIES OTHER THAN THOSE EXPRESSLY CONTAINED IN
THIS AGREEMENT AS TO THE PURCHASED ASSETS, EITHER EXPRESS OR IMPLIED, INCLUDING
ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
VI. COVENANTS
---------
6.1. Investigation by Purchaser. (a) Prior to and after the Closing,
--------------------------
Seller will, and will cause the Assigning Subsidiaries and their respective
affiliates to, afford to the officers, attorneys, accountants, consultants and
other authorized representatives of Purchaser reasonable access, upon reasonable
prior notice, to the facilities, personnel and books and records of Seller and
the Assigning Subsidiaries relating to the Purchased Assets and the Business so
as to afford Purchaser a reasonable opportunity to make at its sole cost and
expense such review, examination and investigation of the Purchased Assets and
the Business as Purchaser may reasonably desire to make;
<PAGE>
provided, however, that after the Closing any such investigation shall be for a
valid business purpose, including the verification of the determination of Net
Book Value. Purchaser will be permitted to prepare such extracts from or to
make such copies of such books and records relating to the Purchased Assets, the
Assumed Liabilities and the Business as it may reasonably request.
(b) Each of the parties will, and each party will cause its respective
representatives to, treat in confidence all documents, materials and other
information disclosed to it, directly or indirectly, by or on behalf of the
other party in connection with the transactions contemplated hereby, whether
during the course of the negotiations leading to the execution of this Agreement
or thereafter. Prior to the Closing, or in the event that this Agreement is
terminated, neither party will use any such information so disclosed by or on
behalf of the other party, unless such information is ascertainable from public
or published information or trade sources or already known or subsequently
independently developed or discovered by such party. Following the Closing,
Seller will, and will cause its affiliates to, treat in confidence all non-
public information regarding the Purchased Assets and the Business, except as
otherwise expressly provided herein or as required by applicable Law, and
neither Seller nor any of its affiliates will use any such information in their
respective businesses. The provisions of the immediately preceding sentence
will not limit the rights of Seller and its affiliates to disclose or use any
information to the extent such information does not relate to the Purchased
Assets or the Business.
6.2. Regulatory Approvals. (a) As promptly as practicable, Seller
--------------------
and Purchaser will use their respective commercially reasonable efforts to make
all filings and obtain all authorizations, consents, orders and approvals of any
Governmental Authority necessary for the performance of their respective
obligations pursuant to this Agreement and the consummation of the transactions
contemplated hereby, and will cooperate fully with each other in all reasonable
respects in promptly seeking to obtain such authorizations, consents, orders and
approvals.
(b) Each party will, and will cause its affiliates to, supply the
other party with copies of all correspondence, filings and communications (or
memoranda setting forth the substance thereof) with Governmental Authorities
with respect to this Agreement or the transactions contemplated hereby. In
addition, each party will notify the other party of any other facts, actions,
communications, or occurrences that might directly or indirectly affect the
parties' intent or ability promptly to make all filings and obtain the filings,
authorizations, consents, orders and approvals contemplated by this Section 6.2.
6.3. Operation of the Business. Except as otherwise contemplated
-------------------------
hereby or as described on Schedule 6.3 or with Purchaser's prior written consent
------------
(which consent shall not be
<PAGE>
unreasonably withheld or delayed), during the period from the Closing through
the end of the applicable Interim Period, Seller will, and will cause the
Assigning Subsidiaries to, conduct each Deferred Business Component only in the
ordinary and normal course consistent with past practices (the "Ordinary
Course") and otherwise consistently with Section 2.4. In addition, except as
otherwise contemplated hereby or with Purchaser's prior written consent (which
consent shall not be unreasonably withheld or delayed), during the period from
the Closing through the end of the applicable Interim Period, Seller will, and
Seller will cause the Assigning Subsidiaries to:
(a) use commercially reasonable efforts to preserve the goodwill of
the customers, licensees, distributors, suppliers and employees of each Deferred
Business Component and others having business relations with such Deferred
Business Component;
(b) comply in all material respects with the provisions of all
Contracts subject to a Deferred Conveyance and applicable Law in connection with
the operation of the Deferred Business Component;
(c) not enter into any new agreement that would be a Contract subject
to a Deferred Conveyance (other than Product Contracts on Seller's standard
forms previously approved by Purchaser), or terminate, modify, amend, renew or
waive any right under any Contract subject to a Deferred Conveyance, except, in
the case of Product Contracts, immaterial waivers in the Ordinary Course;
(d) not sell, lease, dispose of or encumber, or enter into any
agreement for the sale, disposition or encumbrance of, all or any portion of any
rights, properties or assets that are subject to a Deferred Conveyance, except
in the Ordinary Course; provided, however, that Seller shall not, and shall
cause the Assigning Subsidiaries not to, sell or otherwise dispose of any
Purchased Asset that is subject to a Deferred Conveyance having a book value
(before depreciation or amortization) of $10,000 or more without the prior
written consent of Purchaser;
(e) not grant, create or permit to exist any Liens (other than
Permitted Liens) on any of the Purchased Assets that are subject to a Deferred
Conveyance;
(f) not (i) increase in any manner the rate of compensation of any of
the Dedicated Employees employed in any Deferred Business Component, (ii) make
or agree to make any payment pursuant to any Employee Plan, including any
payment of any pension, retirement allowance, severance or other employee
benefit, for the benefit of the Dedicated Employees employed in any Deferred
Business Component, (iii) adopt or enter into any additional Employee Plan, or
employment or consulting agreement, for the benefit of or with any of the
Dedicated Employees employed in any Deferred Business Component, or (iv)
terminate the employment of any Dedicated Employee employed in any Deferred
Business Component prior to the conclusion of the applicable
<PAGE>
Interim Period (otherwise than for cause following notification to Purchaser of
such intended action and the basis therefor), except, in any such case, as
required by Law or in accordance with the terms of any agreement or any Employee
Plan in effect as of the date hereof;
(g) not enter into any compromise or settlement of any litigation,
action, suit, claim, proceeding or investigation that (i) would result in the
imposition of any Lien (other than Permitted Liens) on any of the Purchased
Assets that are subject to a Deferred Conveyance, (ii) would be binding on
Purchaser, or (iii) otherwise adversely affects the Purchased Assets that are
subject to a Deferred Conveyance or any Deferred Business Component;
(h) not modify or amend their accounting policies, practices and
procedures or the manner in which the books, records and financial statements of
Seller pertaining to the Purchased Assets that are subject to any Deferred
Conveyance or any Deferred Business Component are prepared and maintained.
6.4. Notices. Each of Purchaser and Seller will promptly, and in any
-------
event within two business days after obtaining knowledge thereof, notify the
other in writing of:
(a) Any breach of any term or provision of this Agreement on the part
of such party or its affiliates, whether or not any requirement for notice or
lapse of time or other condition precedent has been satisfied, which is then
continuing, specifying the details thereof and the action that such party has
taken or proposes to take with respect thereto;
(b) Any pending or threatened action, suit or proceeding challenging
this Agreement or any of the transactions contemplated hereby;
(c) Any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement;
(d) Any other development that would prevent or raise a substantial
doubt regarding the possibility of the satisfaction of any condition set forth
in Sections 7.1, 7.2 and 7.3; and
(e) Any notice or other communication from any Governmental
Authorities, the approval or consent of which is being sought in connection with
the transactions contemplated by this Agreement.
6.5. Satisfaction of Conditions. Each of Purchaser and Seller will
--------------------------
use commercially reasonable efforts in good faith to satisfy promptly all
conditions required hereby to be satisfied by such party and will take such
other actions as may be necessary in order to consummate the transactions
contemplated by this Agreement.
23
<PAGE>
6.6. Employee Matters.
----------------
6.6.1. Employment. (a) All of the employees of Seller and the
----------
Assigning Subsidiaries listed on Schedule 6.6.1 who are employed by Seller or
--------------
any Assigning Subsidiary on the Closing Date (including those actively at work
or on holiday or vacation, leave of absence or other approved absence from work
(with any such person on leave of absence or other approved leave being
identified as such on such Schedule 6.6.1)), and individuals who are listed on
--------------
Schedule 6.6.1 and have received offers but have not reported to work
- --------------
(collectively, the "Dedicated Employees"), will be offered employment with
Purchaser or a Purchasing Subsidiary as promptly as practicable following the
Closing Date on terms and conditions of employment which are substantially
comparable to those enjoyed by such employees immediately prior to the Closing
Date and, in any event, on such terms and conditions as are required by
applicable Law, collective bargaining agreements, employment agreements, works
councils or other applicable legal or contractual requirements; provided,
however, that nothing contained herein will be construed to grant to any
Dedicated Employee a right to employment by Purchaser or a Purchasing Subsidiary
for any particular length of time or on any particular terms. As promptly as
practicable, Seller shall provide Purchaser with such information regarding the
terms and conditions of employment, compensation and benefits provided to any
Dedicated Employee or Recruited Employee (as hereinafter defined) as may be
reasonably requested by Purchaser following a request by such Dedicated Employee
or Recruited Employee for such information in connection with an offer of
employment by Purchaser or a Purchasing Subsidiary.
(b) Without limiting the generality or effect of the foregoing, the
parties recognize that the transactions contemplated hereby may be subject to
the European Transfer of Undertaking Laws and counterparts thereof or similar
Laws in other countries outside the U.S. (collectively, "Automatic Transfer
Laws"). To the extent provided under any applicable Automatic Transfer Law,
each employee of Seller or any Assigning Subsidiary engaged primarily in the
conduct of the Business automatically will become an employee of Purchaser or,
if applicable, a Purchasing Subsidiary, effective as of the Closing (or, if
applicable, the date on which the Deferred Conveyance relating to the Deferred
Business Component in which they are primarily employed is consummated pursuant
to Section 2.4) and will constitute a Dedicated Employee for purposes of this
Agreement.
(c) Any liability or obligation that Seller or any Assigning
Subsidiary may incur with respect to severance benefits, termination indemnity
payments or the like in respect of Dedicated Employees arising out of
Purchaser's or any Purchasing Subsidiary's failure to provide Dedicated
Employees who accept employment or retention by Purchaser or such Purchasing
Subsidiary with pay, benefits and other terms and conditions of employment
substantially comparable to, those provided such Dedicated Employees as of the
Closing or required
24
<PAGE>
by applicable Law, collective bargaining agreements, employment agreements,
works councils or other applicable legal or contractual requirements will
constitute an Assumed Liability for purposes of this Agreement.
(d) Purchaser and each Purchasing Subsidiary and Seller and each
Assigning Subsidiary will comply with the requirements of the Automatic Transfer
Laws and any other Laws applicable to the Dedicated Employees.
(e) Subject to the provisions of Section 8.2, the parties agree that
the Purchaser and the Purchasing Subsidiaries shall be responsible for providing
compensation and employee benefits to the Dedicated Employees (other than
Recruited Employees) as contemplated in this Section 6.6.1, beginning effective
as of the Closing Date; provided, however, that such responsibility to provide
--------
compensation and employee benefits to any such Dedicated Employee shall cease
effective as of the date on which Purchaser or a Purchasing Subsidiary (as the
case may be) notifies Seller or the applicable Assigning Subsidiary that such
individual (i) has refused or failed to accept an offer of employment from
Purchaser or a Purchasing Subsidiary (as the case may be) or (ii) has refused or
failed to consent (where applicable) to his or her automatic transfer of
employment to Purchaser or a Purchasing Subsidiary (as the case may be).
(f) Notwithstanding anything to the contrary contained herein, as
promptly as practicable after the Closing, Seller or the applicable Assigning
Subsidiary will terminate the employment, effective as of the Closing, of each
of the individuals listed on Schedule 6.6.1 identified with an asterisk. Any
--------------
expense, liability or obligation of Seller or any Assigning Subsidiary resulting
or arising from or incurred in connection with any such termination will be an
Assumed Liability. Although such terminations shall be nominally effected by or
in the name of Seller or the applicable Assigning Subsidiary, Purchaser shall
prepare all necessary documentation, procure all necessary legal advice and
otherwise manage and supervise the termination process.
(g) From the date hereof until the end of the applicable Interim
Period, neither Seller nor any Assigning Subsidiary will reassign any Dedicated
Employee employed in any Deferred Business Component to a position primarily
relating to the conduct of any business of Seller and its affiliates other than
the Business.
6.6.2. Past Service Credit. To the extent permitted under applicable
-------------------
Law, Purchaser and its affiliates will cause all of its employee benefit and
compensation plans (including pension, profit-sharing, retirement, savings,
401(k), vacation, paid time-off, employee and retiree health and other employee
or retiree financial, welfare or other benefit plans) covering or otherwise
benefiting any of the Dedicated Employees after the Closing to count service as
recognized by Seller and its affiliates, without duplication of benefits, for
purposes of
25
<PAGE>
eligibility to participate, vesting and benefit accrual to the same extent such
service was recognized under the corresponding plans of Seller and its
affiliates. Purchaser and its affiliates will also cause all waiting periods
under each plans that would otherwise be applicable to newly hired employees to
be waived with respect to Dedicated Employees.
6.6.3. Vacation. To the extent permitted under applicable Law,
--------
Purchaser and its affiliates will cause each Dedicated Employee to be given
credit, for purposes of Purchaser's and its affiliates' vacation or other paid
leave benefit programs, for his or her accrued and unpaid vacation or paid leave
balance as of the Closing Date (or, if applicable, the date on which the
Deferred Conveyance relating to the Deferred Business Component in which such he
or she is primarily employed is consummated pursuant to Section 2.4), and any
liability or obligation to any such Dedicated Employee in respect of any accrued
and unpaid vacation or paid leave balance as of the Closing Date will be an
Assumed Liability.
6.6.4. Welfare Plans. To the extent permitted under applicable Law,
-------------
Seller's and its affiliates' Employee Plans that are welfare plans will be
responsible for all claims incurred (whether or not reported) on or prior to the
Closing Date (and all related liabilities and obligations will be Retained
Liabilities), and Purchaser's and its affiliates' welfare plans will be
responsible for all claims incurred under Purchaser's and its affiliates'
welfare plans after the Closing Date.
6.6.5. Health Plans. To the extent permitted under applicable Law,
------------
Purchaser and its affiliates will credit toward the applicable deductibles and
copayment limits under its group health plans the same amounts credited under
Seller's and its affiliates' group health plans for each Dedicated Employee.
Purchaser will cause Purchaser's and its affiliates' group health plans to waive
the application of pre-existing condition and proof of insurability provisions
for all conditions that Dedicated Employees and covered dependents have as of
the Closing (or, if applicable, the date on which the Deferred Conveyance
relating to the Deferred Business Component in which they are primarily employed
is consummated pursuant to Section 2.4).
6.6.6. Other Benefit Plans. Purchaser and Seller will cooperate and
-------------------
take all actions reasonably necessary to effectuate the transfer, where required
by Law or where permitted by Law, from Seller or an Assigning Subsidiary (or
from an Employee Plan maintained by Seller or an Assigning Subsidiary or from a
trust established pursuant to such Employee Plan) to Purchaser or one of its
subsidiaries (or to a plan or trust maintained by Purchaser or one of its
subsidiaries) of the assets and liabilities attributable to Dedicated Employees
under any Employee Plan maintained by Seller or an Assigning Subsidiary
primarily for the benefit of employees employed outside the United States. Any
liabilities transferred pursuant to the preceding sentence will be Assumed
Liabilities. As promptly as practicable after the Closing, Purchaser and Seller
shall
26
<PAGE>
negotiate in good faith to mutually determine the allocation of liabilities and
assets, if any, to be transferred pursuant to this Section 6.6.6, including by
utilizing the services of a mutually acceptable actuary to assist the parties
hereto in making such determination.
6.6.7. Employee Plans. As soon as practicable, and in no event more
--------------
than 25 calendar days after the Closing Date, Seller will in good faith provide
Purchaser with any modifications, additions or supplements to the list or
description of Employee Plans (other than employee agreements) set forth on
Schedule 5.1.10 as of the Closing Date. Schedule 5.1.10, as revised by said
- --------------- ---------------
modifications, additions or supplements, shall supersede in all respects, both
prospectively and retroactively, Schedule 5.1.10 as originally appended hereto.
---------------
Concurrently with the delivery of the modifications, additions or supplements to
Schedule 5.1.10 as provided herein, Seller shall, to the extent not previously
- ---------------
provided, provide Purchaser with true, correct and complete copies of all
material documents pursuant to which any Employee Plan was established or is
operating and a description of each Employee Plan for which there is no written
document.
6.7. Non-Solicitation or Hire of Employees and Contract Workers. (a)
----------------------------------------------------------
From the date hereof until the first anniversary of the Closing Date, neither
Purchaser nor any of its affiliates will solicit for employment or hire, employ
or otherwise retain (whether as an employee, officer, agent, consultant,
advisor, contractor or in any capacity whatsoever) any employee or contract
worker of Seller or any Assigning Subsidiary outside the United States and
Canada; provided, however, that nothing contained herein will prevent Purchaser
or any of its affiliates from engaging in discussions regarding the hiring,
employment or other retention of, or hiring, employing or otherwise retaining,
(i) any Dedicated Employee who is solicited in accordance with Section 6.6.1 and
accepts retention or employment by Purchaser or a Purchasing Subsidiary (if at
all) on or prior to the latest of (x) 30 calendar days following the Closing
Date, (y) 30 calendar days following the first day following the Closing Date on
which an offer of employment can be lawfully communicated to such Dedicated
Employee, or (z) in the case of Dedicated Employees employed in a Deferred
Business Component, 30 calendar days following the conclusion of the applicable
Interim Period, (ii) any person who is solicited with Seller's prior written
consent (a "Recruited Employee") and accepts employment or retention by
Purchaser or a Purchasing Subsidiary (if at all) on or prior to the latest of
(x) 30 calendar days following the Closing Date, (y) 30 calendar days following
the first day following the Closing Date on which an offer of employment can be
lawfully communicated to such person, or (z) in the case of the Recruited
Employees to be employed in a Deferred Business Component, 30 calendar days
following the conclusion of the applicable Interim Period, and (iii) any other
person, if such discussions or hiring, employment or other retention shall be
the result of the response by such person to a written employment advertisement
placed in a publication of general circulation or posted at an
27
<PAGE>
Internet website or a general solicitation conducted by executive search firms,
employment agencies or other general employment services, in each case not
directed specifically at employees or contract workers of Seller or any
Assigning Subsidiary. Purchaser will promptly inform its personnel having
responsibility for the hiring, recruiting and staffing of personnel of the
provisions of this Section 6.7 and will direct such personnel to comply with
such provisions. Without limiting the generality or effect of the foregoing,
during the period between the Closing Date and the 30th calendar day after the
Closing Date, Seller shall use reasonable efforts to keep Purchaser generally
apprised of any redundancies that Seller shall have determined to have developed
among the employees of Seller and the Assigning Subsidiaries and will not
unreasonably withhold its consent to the solicitation of such redundant
employees by Purchaser or its affiliates.
(b) Any Recruited Employee who accepts employment or retention by
Purchaser on or prior to the latest of (i) 30 calendar days following the
Closing Date, (ii) 30 calendar days following the first day following the
Closing Date on which an offer of employment can be lawfully communicated to
such Recruited Employee, or (iii) in the case of the Recruited Employees to be
employed in a Deferred Business Component, 30 calendar days following the
conclusion of the applicable Interim Period, will, following such acceptance of
employment or retention, constitute a Dedicated Employee for all purposes of
this Agreement, and Purchaser or a Purchasing Subsidiary shall promptly purchase
from Seller or the applicable Assigning Subsidiary, for a price equal to the
book value thereof, any amount due to Seller or Assigning Subsidiary from such
Recruited Employee as of the date of such acceptance that is not otherwise
included in the Purchased Assets pursuant to Section 2.4. Notwithstanding
anything to the contrary contained herein, in connection with making offers of
employment to Recruited Employees, Purchaser and each Purchasing Subsidiary
shall have no obligation to offer such persons pay, benefits or other terms and
conditions of employment comparable to those such persons are presently
receiving from Seller or any Assigning Subsidiary and Purchaser and each
Purchasing Subsidiary shall have no obligation to Seller or any Assigning
Subsidiary with respect to severance or similar compensation to which such
persons may be entitled from Seller or any Assigning Subsidiary arising out of
such offer or termination of employment with Seller or any Assigning Subsidiary.
(c) From the Closing Date until the first anniversary of the Closing
Date, neither Seller nor any of its affiliates will solicit for employment or
hire, employ or otherwise retain (whether as an employee, officer, agent,
consultant, advisor, contractor or in any other capacity whatsoever) any
employee or contract worker of Purchaser or its affiliates outside the United
States and Canada; provided, however, that nothing contained herein will prevent
Seller or any of its affiliates from engaging in discussions regarding the
hiring, employment or other retention of, or hiring, employing or otherwise
retaining, any
28
<PAGE>
such employee or contract worker, if such discussions or hiring, employment or
other retention shall be the result of the response by such person to a written
employment advertisement placed in a publication of general circulation or
posted at an Internet website or a general solicitation conducted by executive
search firms, employment agencies or other general employment services, in each
case not directed specifically at such employees or contract workers. Seller
will promptly inform its personnel having responsibility for the hiring,
recruiting and staffing of personnel of the provisions of this Section 6.7 and
will direct such personnel to comply with such provisions.
6.8. Uncollected Accounts Receivable. (a) From and after the
-------------------------------
Closing Date and until December 31, 1997, Purchaser and, if applicable, the
Purchasing Subsidiaries, shall use commercially reasonable efforts to collect
all of the Accounts Receivable as and when they become due, consistent with
their respective practices and procedures used in collecting their respective
other accounts receivable. Purchaser, and if applicable, the Purchasing
Subsidiaries, shall promptly apply all amounts collected from the obligor under
any particular Account Receivable to the Account Receivable designated by such
obligor in connection with such payment or, if no such designation is made, to
the Account Receivable that shall have been due and payable for the longest
period of time.
(b) As promptly as practicable after December 31, 1997, Purchaser
shall provide Seller with a list of Accounts Receivable that, as of such date,
remain uncollected, specifying therefrom those, if any, that Purchaser desires
to re-Transfer to Seller pursuant to this Section 6.8 (the "Uncollected Accounts
Receivable"). Within five business days after Seller receives such list (i)
Seller shall pay to Purchaser (on behalf of itself and, if applicable, as agent
for the Assigning Subsidiaries) an amount in cash equal to 50% of the
outstanding balance of the Uncollected Accounts Receivable as of December 31,
1997, together with accrued interest thereon at the rate of five percent (5%)
per annum, computed with respect to the period from and including the Closing
Date to (but excluding) the date on which such amount is paid, and (ii)
Purchaser and, as applicable, the Purchasing Subsidiaries, shall Transfer to
Seller and/or one or more Assigning Subsidiaries designated by Seller, pursuant
to instruments of transfer executed by Purchaser or, as applicable, a Purchasing
Subsidiary, and in form and substance reasonably acceptable to Seller, the
Uncollected Accounts Receivable, free and clear of all Liens.
(c) Following any re-Transfer of Uncollected Accounts Receivable
pursuant to Section 6.8(b), (i) Seller and, if applicable, the Assigning
Subsidiaries shall use commercially reasonable efforts to collect the
Uncollected Accounts Receivable (provided that such collection efforts will be
no more aggressive than those used by Seller or the Assigning Subsidiaries in
collecting accounts receivable from their customers), and Purchaser shall, and,
if applicable, shall cause the Purchasing Subsidiaries to, provide Seller with
such information and records
29
<PAGE>
in its possession relating to the Uncollected Accounts Receivable and otherwise
reasonably cooperate with Seller in any such attempt, and (ii) 50% of all
amounts collected in respect of the Uncollected Accounts Receivable by Seller
and its affiliates, on the one hand, or Purchaser and its affiliates, on the
other hand, net of related third party collection costs and expenses, shall
promptly be remitted by the collecting party to Purchaser or Seller,
respectively. Nothing contained in this Agreement will be construed to require
Seller or any Assigning Subsidiary to collect any amount of Uncollected Accounts
Receivable that Seller determines in good faith is likely to be uncollectible.
6.9. Repurchases under Financing Documents. (a) If Purchaser or, if
-------------------------------------
applicable, any Purchasing Subsidiary is required to repurchase any account
receivable (a "Defaulted Financed Receivable") sold pursuant to the Financing
Documents on or prior to the Closing Date (other than as a result of a breach by
Purchaser or any Purchasing Subsidiary of its obligations under the applicable
Financing Document or a breach of any representation or warranty regarding any
Product authorized by Purchaser or any Purchasing Subsidiary and contained in
the related Product Contract), Purchaser or such Purchasing Subsidiary may
require Seller, upon written demand, to purchase such Defaulted Financed
Receivable.
(b) Within five business days after Seller receives any demand that it
purchase any Defaulted Financed Receivable pursuant to this Section 6.9, (i)
Seller shall pay to Purchaser (on behalf of itself and, if applicable, as agent
for the Assigning Subsidiaries) an amount in cash equal to the Applicable
Percentage (as hereinafter defined) of the outstanding balance of such Defaulted
Financed Receivable, together with accrued interest thereon at the rate of five
percent (5%) per annum, computed with respect to the period from and including
the fifth business day following the date such demand was received to (but
excluding) the date on which such amount is paid, and (ii) Purchaser and, as
applicable, the Purchasing Subsidiaries, shall Transfer to Seller and/or one or
more Assigning Subsidiaries designated by Seller, pursuant to instruments of
transfer executed by Purchaser or, as applicable, a Purchasing Subsidiary, and
in form and substance reasonably acceptable to Seller, such Defaulted Financed
Receivable, free and clear of all Liens.
(c) Following any Transfer of any Defaulted Financed Receivable
pursuant to Section 6.9(b), (i) Seller and, if applicable, the Assigning
Subsidiaries, shall use commercially reasonable efforts to collect such
Defaulted Financed Receivable (provided that such collection efforts will be no
more aggressive than those used by Seller or the Assigning Subsidiaries in
collecting these accounts receivable from their customers), and Purchaser shall
and, if applicable, shall cause the Purchasing Subsidiaries to, provide Seller
with such information and records in its possession relating to such Defaulted
Financed Receivable and otherwise reasonably cooperate with Seller in any such
attempt, and (ii) the Applicable Percentage of all amounts collected in respect
of such Defaulted Financed Receivable by
30
<PAGE>
Seller and its affiliates, on the one hand, or Purchaser and its affiliates, on
the other hand, net of related third party collection costs and expenses, shall
promptly be remitted by the collecting party to Purchaser or Seller,
respectively. Nothing contained in this Agreement will be construed to require
Seller or any Assigning Subsidiary to collect any amount of Defaulted Financed
Receivable that Seller determines in good faith is likely to be uncollectible.
(d) For purposes of this Agreement, the term "Applicable Percentage"
shall mean 50%; provided, however, that if it shall be determined that less than
100% of the revenue associated with any particular Defaulted Financed Receivable
shall have been recognized on or prior to the Closing Date, the term "Applicable
Percentage" shall mean (i) for purposes of Section 6.9(b) and in respect of
amounts collected by Seller and its affiliates referred to in Section 6.9(c), a
percentage determined by subtracting from 100% the product of 50% and the
percentage of the revenue associated with such Defaulted Financed Receivable
that shall have been recognized on or prior to the Closing Date and (ii) in
respect of amounts collected by Purchaser and its affiliates referred to in
Section 6.9(c), a percentage equal to the product of 50% and the percentage of
the revenue associated with such Deferred Financed Receivable that shall have
been recognized on or prior to the Closing Date.
6.10. Press Releases. Prior to the Closing, neither party will issue
--------------
or cause the publication of, or permit any of its affiliates to issue or cause
the publication of, any press release or other public announcement (including
announcements to employees of Seller and its affiliates) with respect to this
Agreement or the transactions contemplated hereby without the prior written
consent of Purchaser (in the case of Seller and its affiliates) or Seller (in
the case of Purchaser and its affiliates), which consent will not be
unreasonably withheld or delayed; provided, however, that nothing herein will
prohibit any party or its affiliates from issuing or causing publication of any
such press release or public announcement to the extent that such party
determines such action to be required by Law or the rules of any national stock
exchange applicable to it or its affiliates, in which event the party making
such determination will, if practicable in the circumstances, use reasonable
efforts to allow the other party reasonable time to comment on such release or
announcement in advance of its issuance.
VII. THE CLOSING
-----------
7.1. Conditions Precedent to Obligations of Purchaser and Seller.
-----------------------------------------------------------
The obligations of each of Purchaser and Seller under this Agreement to
consummate the transactions contemplated hereby will be subject to the
satisfaction, at or prior to Closing, of the conditions that (a) there shall not
have been entered a preliminary or permanent injunction, temporary restraining
order or other judicial or administrative order or decree, the effect of which
prohibits the Closing, and (b) each of the approvals,
31
<PAGE>
consents, clearances, waivers or actions identified on Schedule 7.1 as being a
------------
condition of the Closing shall have been obtained or completed, as the case may
be, or the applicable notice and waiting periods shall have expired or been
otherwise terminated.
7.2. Additional Conditions Precedent to Obligations of Purchaser.
-----------------------------------------------------------
The obligations of Purchaser under this Agreement to consummate the transactions
contemplated hereby will be further subject to the satisfaction, at or prior to
the Closing, of all of the following conditions, any one or more of which may be
waived by Purchaser at its option:
7.2.1. Accuracy of Representations and Warranties. The
------------------------------------------
representations and warranties of Seller contained in this Agreement qualified
as to materiality shall be true and correct and those not so qualified shall be
true and correct in all material respects as of the Closing Date (with the same
force and effect as if made anew on and as of the Closing Date);
7.2.2. Compliance with Covenants. All covenants of Seller contained
-------------------------
in this Agreement to be performed and complied with by Seller or its affiliates
on or before the Closing Date shall have been performed and complied with in all
material respects;
7.2.3. No Litigation; Etc. No investigation, suit, action or other
-------------------
proceeding shall be pending or threatened before any Governmental Authority
which, in the reasonable opinion of Purchaser or its counsel, is likely to
result in a restraint or prohibition on, or an award of damages or other relief
in connection with, this Agreement or the consummation of the transactions
contemplated hereby; and
7.2.4. Delivery of Documents by or on Behalf of Seller. At or prior
-----------------------------------------------
to the Closing, Seller shall have caused to be effected the deliveries required
pursuant to Section 7.4(c).
7.3. Additional Conditions Precedent to Obligations of Seller. The
--------------------------------------------------------
obligations of Seller under this Agreement to consummate the transactions
contemplated hereby will be further subject to the satisfaction, at or prior to
the Closing, of all of the following conditions, any one or more of which may be
waived by Seller at its option:
7.3.1. Accuracy of Representations and Warranties. The
------------------------------------------
representations and warranties of Purchaser contained in this Agreement
qualified as to materiality shall be true and correct and those not so qualified
shall be true and correct in all material respects as of the Closing Date (with
the same force and effect as if made anew on and as of the Closing Date);
7.3.2. Compliance with Covenants. All covenants contained in this
-------------------------
Agreement to be performed and complied with by Purchaser or its affiliates on or
before the Closing Date shall have been performed and complied with in all
material respects;
32
<PAGE>
7.3.3. No Litigation; Etc. No investigation, suit, action or other
-------------------
proceeding will be pending or threatened before any Governmental Authority
which, in the reasonable opinion of Seller or its counsel, is likely to result
in a restraint or prohibition on, or an award of damages or other relief in
connection with, this Agreement or the consummation of the transactions
contemplated hereby; and
7.3.4. Delivery of Documents by or on Behalf of Purchaser. At or
--------------------------------------------------
prior to the Closing, Purchaser shall have effected the deliveries required
pursuant to Section 7.4(d).
7.4. The Closing. (a) Subject to the fulfillment or waiver of the
-----------
conditions precedent specified in Sections 7.1, 7.2 and 7.3, the consummation of
the purchase and sale of the Purchased Assets contemplated hereby (the
"Closing") shall take place at 10:00 a.m. (Dallas, Texas time) on June 30, 1997
("Closing Date"). The Closing will take place at the offices of Jones, Day,
Reavis & Pogue, 2300 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas
75201.
(b) Subject to Section 7.5(b), if the Closing shall not have occurred
by the date specified in Section 7.4(a), then the Closing Date will be extended
to such other date to which Purchaser and Seller mutually agree.
(c) At the Closing, Seller will deliver to Purchaser the following:
(1) Certificate of Seller. A certificate of Seller, signed on
---------------------
its behalf by an authorized officer of Seller and certifying that the
conditions set forth in Sections 7.2.1 and 7.2.2 have been satisfied;
(2) Transfer Documents. Such business transfer agreements, bills
------------------
of sale, deeds, assignments and other instruments of transfer (the
"Transfer Documents") as may be necessary or appropriate to Transfer
to Purchaser and, as applicable, the Purchasing Subsidiaries all of
the right, title and interest of Seller and the Assigning Subsidiaries
in, to and under the Purchased Assets, duly executed by Seller or the
appropriate Assigning Subsidiary and in form and substance reasonably
satisfactory to Purchaser; and
(3) Other Documents. All other documents, certificates,
---------------
instruments or writings reasonably requested by Purchaser in
connection herewith.
(d) At the Closing, Purchaser will deliver to Seller the following:
(1) Certificate of Purchaser. A certificate of Purchaser, signed
------------------------
on its behalf by an authorized officer of Purchaser, and certifying
that the
33
<PAGE>
conditions set forth in Sections 7.3.1 and 7.3.2 have been satisfied;
(2) Payment of Closing Payment Amount. The Closing Payment
---------------------------------
Amount, in the manner specified in Section 3.1.1;
(3) Payment of Transition Services Fee. The Transition Services
----------------------------------
Fee (as hereinafter defined), in the manner specified in Section
8.2(b);
(4) Payment of Space Sharing Fee. The Space Sharing Fee (as
----------------------------
hereinafter defined), in the manner specified in Section 8.3(b);
(5) Instruments of Assumption. Such instruments of assumption as
-------------------------
may be necessary or appropriate to effect the assumption by Purchaser
and, as applicable, the Purchasing Subsidiaries of the Assumed
Liabilities, duly executed by Purchaser and, as applicable, the
Purchasing Subsidiaries and in form and substance reasonably
satisfactory to Seller; and
(6) Other Documents. All other documents, certificates,
---------------
instruments or writings reasonably requested by Seller in connection
herewith.
(e) Title to the Purchased Assets shall pass to Purchaser and, as
applicable, the Purchasing Subsidiaries as of the Closing at the applicable
places of business of Seller and the Assigning Subsidiaries (with the originals
and copies of Contracts contemplated to be delivered pursuant to Section 2.1.9
located at such places of business to be physically segregated from the other
files of Seller and the Assigning Subsidiaries). Purchaser will bear all costs
associated with the removal from such places of business of all Tangible
Personal Property.
7.5. Termination. Notwithstanding anything to the contrary contained
-----------
herein, this Agreement may be terminated at any time prior to the Closing:
(a) By the mutual written consent of Seller and Purchaser;
(b) By Seller or Purchaser if the Closing has not occurred on or
before July 31, 1997 (provided that no right to terminate this Agreement
pursuant to this Section 7.5(b) will be available to any party whose breach of
any representation, warranty, or covenant contained herein shall have materially
contributed to the failure of the Closing to have occurred);
(c) By Seller or Purchaser if there shall have been entered a final,
nonappealable order or injunction of any Governmental Authority restraining or
prohibiting the consummation of the transactions contemplated hereby or any
significant part thereof; and
34
<PAGE>
(d) By Seller upon a breach of any representation, warranty or
covenant of this Agreement by Purchaser qualified as to materiality or upon a
material breach of any representation, warranty or covenant of this Agreement by
Purchaser not so qualified, and by Purchaser upon a breach of any
representation, warranty or covenant of this Agreement by Seller qualified as to
materiality or upon a material breach of any representation, warranty or
covenant of this Agreement by Seller not so qualified; but only if such breach
remains uncured for a period of 10 calendar days after receipt of written notice
of such breach from the nonbreaching party.
If this Agreement is terminated as provided herein, each party will
pay all of its own fees and expenses and no party will have any liability or
further obligation to the other party under this Agreement, except that nothing
contained herein will relieve any party of any liability for any breach prior to
such termination of any representation, warranty or covenant contained in this
Agreement.
VIII. TRANSITIONAL MATTERS
--------------------
8.1. General. Following the Closing, Purchaser and Seller will cooperate
-------
and take all such actions (including Purchaser making available Dedicated
Employees theretofore employed by Seller in the Business) as may be reasonably
requested by the other party in order to effect an orderly and expeditious
transition of the conduct of the Business with a minimum of disruption to the
operations of the Business.
8.2. Transition Services. (a) Schedule 8.2 lists certain accounting,
------------------- ------------
human resources and order processing services (collectively, "Transition
Services"), together with an indication for each identified component thereof,
on a geographical basis, of the period of time, if any, for which Seller is
willing to provide the same to Purchaser and the Purchasing Subsidiaries
following the Closing pursuant to this Section 8.2 (each such period being a
"Services Period"). Without limiting the generality or effect of Section 8.1,
during the period beginning on the Closing Date and ending on the earlier of (i)
10 days following a written notice by Purchaser to Seller or (ii) the last day
of the applicable Services Period, Seller will provide Purchaser and the
Purchasing Subsidiaries, as applicable, with respect to the operations of the
Business conducted at each of the locations identified on Schedule 8.2, such of
------------
the Transition Services indicated on Schedule 8.2 to be provided by Seller and
------------
the Assigning Subsidiary with respect to such operations as are presently
performed by Seller and the Assigning Subsidiaries in the conduct of the
Business and as may reasonably be requested by Purchaser.
(b) Subject to the provisions of Section 8.2(c), the price to be paid
by Purchaser to Seller for the Transition Services to be provided hereunder (the
"Transition Services Fee") will be equal to $370,500, which amount shall be paid
by
35
<PAGE>
Purchaser to Seller at the Closing by wire transfer of immediately available
funds to such account as shall have been designated by Seller for such purpose
prior to the Closing.
(c) The component of the Transition Services identified on Schedule
--------
8.2 as "All Benefit Programs" shall include, to the extent requested by
- ---
Purchaser and subject to compliance with applicable Law and the receipt of any
other necessary consents or approvals, the participation of employees of
Purchaser and the Purchasing Subsidiaries engaged primarily in the conduct of
the Business following the Closing Date in the Employee Plans in effect on the
Closing Date in which any Dedicated Employees participated as of the Closing
Date on the same basis as such Dedicated Employees participated in such Employee
Plan immediately prior to the Closing Date; provided, however, that nothing
contained in this Agreement shall prohibit Seller or any Assigning Subsidiary
from modifying or terminating any Employee Plan so long as such modification or
termination shall apply to all participants in such Employee Plan or, with
respect to any modification or termination that does not apply to all
participants in such Employee Plan, Purchaser consents thereto (which consent
shall not be unreasonably withheld). The contributions of such employees to
such Employee Plans and the costs associated with participation by such
employees in such Employee Plans shall be accounted for separately from
contributions of and costs associated with participation by other participants
in such Employee Plans. Following the conclusion of each calendar month during
the applicable Services Period, Seller will invoice Purchaser in respect of the
employee benefits provided to Purchaser hereunder during such calendar month an
amount equal to Seller's actual out-of-pocket cost (excluding any administrative
or other similar overhead expenses) of providing the same. Each such invoice
will be accompanied by substantiating documentation in reasonable detail.
Purchaser will pay to Seller the full amount shown in any such invoice to be due
to Seller within 10 business days of Purchaser's receipt of such invoice.
8.3. Facilities Sharing Arrangement. (a) Without limiting the generality
------------------------------
or effect of Section 8.1, during the Facility Sharing Period, Seller will permit
employees of Purchaser to occupy and use a portion of the space contained in
each of the facilities listed or described on Schedule 8.3(a) (collectively, the
---------------
"Shared Facilities") for the purpose of facilitating the conduct of the Business
by Purchaser and the Purchasing Subsidiaries following the Closing (such
occupancy and usage to include the related matters listed on such Schedule
--------
8.3(a)). For each Shared Facility, the term "Facility Sharing Period" means, as
- ------
to each Shared Facility, the period beginning on the Closing Date and ending on
the earliest of (i) December 31, 1997 (or, as applicable, such earlier date as
is specified with respect to a particular Shared Facility on Schedule 8.3(b)),
---------------
(ii) the termination date of the applicable lease agreement with respect to such
Shared Facility, including any early termination of any such lease (provided,
however, that Seller shall give Purchaser written notice not less than 60
calendar days prior to any such
36
<PAGE>
termination prior to December 31, 1997), or (iii) such date as may be specified
in a written termination notice delivered by Seller to Purchaser at least 60
days prior to such specified date (it being understood that Seller shall deliver
such termination notices, if any, only on an individualized basis in connection
with good faith space planning initiatives, and not on a widespread or
generalized basis). The quantity of space in each Shared Facility to be so
provided to such employees of Purchaser and the Purchasing Subsidiaries will be
substantially the same as that presently used by employees of Seller and the
Assigning Subsidiaries primarily in the conduct of the Business and the manner
of use of such space by such employees of Purchaser will be substantially the
same as the present use of such space by employees of Seller and the Assigning
Subsidiaries in the conduct of the Business. Purchaser and the Purchasing
Subsidiaries will cooperate with, and take all such actions as may reasonably be
requested by, Seller or any Assigning Subsidiary in order to avoid or resolve
any objection or claim relating to the arrangements contemplated by this Section
8.3 that may be asserted by the lessor under any lease under which Seller or
such Assigning Subsidiary occupies any of the Shared Facilities.
(b) The price to be paid by Purchaser to Seller in respect of the
facilities sharing arrangement provided hereunder (the "Space Sharing Fee") will
be equal to $1,222,650, which amount shall be paid by Purchaser to Seller at the
Closing by wire transfer of immediately available funds to such account as shall
have been designated by Seller for such purposes prior to the Closing.
Purchaser and Seller agree that in the event the usage of the Shared Facilities
by Purchaser and the Purchasing Subsidiaries varies significantly from that
contemplated by Schedule 8.3(a) and Schedule 8.3(b), Purchaser and Seller will
--------------- ---------------
negotiate in good faith a mutually acceptable adjustment to the Space Sharing
Fee.
(c) The parties hereto acknowledge that, following the Closing Date,
certain employees of Seller or the applicable Assigning Subsidiary will occupy
and use a portion of the space contained in the facility covered by the Lease,
dated December 27, 1996, by and between Everbilt Developers Pte. Ltd. and
Sterling Software (Singapore) Pte. Ltd. The parties hereby agree, following the
Closing Date, to negotiate in good faith the terms and conditions of such
occupancy and use.
8.4. Related Matters. (a) The Deferred Operations Services to be provided
---------------
by Seller pursuant to Section 2.4, the Transition Services to be provided by
Seller pursuant to Section 8.2 and the Shared Facilities to be made available by
Seller pursuant to Section 8.3 are to be so provided and made available without
unreasonable disruption to the conduct by Seller and the Assigning Subsidiaries
of their respective businesses. Nothing contained in this Agreement will be
construed to create a partnership, agency or similar relationship between
Purchaser or any Purchasing Subsidiary and Seller or any Assigning Subsidiary.
37
<PAGE>
(b) From time to time after the Closing, upon reasonable notice from
Purchaser to Seller, Seller will afford to the officers, accountants or other
authorized representatives of Purchaser and the Purchasing Subsidiaries
reasonable access during normal business hours to the books, records and
personnel of Seller and the Assigning Subsidiaries relating to the Deferred
Operations Services provided to Purchaser pursuant to Section 2.4 and the
Transition Services provided to Purchaser pursuant to Section 8.2. Purchaser
will be permitted to make such extracts from or to make such copies of such
books and records as it may reasonably request. Notwithstanding anything to the
contrary contained herein, neither Seller nor any Assigning Subsidiary will be
obligated under this Section 8.4(b) to take any action that would unreasonably
disrupt the normal course of its business, violate the terms of any applicable
Law or any contract to which it is a party or to which it or any of its assets
is subject or grant access to any of its proprietary, confidential or classified
information.
(c) In performing its obligations under Sections 2.4, 8.2 and 8.3,
neither Seller nor any Assigning Subsidiary will have any liability or
obligation (including any liability or obligation arising out of its own
negligence) for damages, losses or expenses suffered by Purchaser as a result of
the performance or non-performance of Seller's obligations thereunder, unless
such damages, losses or expenses are caused by or arise out of the willful
misconduct or gross negligence of Seller or Seller's failure to use commercially
reasonable efforts to perform such obligations. In no event will Seller or any
Assigning Subsidiary have any liability to Purchaser for indirect, incidental or
consequential damages that Purchaser or any third party may incur or experience
on account of the performance or non-performance of Seller's obligations
thereunder. Seller or, if applicable, the Assigning Subsidiaries, shall perform
their obligations under Sections 2.4, 8.2 and 8.3, with the same degree of care
and diligence customarily exercised by them in respect of their own businesses,
operations and affairs.
(d) To the extent that any Purchased Assets or Dedicated Employees
were used or involved in the performance of any Deferred Operations Services or
any Transition Services prior to the Closing on behalf of Seller or the
Assigning Subsidiaries, Purchaser shall, upon Seller's request, make such
Purchased Assets and/or Dedicated Employees available to Seller and the
Assigning Subsidiaries, without charge, for the sole purpose of facilitating the
provision by Seller of the Deferred Operations Services and Transitional
Services to Purchaser and the Purchasing Subsidiaries.
(e) In the event of a dispute as to any amount payable after the
Closing pursuant to Sections 2.4, 6.8, 6.9, 8.2 or 8.3, the party obligated to
pay any such amount shall promptly pay all undisputed amounts, but shall notify
the other party of any such dispute. Each party will provide the other
sufficient records and information to resolve any such dispute and, without
limiting
38
<PAGE>
the rights and remedies of the parties hereunder, will negotiate in good faith a
resolution thereto.
8.5. Payments, Correspondence and Communications. Subject to the
-------------------------------------------
provision of Sections 6.8 and 6.9, from and after the Closing, (a) Seller will
(and will cause the Assigning Subsidiaries to) use commercially reasonable
efforts to cause all payments, correspondence and other communications received
by it in respect of or relating to the Business or the Purchased Assets to be
delivered or directed to Purchaser (or the applicable Purchasing Subsidiary)
promptly and (b) Purchaser will use commercially reasonable efforts to cause all
payments, correspondence and other communications received by it in respect of
or relating to any other business conducted by Seller or any of its affiliates
or the Excluded Assets to be delivered or directed to Seller (or the applicable
Assigning Subsidiary) promptly. In the event that any amount to be delivered
pursuant to this Section 8.5 is not so delivered within 15 days from the last
day of the month in which such payment was received, such amount shall bear
interest thereafter at a rate of five percent (5%) per annum.
IX. SURVIVAL AND INDEMNIFICATION
----------------------------
9.1. Survival of Representations, Warranties and Covenants. The several
-----------------------------------------------------
representations and warranties of the parties contained in this Agreement will
survive the Closing and will remain operative and in full force and effect until
the date that is 18 months after the Closing Date, except that (i) the
representations and warranties contained in Sections 5.1.1, 5.1.2, 5.2.1 and
5.2.2, will survive the Closing and will remain operative and in full force and
effect until the date that is 36 months after the Closing Date and (ii) the
representations and warranties contained in Section 5.1.6 will survive the
Closing and will remain operative and in full force and effect without any time
limitation. The covenants of the parties contained in this Agreement will
remain operative and in full force and effect without any time limitation,
except to the extent that any such covenant is limited in duration by the
express terms thereof. Any right of indemnification pursuant to this Article IX
with respect to a claimed breach of a representation or warranty will expire at
11:59 p.m. (Dallas, Texas time) on the last day of the survival period
applicable thereto unless, on or prior to such time on such day, a Claim Notice
(as hereinafter defined) shall have been given to the party from whom
indemnification is sought. Provided that a Claim Notice is timely so given, the
right to indemnification pursuant to this Article IX with respect to a claimed
breach of a representation or warranty described in such Claim Notice as
contemplated in the following sentence will not be affected by the expiration of
the survival period applicable thereto. For purposes of this Agreement, a
"Claim Notice" means a written notice asserting a breach of a representation or
warranty contained in this Agreement which sets forth in reasonable detail a
description of such breach, together with copies of all available documentation
with respect thereto.
39
<PAGE>
9.2. Indemnification by Purchaser. (a) From and after the Closing,
----------------------------
Purchaser will indemnify, defend and hold Seller, its affiliates, and their
respective directors, officers, representatives, employees and agents
(collectively, the "Indemnified Seller Parties") harmless from and against any
and all claims, actions, suits, demands, assessments, judgments, losses,
liabilities, damages, costs and expenses (including interest, penalties,
reasonable attorneys' fees and investigation costs) (collectively,
"Liabilities") resulting or arising from, relating to or incurred in connection
with: (i) any failure of Purchaser or any of its affiliates (including the
Purchasing Subsidiaries) to pay, perform and discharge any of the Assumed
Liabilities, (ii) any breach of any representation or warranty of Purchaser
contained herein, (iii) any breach of any covenant of Purchaser contained
herein, which covenant requires or contemplates performance by Purchaser after
the Closing, or (iv) the ownership or use of the Purchased Assets or the conduct
of the Business after the Closing (including pursuant to the arrangements set
forth in Sections 2.4 and 8.2(c)).
(b) Notwithstanding any other provision of this Section 9.2, no
Indemnified Seller Party will be entitled to assert a claim for indemnification
against Purchaser under Section 9.2(a)(ii) in respect of any breach of any
representation or warranty of Purchaser, unless and until the aggregate amount
of all claims that the Indemnified Seller Parties could otherwise assert under
Section 9.2(a)(ii) in respect of breaches of such representations and warranties
exceeds $100,000 (and then only to the extent of such excess). Notwithstanding
any other provision of this Section 9.2, no Indemnified Seller Party will be
entitled to indemnification payments under this Section 9.2 to the extent such
aggregate indemnification payments by Purchaser would exceed the sum of the
Closing Payment Amount and the Deferred Payment Amount.
9.3. Indemnification by Seller. (a) From and after the Closing, Seller
-------------------------
will indemnify, defend and hold Purchaser, its affiliates, and their respective
directors, officers, representatives, employees and agents (collectively, the
"Indemnified Purchaser Parties") harmless from and against any and all
Liabilities resulting or arising from, relating to or incurred in connection
with: (i) any failure of Seller or any of its affiliates (including the
Assigning Subsidiaries) to pay, perform and discharge any of its liabilities or
obligations that constitute Retained Liabilities, (ii) any breach of any
representation or warranty of Seller contained herein, or (iii) any breach of
any covenant of Seller contained herein or any covenant of Seller or any SSW
Distributor contained in the provisions of the Distributor Agreement referred to
in Section 1.2(a) hereof, which covenant, in any such case, requires or
contemplates performance by Seller or any SSW Distributor after the Closing.
(b) Notwithstanding any other provision of this Section 9.3, no
Indemnified Purchaser Party will be entitled to assert a claim for
indemnification against Seller under Section
40
<PAGE>
9.3(a)(ii) in respect of any breach of any representation or warranty of Seller,
unless and until the aggregate amount of all claims that the Indemnified
Purchaser Parties could otherwise assert under Section 9.3(a)(ii) in respect of
breaches of such representations and warranties exceeds $100,000 (and then only
to the extent of such excess). Notwithstanding any other provision of this
Section 9.3, no Indemnified Purchaser Party will be entitled to indemnification
payments under this Section 9.3 to the extent such aggregate indemnification
payments by Seller would exceed the sum of the Closing Payment Amount and the
Deferred Payment Amount.
9.4. Notice of Claim; Right to Participate in and Defend Third Party
---------------------------------------------------------------
Claim. (a) If any indemnified party receives notice of the assertion of any
claim, the commencement of any suit, action or proceeding, or the imposition of
any penalty or assessment by a third party in respect of which indemnity may be
sought hereunder (a "Third Party Claim"), and the indemnified party intends to
seek indemnity hereunder, then the indemnified party will promptly provide the
indemnifying party with prompt written notice of the Third Party Claim, but in
any event not later than 30 calendar days after receipt of such notice of Third
Party Claim. The failure by an indemnified party to notify an indemnifying
party of a Third Party Claim will not relieve the indemnifying party of any
indemnification responsibility under this Article IX, except to the extent, if
any, that such failure materially prejudices the ability of the indemnifying
party to defend such Third Party Claim.
(b) The indemnifying party will have the right to control the defense,
compromise or settlement of the Third Party Claim with its own counsel
(reasonably satisfactory to the indemnified party) if the indemnifying party
delivers written notice to the indemnified party within 10 calendar days
following the indemnifying party's receipt of notice of the Third Party Claim
from the indemnified party acknowledging its obligations to indemnify the
indemnified party with respect to such Third Party Claim in accordance with this
Article IX; provided, however, that the indemnifying party will not enter into
any settlement of any Third Party Claim that would impose or create any
obligation or any financial or other liability on the part of the indemnified
party if such liability or obligation (i) requires more than the payment of a
liquidated sum (provided that the indemnifying party has the financial resources
to pay such amount) or (ii) is not covered by the indemnification provided to
the indemnified party hereunder. In its defense, compromise or settlement of
any Third Party Claim, the indemnifying party will timely provide the
indemnified party with such information with respect to such defense, compromise
or settlement as the indemnified party may request, and will not assume any
position or take any action that would impose an obligation of any kind on, or
restrict the actions of, the indemnified party. The indemnified party will be
entitled (at the indemnified party's expense) to participate in the defense by
the indemnifying party of any Third Party Claim with its own counsel.
41
<PAGE>
(c) In the event that the indemnifying party does not undertake the
defense, compromise or settlement of a Third Party Claim in accordance with
subsection (b) of this Section 9.4, the indemnified party will have the right to
control the defense or settlement of such Third Party Claim with counsel of its
choosing; provided, however, that the indemnified party will not settle or
compromise any Third Party Claim without the indemnifying party's prior written
consent, unless (i) the terms of such settlement or compromise release the
indemnifying party from any and all liability with respect to the Third Party
Claim or (ii) the indemnifying party will not have acknowledged its obligations
to indemnify the indemnified party with respect to such Third Party Claim in
accordance with this Article IX. The indemnifying party will be entitled (at
the indemnifying party's expense) to participate in the defense of any Third
Party Claim with its own counsel.
(d) Any indemnifiable claim hereunder that is not a Third Party Claim
will be asserted by the indemnified party by promptly delivering notice thereof
to the indemnifying party. If the indemnifying party does not respond to such
notice within 45 calendar days after its receipt, it will have no further right
to contest the validity of such claim.
9.5. Exclusive Remedy. To the fullest extent permitted by Law, the sole
----------------
and exclusive remedy of the Purchaser Indemnified Parties and the Seller
Indemnified Parties after the Closing with respect to any claim or cause of
action relating to or arising from breaches of the representations, warranties
or covenants contained in this Agreement shall be limited to the rights of the
Purchaser Indemnified Parties and the Seller Indemnified Parties under, and
shall be subject to the terms and conditions of, this Article IX.
Notwithstanding anything to the contrary contained herein, the sole and
exclusive remedy of the Purchaser Indemnified Parties with respect to any claim
or cause of action relating to or arising from any breach of representations and
warranties set forth in Section 5.1.5 shall be limited to the rights of
Purchaser and the Purchasing Subsidiaries under, and shall be subject to the
terms and conditions of, Sections 6.8 and 6.9.
X. MISCELLANEOUS PROVISIONS
------------------------
10.1. Notices. All notices and other communications required or permitted
-------
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person, when dispatched
by telegram or electronic facsimile transmission (confirmed in writing by mail
simultaneously dispatched) or one business day after having been dispatched by a
nationally recognized overnight courier service to the appropriate party at the
address specified below:
42
<PAGE>
(a) If to Seller, to:
Sterling Software International, Inc.
c/o Sterling Software, Inc.
300 Crescent Court, Suite 1200
Dallas, Texas 75201-7853
Attention: Don J. McDermett, Jr.
Facsimile No. 214-981-1265
(b) If to Purchaser to:
Sterling Commerce B.V.
c/o Sterling Commerce, Inc.
4600 Lakehurst Court
Dublin, Ohio 43016-2000
Attention: Albert K. Hoover
Facsimile No. 614-718-1510
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
10.2. Expenses. Except to the extent otherwise expressly provided herein,
--------
each of Seller and Purchaser will pay its own expenses incurred incident to this
Agreement and in preparing to consummate and consummating the transactions
provided for herein.
10.3. Successors and Assigns. This Agreement will inure to the benefit of
----------------------
and be binding upon the parties hereto and their respective successors and
permitted assigns. Neither this Agreement nor either of the parties' rights or
obligations hereunder will be assignable or delegatable to any other person
without the prior written consent of the other party hereto, except that
Purchaser may assign its rights and delegate its obligations hereunder, in whole
or in part, to any one or more affiliates or wholly owned subsidiaries of
Purchaser (but no such assignment or delegation will relieve Purchaser of any of
its obligations hereunder). Any subsidiary or affiliate of Purchaser referred
to in the preceding sentence is referred to herein as a "Purchasing Subsidiary."
Any purported assignment or delegation in violation of this Section 10.3 will be
null and void and of no force and effect.
10.4. Waiver. Either Purchaser or Seller by written notice to the other
------
may (a) extend the time for performance of any of the obligations or other
actions of the other under this Agreement, (b) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement, (c)
waive compliance with any of the conditions or covenants of the other contained
in this Agreement, or (d) waive performance of any of the obligations of the
other under this Agreement. Except as provided in the immediately preceding
sentence, no action taken pursuant to this Agreement will be deemed to
constitute a waiver of compliance with any representations, warranties or
covenants contained in this Agreement and will not operate or be construed as a
waiver of any subsequent breach, whether of a similar or dissimilar nature.
43
<PAGE>
10.5. Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits hereto and the provisions of the Distributor Agreement that are to
survive the Closing pursuant to the terms of Section 1.2 hereof) supersedes any
other agreement, whether written or oral, that may have been made or entered
into by any party hereto or any of their respective affiliates (or by any
director, officer or representative thereof) relating to the matters
contemplated hereby. This Agreement (including the Schedules and Exhibits
hereto and the provisions of the Distributor Agreement that are to survive the
Closing pursuant to the terms of Section 1.2 hereof) constitutes the entire
agreement by and among the parties hereto and there are no agreements or
commitments by or among such parties or their affiliates except as expressly set
forth herein.
10.6. Amendments, Supplements, Etc. This Agreement may be amended or
-----------------------------
supplemented at any time by additional written agreements as may mutually be
determined by Purchaser and Seller to be necessary, desirable or expedient to
further the purposes of this Agreement, or to clarify the intention of the
parties hereto.
10.7. Rights of the Parties. Except as provided in Article IX or in
---------------------
Section 10.3, nothing expressed or implied in this Agreement is intended or will
be construed to confer upon or give any person or entity other than the parties
hereto any rights or remedies under or by reason of this Agreement or any
transaction contemplated hereby.
10.8. Further Assurances. Subject to the terms and conditions herein
------------------
provided, each of the parties hereto will use commercially reasonable efforts,
both before and after the Closing, to take, or cause to be taken, such action,
to execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and under applicable
Law to consummate and make effective the transactions contemplated hereby.
10.9. Applicable Law; Venue. This Agreement and the legal relations among
---------------------
the parties hereto will be governed by and construed in accordance with the
substantive laws of the State of Ohio, without giving effect to the principles
of conflict of laws thereof. Purchaser, on behalf of itself and each Purchasing
Subsidiary, and Seller, on behalf of itself and each Assigning Subsidiary,
hereby irrevocably submits in any suit, action or proceeding arising out of or
relating to this Agreement, any of the obligations hereunder, or any of the
transactions contemplated hereby, to any court of general jurisdiction of the
State of Texas located in Dallas County, and waives any and all objections to
such jurisdiction that it may have under the laws of the State of Texas or any
other jurisdiction, except to the extent that this Agreement or any other
document formalizing the transactions contemplated hereby specifically provides
that a
44
<PAGE>
particular dispute is to be referred to a court in another jurisdiction or to
resolution by arbitration or experts.
10.10. Titles and Headings. Titles and headings to Sections herein are
-------------------
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
10.11. Deemed Time of Closing. The Closing, once it shall have occurred,
----------------------
will be deemed effective for tax, accounting and other computational purposes as
of 11:59 p.m. (Dallas, Texas time) on the Closing Date.
10.12. Certain Interpretive Matters and Definitions. Unless the context
--------------------------------------------
otherwise requires, (i) all references to Sections, Articles, Schedules or
Exhibits are to Sections, Articles, Schedules or Exhibits of or to this
Agreement, (ii) each term defined in this Agreement has the meaning assigned to
it, (iii) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with GAAP, (iv) "or" is disjunctive but not
necessarily exclusive, (v) words in the singular include the plural and vice
----
versa, (vi) the terms "subsidiary" and "affiliate" have the meanings given to
- -----
those terms in Rule 12b-2 of Regulation 12B under the Securities Exchange Act of
1934, as amended (provided that neither Sterling Software, Inc. nor any of its
subsidiaries will be deemed to be an affiliate of Sterling Commerce, Inc. or any
of its subsidiaries and neither Sterling Commerce, Inc. nor any of its
subsidiaries will be deemed to be an affiliate of Sterling Software, Inc. or any
of its subsidiaries), (vii) the phrase "liabilities and obligations" means all
such matters of any nature, whether fixed or contingent, known or unknown, or
arising under contract, law, equity, or otherwise, (viii) the word "including"
and similar terms following any statement will not be construed to limit the
statement to the matters listed after such word or term, whether or not a phrase
of nonlimitation such as "without limitation" is used, (ix) the words "herein,"
"hereby," "hereto," and "hereunder" refer to this Agreement in its entirety
rather than to a particular portion of this Agreement, (x) the phrase "to the
knowledge of Seller" and any other phrases of similar import refers to the
actual knowledge of any of Geno Tolari, Gillian Parrillo, Jim Johnson, John
Middleditch, Charles Corbett, Don McDermett, Peter Rasp, Jay Greenwald, Pauline
Architas, Derek Masters, Kiyo Ishigaki, Ross Balard and Ruth Connolly, together
with any Divisional Vice President for Finance and Administration of any
Division within Sterling Software, Inc.'s International Group or Asia Pacific
Group and any Country Manager within any such Division not otherwise included in
the foregoing, as of the time at which the representation or assertion
containing such phrase shall have been made or deemed to have been made, (xi)
when used in respect of actions to be taken or not to be taken by Seller prior
to the Closing, the term "Dedicated Employee" means a person who may become a
Dedicated Employee, (xii) the term "Taxes" means any federal, state, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license,
45
<PAGE>
lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments or charges of any kind whatsoever,
together with any interest and any penalties, additions to tax, additional
amounts with respect thereto and reasonable costs and expenses incurred in
connection therewith (including interest, penalties, reasonable attorneys' fees,
reasonable accounting fees and reasonable investigation costs), (xiii) the term
"Tax Return" means any return, declaration, report or information return or
statement relating to Taxes, including any amendments thereto, (xiv) any
Contract that, as of the Closing, shall have expired by its terms but that is
then being treated by the parties thereto as though it remains in effect shall,
for all purposes of this Agreement, be deemed to be in effect as of the Closing,
and (xv) each representation or warranty of Seller relating to SSW Brazil or the
portion of the Business conducted thereby shall be deemed to be limited in all
respects to the knowledge of Seller, and each covenant of Seller to cause SSW
Brazil to take or refrain from taking any specified action shall be deemed to be
limited in all respects to the use by Seller of commercially reasonable efforts
to that end. All references to "U.S." and "United States" are references to the
United States of America, and all references to "$" or dollar amounts are
references to lawful currency of the United States of America.
10.13. Execution in Counterparts. This Agreement may be executed in two
-------------------------
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
STERLING SOFTWARE INTERNATIONAL, INC.
By: /s/ DON J. McDERMETT, JR.
-------------------------------------------------
Name: Don J. McDermett, Jr.
-----------------------------------------------
Title: Secretary
----------------------------------------------
STERLING COMMERCE B.V.
By: /s/ ALBERT K. HOOVER
-------------------------------------------------
Name: Albert K. Hoover
-----------------------------------------------
Title: Managing Director
----------------------------------------------
<PAGE>
EXHIBIT 99.1
STERLING SOFTWARE CLOSES ACQUISITION
OF TEXAS INSTRUMENTS SOFTWARE
DALLAS, Texas (July 1, 1997) -- Sterling Software, Inc. (SSW-NYSE) today
announced the completion and details of its $165 million cash acquisition of
Texas Instruments Software from Texas Instruments Incorporated (TXN-NYSE). The
acquisition was completed June 30, 1997 under terms of the asset purchase
agreement announced April 21, 1997. The transaction includes the purchase of
all Texas Instruments Software assets, including the stock of certain European
subsidiaries, and the assumption of various liabilities related to the business.
The acquisition, the 26th and largest ever in Sterling Software's
history, allows the company to emerge with a new Applications Management Group
that brings together the best of both companies. Sterling Software will combine
Texas Instruments Software's Composer (Trademark) technology and its own KEY
(Trademark) software suite to create the first and most complete development
environment for planning, modeling, designing and building applications and
components. The new line of products, to be marketed and sold immediately under
a single family name, will allow customers to plan and build applications
quickly through object-oriented and modeling techniques, to reuse components
they have already developed and to protect their existing product investments.
"This has been the most exhilarating time in the history of Sterling
Software," said Sterling L. Williams, president and chief executive officer.
"The acquisition of Texas Instruments Software makes Sterling Software the
unquestioned leader in applications development. We have reached yet another
milestone that will accelerate Sterling Software's long-term growth and
profitability."
Sterling Software has reshaped its organization into three major
business groups Applications Management, Systems Management and Federal Systems.
Applications Management and Systems Management each add responsibility for the
international distribution
<PAGE>
of their respective product lines through separate, product-focused businesses.
The Applications Management Group, headed by group president F. L. Mike
Harvey, moves its headquarters from Atlanta to Plano, Texas and is now comprised
of three divisions: Applications Development, Information Management and
Applications International. The Applications Development Division, headed by
division president Mark Theel, also moves its headquarters from Atlanta to
Plano, Texas. The division has research and development facilities in Plano,
Atlanta and London.
As a result of the acquisition, the Applications Development Division
will debut its new product family, COOL, and the combined line of products
called COOL:Stuff (Trademark), including the market's first true component-based
development environment. Known as COOL:Cubes (Trademark), the component-based
development product is expected to be introduced by the end of the year.
Products available today in the new COOL family include COOL:Biz (Trademark) for
business and workflow modeling; COOL:Gen (Trademark), an upgrade of Texas
Instrument's Composer product, for mission critical application development; and
COOL:Dat (Trademark) for data design and analysis. A fourth product, COOL:Jex
(Trademark), which is expected to debut within weeks, is designed for object-
oriented applications development.
The group's Information Management Division continues with B. Carole
Morton as its president and with its headquarters in Woodland Hills, California.
The division also now sells the client/server integration products of the former
Desktop Integration Division and the database query and reporting products of
the former Data Access Division, in addition to its VISION (Trademark) family of
products.
The Applications Management Group adds responsibility for the
international distribution of its applications management and information
management products outside the United States and Canada through its new
Applications International Division. Employees of Sterling Software's former
International Group and Asia Pacific Group previously dedicated to these product
lines and employees added from Texas Instruments Software are now employees of
the Applications International Division. Three of the division's regions are
responsible for direct sales in Western Europe, Central Europe and Asia Pacific,
and a fourth business unit is
<PAGE>
responsible for the group's distributor operations in emerging international
markets. C. Marvin Applewhite is president of this U.K.-based division.
"We're racing out of the gate," Mike Harvey said. "Customers will not
have to wait to see the results of this merger. We can now offer our customers a
complete line of products, tools, methods and services to help them meet their
market demands, protect their technology investments and build for the future."
Of the approximately 1,310 Texas Instruments Software employees,
approximately 910 were added to the Applications Management Group, approximately
20 were added elsewhere within Sterling Software and approximately 380 positions
were eliminated. In addition, Sterling Software eliminated approximately 60
positions related to its applications management business.
"One of the reasons we acquired Texas Instruments Software was for the
expertise of the people working there. We worked very hard to accommodate every
employee from both organizations before we considered any layoffs," Mr. Williams
said. "Unfortunately, when you merge two large organizations there is overlap,
and we had to make some tough decisions. This was the most difficult part of
this project, and we have made every effort to make this transition as smooth as
possible."
The Systems Management Group, previously based in Reston, Virginia, now
has its headquarters in Plano, and is headed by group president Gillian M.
Parrillo. The group has sharpened its focus and streamlined its operations by
adding to its existing three U.S.-based product divisions two divisions and a
business unit which are responsible for the international distribution of the
Systems Management Group products. The employees of Sterling Software's former
International Group and Asia Pacific Group previously dedicated to these product
lines are now employees of the Paris-based Europe Division, the Sydney-based
Asia Pacific Division and the Plano, Texas-based Latin America Operation.
The Federal Systems Group's organization structure has not changed, but
an important contract with the intelligence community and a small number of
employees shift from Texas Instruments Software to the group's Information
Technology Division.
<PAGE>
For its fiscal year ended Sept. 30, 1996, Sterling Software reported
revenue of $439 million, including revenue of $109.8 million from its
applications management business segment. For the calendar year 1996, Texas
Instruments Software had total revenue of about $250 million.
Sterling Software is a leading provider of software and services for the
applications management, systems management and federal systems markets.
Sterling Software, with its headquarters in Dallas, has a worldwide installed
base of more than 20,000 customer sites and has 3,300 employees in 85 offices
worldwide. For more information on Sterling Software, visit the company's
website at http://www.sterling.com.
CONTACTS:
FINANCIAL ANALYSTS: INDUSTRY ANALYSTS: MEDIA:
Julie Kupp Leslie Sobon Melanie Ofenloch
Sterling Software Sterling Software M/C/C
(214) 981-1000 (972) 575-5190 (972) 480-8383
[email protected] [email protected] [email protected]
MEDIA:
Greg Amrofell
NRG
(415) 827-7088
[email protected]
<PAGE>
EXHIBIT 99.2
STERLING COMMERCE ACQUIRES INTERNATIONAL ELECTRONIC
COMMERCE SALES AND SUPPORT OPERATIONS
FROM STERLING SOFTWARE
EXPANDS STERLING COMMERCE'S INTERNATIONAL INFRASTRUCTURE AND ESTABLISHES DIRECT
SALES CHANNEL IN 16 COUNTRIES; ALLOWS STERLING SOFTWARE TO FOCUS ON CORE
BUSINESSES INTERNATIONALLY AND TEXAS INSTRUMENTS SOFTWARE INTEGRATION
DALLAS -- July 1, 1997 -- Sterling Commerce, Inc. (NYSE:SE) and Sterling
Software, Inc. (NYSE:SSW) today announced they have terminated their
international marketing arrangement and Sterling Commerce is acquiring the
current Sterling Software international operations dedicated to selling and
supporting the GENTRAN and CONNECT products.
Sterling Software, which completed the spin-off of Sterling Commerce in
September 1996, had been operating under a three-year exclusive marketing and
services agreement with Sterling Commerce to sell, market and provide first-
level support of GENTRAN and CONNECT products sold in markets outside of the
U.S. and Canada. With the accelerated termination of this agreement,
approximately 160 Sterling Software employees in Europe, Asia Pacific and Latin
America are expected to join Sterling Commerce. In addition, Sterling Commerce
is acquiring certain assets, including accounts receivable, and assuming certain
liabilities, related to the business.
"In addition to announcing the early termination of our international
marketing relationship with Sterling Commerce, Sterling Software today completed
its acquisition of Texas Instruments Software, a leading provider of enterprise-
level applications development software with a substantial international
presence," said Sterling L. Williams, president and CEO of Sterling Software.
"The termination of the international marketing agreement, which was already set
to expire in March of 1999, will free Sterling Software to fully dedicate its
international resources to its core applications management and systems
management markets."
Mr. Williams commented that Sterling Software continues to have a major
global presence, with more than one-third of its worldwide revenue derived from
international sources. Its international operations now include over 700
employees in direct sales and marketing offices in 22 countries and distributors
and agents in an additional 31 countries.
This acquisition of its international sales channel is the latest in a
series of strategic moves by Sterling Commerce to expand its global presence to
better leverage the rapidly expanding international electronic commerce market.
In March, the company acquired Comfirst SA, a privately-owned French vendor of
automated data transfer software. The company is also continuing to actively
seek additional business opportunities in emerging international markets.
<PAGE>
"Clearly there are tremendous international growth opportunities for
electronic commerce solutions, and the acquisition of our international sales
channel is a key part of Sterling Commerce's blueprint for expanding its EC
leadership into the global marketplace," said Warner C. Blow, president and CEO
of Sterling Commerce. "By transitioning our largest distributor operation to a
direct sales channel, we are accelerating our timetable for strategic
international expansion. For our customers, this re-alignment will be seamless
- -- Sterling Commerce will continue to be the best single source for business-
to-business electronic commerce solutions, support, consulting and deployment."
With direct sales, marketing and support operations in 16 countries,
located in Europe, Asia Pacific and Latin America, and distributors in 39 other
countries, Sterling Commerce is uniquely positioned to meet the international
business requirements of local customers, as well as large, multi-national
customers deploying electronic commerce solutions across worldwide operations.
Sterling Commerce products adhere to all major international standards.
Sterling Software is a leading provider of software and services for the
applications management, systems management and federal systems markets.
Sterling Software, with its headquarters in Dallas, has a worldwide installed
base of more than 20,000 customer sites and has 3,300 employees in 85 offices
worldwide. For more information on Sterling Software, visit the company's
website at http://www.sterling.com.
Sterling Commerce, with executive offices in Dallas, Texas, is a leading
global provider of electronic commerce software products and services that
enable businesses to engage in business-to-business electronic communications
and transactions. Sterling Commerce has been providing electronic commerce
solutions for over 20 years and has more than 30,000 customers worldwide and
1,700 employees. For more information on Sterling Commerce and this
announcement, visit us at http://www.stercomm.com.
# # # #
FOR INVESTOR/FINANCIAL INQUIRIES CONTACT:
Dawn Wheeler Julie Kupp
Vice President, Investor Relations Vice President, Investor Relations
Sterling Commerce, Inc. Sterling Software, Inc.
(614)793-7019 (214) 981-1000
FOR MEDIA INQUIRIES CONTACT:
Tim Hurley/Dana Lieske
Copithorne & Bellows
(617) 450-4300
