<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission File No. 1-8465
STERLING SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1873956
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Crescent Court, Suite 1200
Dallas, Texas 75201
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (214) 981-1000
<TABLE>
<CAPTION>
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<S> <C>
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, $0.10 Par Value New York Stock Exchange
Rights to Purchase Series A Junior Participating New York Stock Exchange
Preferred Stock, $0.10 Par Value
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K .
-----
As of December 31, 1999, 82,034,929 shares of the Registrant's Common Stock
were outstanding.
The aggregate market value of the Registrant's Common Stock held by non-
affiliates of the Registrant was $2,505,585,820 based on the $31.50 closing
sales price of the Registrant's Common Stock on the New York Stock Exchange on
December 31, 1999.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
STERLING SOFTWARE, INC.
FORM 10-K/A
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for the
fiscal year ended September 30, 1999 as set forth in the pages attached hereto:
Item 10. Directors and Executive Officers of the Registrant.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Item 13. Certain Relationships and Related Transactions.
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K--Exhibits
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The name, age and position of each executive officer of Sterling Software,
Inc. (the "Company") is set forth under the heading "Executive Officers" in Part
I of the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999.
Board of Directors
The Company's Certificate of Incorporation provides for a board of directors
(the "Board") divided into three classes, as nearly equal in number as possible,
with the term of office of one class expiring each year at the Company's Annual
Meeting of Stockholders. Each class of directors is elected for a term of three
years except in the case of elections to fill vacancies or newly created
directorships.
The current Class A directors of the Company, whose terms will expire at the
Annual Meeting of Stockholders in 2000, are as follows:
Robert J. Donachie, age 71. Mr. Donachie has served as a director of the
Company since May 1983. He has been principally employed as a private business
consultant since March 1981. Mr. Donachie formerly served as President of the
Institute of Management Accountants, a worldwide professional organization
devoted to the development of accounting and control practices and promotion of
ethical standards, and he remains a lifetime member of its Board of Directors.
Mr. Donachie is Chairman of the Audit Committee and a member of the 1996 Special
Stock Option Committee of the Board.
Alan W. Steelman, age 57. Mr. Steelman has served as a director of the
Company since February 1997. He is President of Steelman Stonebridge, Inc., a
corporate advisory and investment firm. From 1993 through August 1999, he was a
Senior Principal with Monitor Company, a leading international management
consulting firm. Mr. Steelman also currently serves as Vice President of
Consulting for Maxager Technology, a software company based in San Rafael,
California, as a director of Aristocrat Leisure Ltd., a software and machine
manufacturing firm based in Sydney, Australia, and serves on the Advisory Board
of Asia Information Services, a Beijing-based information technology company.
Prior to joining Monitor Company, Mr. Steelman was Chief Operating Officer of
Alexander Proudfoot Company, a consulting company listed on The London Stock
Exchange. During his 15 years at Alexander Proudfoot, Mr. Steelman held several
assignments, including Group President of the Asia-Pacific region and Executive
Vice President of worldwide sales and marketing. Prior to joining Alexander
Proudfoot, Mr. Steelman served in the U.S. Congress, representing Texas' 5th
Congressional District, and also held several appointed positions in government.
Mr. Steelman is a member of the Audit Committee and the 1996 Special Stock
Option Committee of the Board.
Evan A. Wyly, age 38. Mr. Wyly has served as a director of the Company since
July 1992. He has been a Managing Partner of Maverick Capital, Ltd., an
investment fund management company, since 1991. In 1988, Mr. Wyly founded
Premier Partners Incorporated, a private investment firm, and served as its
President prior to joining Maverick Capital, Ltd. Mr. Wyly also currently serves
as a director of Sterling Commerce, Inc., a provider of electronic commerce
software and network services, and as a director of Michaels Stores, Inc., a
specialty retailer.
The current Class B directors of the Company, whose terms will expire at the
Company's Annual Meeting of Stockholders in 2001, are as follows:
Charles J. Wyly, Jr., age 66. Mr. Wyly co-founded the Company in 1981 and
since such time has served as a director of the Company, and as Vice Chairman
since 1984. He served as an officer and director of University Computing
Company, a computer software and services company, from 1964 to 1975, including
President from 1969 to 1973. Mr. Wyly and his brother, Sam Wyly, founded Earth
Resources Company, an oil refining and silver mining company, and Charles J.
Wyly, Jr. served as its Chairman of the Board from 1968 to 1980. Mr. Wyly
served as Vice Chairman of the Bonanza Steakhouse chain from 1967 to 1989. Mr.
Wyly currently serves as Vice
1
<PAGE>
Chairman of Michaels Stores, Inc., as a director of Scottish Annuity & Life
Holdings, Ltd., a variable life insurance and reinsurance company, and as a
director of Sterling Commerce, Inc. Mr. Wyly is a member of the Executive
Committee and the 1996 and 1999 Stock Option Committees of the Board. Mr. Wyly
is the father-in-law of Donald R. Miller, Jr., also a director of the Company.
Michael C. French, age 56. Mr. French has served as a director of the
Company since July 1992. He currently serves as Chief Executive Officer,
President and a director of Scottish Annuity & Life Holdings, Ltd. Mr. French is
also a Partner of Maverick Capital, Ltd. and a consultant to the international
law firm of Jones, Day, Reavis & Pogue. He was a partner with the law firm of
Jackson & Walker, L.L.P. from 1976 through 1995. Mr. French is also a director
of Michaels Stores, Inc.
Paul V. Barber, age 38. Mr. Barber has served as a director of the Company
since December 1999. He has served as a General Partner of JMI Equity Fund, a
private equity investment firm, since November 1998. From August 1990 to
September 1998, Mr. Barber was employed by Alex. Brown & Sons, an investment
banking firm, most recently as a managing director. He also currently serves as
a director of eBenX, Inc., a provider of e-commerce and connectivity solutions
for healthcare transactions.
Mr. Phillip A. Moore served as a Class B director until his retirement and
resignation from the Board on December 14, 1999.
The current Class C directors of the Company, whose terms will expire at the
Company's Annual Meeting of Stockholders in 2002, are as follows:
Sam Wyly, age 65. Mr. Wyly has served as Chairman of the Board since co-
founding the Company in 1981. He also serves as Chairman of the Executive and
1996 and 1999 Stock Option Committees of the Board. Companies founded by Mr.
Wyly were among the forerunners of the computer software and electronic commerce
industries and the Internet. In 1963, he founded University Computing Company,
which became one of the largest computer service and software companies. His
data transmission company, Datran, Inc., was one of the pioneering
telecommunications ventures that broke up the telephone monopoly. Sterling
Commerce, Inc., a leader in this industry, was spun off to the Company's
stockholders in 1996 and Mr. Wyly serves as Chairman of its Executive Committee.
Mr. Wyly also serves as Chairman of Michaels Stores, Inc. and Chairman of
Scottish Annuity & Life Holdings, Ltd. and is Founding Partner of the General
Partner of Maverick Capital, Ltd. Mr. Wyly is the father of Evan Wyly, also a
director of the Company.
Sterling L. Williams, age 56. Mr. Williams co-founded the Company in 1981
and since such time has served as President, Chief Executive Officer and a
director of the Company. Mr. Williams has served as Chairman of the Board and a
director of Sterling Commerce, Inc. since December 1995. From December 1995 to
October 1996, Mr. Williams also served as Chief Executive Officer of Sterling
Commerce, Inc. Mr. Williams is a member of the Executive Committee and the 1996
and 1999 Stock Option Committees of the Board.
Donald R. Miller, Jr., age 45. Mr. Miller has served as a director of the
Company since September 1993. He has served as Vice President-Market
Development of Michaels Stores, Inc. since November 1990 and also currently
serves as a director of Michaels Stores, Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
''Exchange Act''), requires the Company's directors and executive officers, and
persons who own more than 10% of the Company's outstanding common stock, $.10
par value (the "Common Stock"), to file initial reports of ownership and reports
of changes in ownership of Common Stock with the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange (the "NYSE"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) reports they file.
Based solely on its review of such reports received by the Company with
respect to fiscal 1999 and written representations from such reporting persons,
the Company believes that, except as noted herein, all reports required to be
filed under Section 16(a) have been timely filed by such persons. A Form 4 was
filed on behalf of Sterling L.
2
<PAGE>
Williams on January 7, 2000 disclosing the previously unreported sale of Common
Stock by his spouse. The subject shares were acquired by his spouse prior to
their marriage and Mr. Williams disclaimed beneficial ownership of such
securities held and sold by his spouse.
Item 11. Executive Compensation.
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid or accrued for services rendered during each of the Company's last three
fiscal years to the Company's Chief Executive Officer and each of the other four
most highly compensated executive officers of the Company and its subsidiaries
(collectively, the ''Named Executive Officers'') based on salary and bonus
earned during fiscal 1999.
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------------------------- ---------------
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary (1) Bonus (1) Compensation(2) Options(3) Compensation
- ------------------------------- ---- -------------- --------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Sterling L. Williams........... 1999 $ 800,000 $400,000 $91,863(4) 0 $ 42,016(5)
President, Chief Executive 1998 650,000 250,000 22,539(6) 0 47,550
Officer and Director 1997 650,000 250,000 35,868(6) 3,600,000 42,252
Sam Wyly....................... 1999 1,000,000(7) 500,000 24,281(6) 0 187,313(8)
Chairman of the 1998 1,000,000(7) 500,000 38,248(6) 0 156,881
Board and Director 1997 1,000,000(7) 500,000 53,363(6) 3,600,000 182,691
Charles J. Wyly, Jr............ 1999 500,000(9) 250,000 23,308(6) 0 34,119 (10)
Vice Chairman of the 1998 500,000(9) 250,000 44,197(6) 0 41,640
Board and Director 1997 500,000(9) 250,000 29,249(6) 1,800,000 49,669
Geno P. Tolari................. 1999 520,000 255,000 30,342(6) 0 12,967(11)
Executive Vice President and 1998 485,000 240,000 25,043(6) 0 20,805
Chief Operating Officer 1997 435,000 215,000 3,302(6) 1,200,000 9,121
F. L. "Mike" Harvey............ 1999 285,000 160,660 0 0 4,800(12)
Senior Vice President and 1998 285,000 137,080 0 0 0
Group President 1997 142,500 0 76,235(13) 350,000 0
</TABLE>
- ----------
(1) Reflects salary and bonus earned during the fiscal year. In some
instances, the payment of all or a portion of salary or bonus was deferred
to a subsequent year.
(2) Excludes perquisites and other personal benefits if the aggregate amount of
such compensation is less than the lesser of $50,000 or 10% of the total
annual salary and bonus reported for such Named Executive Officer.
(3) Reflects options to purchase Common Stock. Options to purchase Common Stock
have been adjusted to reflect the two-for-one stock split dividend paid on
April 3, 1998, consisting of one share of Common Stock for each share of
Common Stock held. The Company has not granted stock appreciation rights.
(4) Includes $31,915 relating to Mr. Williams' personal use of a Company-owned
aircraft and a $29,716 reimbursement for the payment of taxes.
(5) Consists of $4,800 in Company contributions to the Sterling Software, Inc.
Savings and Security Plan (the "Savings Plan") and $37,216 in respect of
premiums on life insurance policies for Mr. Williams' benefit.
(6) Consists of reimbursements for the payment of taxes.
(footnotes continued on following page)
3
<PAGE>
(7) Includes director's fees of $500,000 paid to Sam Wyly in each of fiscal
1999, 1998 and 1997 for his services as Chairman of the Board of the
Company.
(8) Consists of $4,800 in Company contributions to the Savings Plan, $29,319 in
respect of premiums on a life insurance policy for Mr. Wyly's benefit and
$153,194 representing compensation deemed received by Mr. Wyly as a result
of insurance policy premiums paid by the Company pursuant to a split dollar
insurance agreement (which dollar amount was determined based on an
actuarial computation in accordance with SEC regulations).
(9) Includes director's fees of $250,000 paid to Charles J. Wyly, Jr. in each
of fiscal 1999, 1998 and 1997 for his services as Vice Chairman of the
Board of the Company.
(10) Consists of $4,800 in Company contributions to the Savings Plan and $29,319
in respect of premiums on a life insurance policy for Mr. Wyly's benefit.
(11) Consists of $4,800 in Company contributions to the Savings Plan and $8,167
in respect of premiums on a life insurance policy for Mr. Tolari's benefit.
(12) Consists of $4,800 in company contributions to the Savings Plan.
(13) Consists of a reimbursement of $76,235 in relocation expenses.
Option Grants in Fiscal 1999
No options to purchase Common Stock were granted to any Named Executive
Officer during fiscal 1999. The Company has not granted stock appreciation
rights.
Option Exercises in Fiscal 1999 and Fiscal Year-End Option Values
The following table provides information related to options to purchase
Common Stock exercised by the Named Executive Officers during fiscal 1999 and
the number and value of such options held at September 30, 1999, the last day of
fiscal 1999. The Company does not have any outstanding stock appreciation
rights.
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money
On Value Options at Options at
Exercise Realized (1) September 30, 1999 September 30, 1999 (2)
-------- ------------ ------------------ ----------------------
Name
---- Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sterling L. Williams 0 $ 0 3,600,000 0 $21,350,000 $ 0
Sam Wyly 0 0 1,875,000(3) 0 11,115,625(3) 0
Charles J. Wyly, Jr. 0 0 900,000(4) 0 5,337,500(4) 0
Geno P. Tolari 100,000 1,037,500 500,000 325,000 2,937,500 1,640,625
F. L. "Mike" Harvey 62,500 651,300 87,500 175,000 432,813 865,625
</TABLE>
- ----------
(1) Value was calculated based on the difference between the option price and
the closing market price of Common Stock on the date of exercise multiplied
by the number of shares to which the exercise related.
(2) The closing price of the Common Stock as reported by the NYSE on September
30, 1999 was $20.00. In accordance with SEC regulations, value is
calculated based on the difference between the option exercise price and
$20.00, multiplied by the number of shares of Common Stock underlying the
options.
(3) In fiscal 1999, Sam Wyly transferred options to purchase 1,725,000 shares of
Common Stock and disclaims beneficial ownership of such transferred options
and the underlying shares of Common Stock. The table above does not include
the number or value of securities underlying such transferred options.
(4) In fiscal 1999, Charles J. Wyly, Jr. transferred options to purchase
900,000 shares of Common Stock and disclaims beneficial ownership of such
transferred options and the underlying shares of Common Stock. The table
above does not include the number or value of securities underlying such
transferred options.
Director Compensation
Each of Messrs. Donachie, French, Miller, Moore and Steelman received an
annual directors' fee of $36,000 for his service as a director of the Company,
plus $2,500 for each meeting of the Board and each meeting of any committee of
the Board that he attended during fiscal 1999. During fiscal 1999, Sam Wyly and
Charles J. Wyly, Jr. received annual directors' fees of $500,000 and $250,000 in
their capacities as Chairman and Vice Chairman of the Board, respectively. For
fiscal 2000, Sam Wyly and Charles J. Wyly, Jr. will receive annual directors'
fees of $537,500 and $268,750, respectively. The annual retainers and meeting
fees to be received by each other director will remain at the same level for
fiscal 2000 as for fiscal 1999. Messrs. Williams and Evan Wyly did not receive
directors' fees for their services as directors in fiscal 1999.
4
<PAGE>
Pursuant to the terms of the Sterling Software, Inc. 1996 Stock Option Plan
(the "1996 Option Plan"), Messrs. Donachie and Steelman, as members of the 1996
Special Stock Option Committee of the Board, are each entitled every five years
to receive a formula grant of options to purchase 100,000 shares of Common
Stock.
See Item 13. "Certain Relationships and Related Transactions" for a
discussion of certain agreements between the Company and certain directors of
the Company.
Change-in-Control, Severance and Employment Agreements
The Company has entered into an agreement (a ''Change-in-Control
Agreement'') with each of the Named Executive Officers and certain of its other
officers. Each Change-in-Control Agreement provides for certain payments and
benefits upon the termination of employment of such person with the Company
following a Change in Control (as defined in such agreement). Each Change-in-
Control Agreement covers termination within a specified number of years after
the date of a Change in Control and requires the Company to pay to such officer,
if prior to the expiration of such period his or her employment is terminated
with or without cause by the Company (other than upon such officer's death) or
by such officer upon the occurrence of certain constructive termination events,
a lump-sum amount equal to a multiple of such officer's annual cash compensation
and to continue all benefits and perquisites for a specified number of months.
In addition, if any payments (including payments under the Change-in-Control
Agreement, any stock option agreement or otherwise) to such officer are
determined to be ''excess parachute payments'' under the Internal Revenue Code
of 1986, as amended (the "Code"), such officer would be entitled to receive an
additional payment (net of income taxes) to compensate such officer for any
excise tax imposed by the Code on such payments. The specified number of years,
the multiple and the specified number of months referred to above are seven,
700% and 84, in the case of each of Messrs. Williams, Sam Wyly and Charles J.
Wyly, Jr.; five, 500% and 60, in the case of Mr. Tolari; and two, 200% and 24 in
the case of Mr. Harvey.
The Company has also entered into an agreement (the ''CEO Agreement'') with
Sterling L. Williams, providing for a minimum base salary (subject to mutually
agreeable annual increases) and certain benefits, plus such bonuses and other
benefits which the Company and Mr. Williams may agree upon. Mr. Williams' base
salary for fiscal 1999 was $800,000. Under the terms of the CEO Agreement, upon
the termination of Mr. Williams' employment by (i) the Company (with or without
cause) or (ii) Mr. Williams as a result of a reduction in his compensation or of
the nature or scope of his authority or duties, the CEO Agreement will convert
into a seven-year consulting agreement. In such event, Mr. Williams would be
entitled to continue receiving compensation and benefits at the levels specified
in the CEO Agreement. Prior to the expiration of its seven-year term, the
consulting agreement may be terminated by Mr. Williams at any time and by the
Company at Mr. Williams' death. In the event of termination of Mr. Williams'
employment following a Change in Control, at Mr. Williams' option, the terms of
his Change-in-Control Agreement may govern such termination in lieu of the
conversion of the CEO Agreement into a consulting agreement. In the event of a
Change in Control following conversion of the CEO Agreement into a consulting
agreement, Mr. Williams would have the option of terminating the consulting
agreement and would be entitled to receive a lump-sum amount equal to all
compensation due through the unexpired portion of the seven-year consulting
agreement.
The Company has entered into an agreement (a ''Severance Agreement'') with
Mr. Tolari, Mr. Harvey and certain of its other officers (other than Messrs.
Williams, Sam Wyly and Charles J. Wyly, Jr.), providing for the continued
compensation of such officer in the event that the Company terminates his or her
employment, with or without cause. Each Severance Agreement expires a specified
number of years after the date on which notice of termination is given to him or
her by the Company and requires the Company to continue to pay such officer,
following his or her termination from employment by the Company, for a specified
number of months, the salary, bonus and certain benefits in effect prior to the
termination of his or her employment. The specified number of years and months
referred to above are five and 60 for Mr. Tolari and two and 24 for Mr. Harvey.
In the event of a termination of employment following a Change in Control, at
the officer's option, the terms of his or her Change-in-Control Agreement may
govern such termination in lieu of the terms of his or her Severance Agreement.
5
<PAGE>
SERP II
In connection with its acquisition of Informatics General Corporation
("Informatics") in 1985, the Company retained the Informatics Supplemental
Executive Retirement Plan II (''SERP II''). As of December 31, 1999, Geno P.
Tolari had accrued approximately 29 years of service under SERP II. None of the
other Named Executive Officers participates or is eligible to participate in
SERP II. The annual benefit payable upon retirement at age 65 or above under
SERP II is equal to the lesser of the following amounts: (i) 2% of the
participant's ''final average pay,'' which is equal to the highest average of
the participant's base salary plus the participant's bonuses (up to a maximum
bonus amount not to exceed 50% of the participant's base salary) over three
consecutive years of service, multiplied by the participant's years of service
and (ii) 50% of the participant's final average pay less the annuity equivalent
of the participant's account balance under the Sterling Software, Inc.
Subsidiary Retirement Plan (a former Informatics plan) as of June 30, 1987 (plus
interest) and the annuity equivalent of the assumed Company matching
contribution under the Savings Plan thereafter, plus interest (collectively, the
''annuity offset''). Benefits paid under SERP II are adjusted in the event of
disability or retirement prior to age 65. Benefits are also adjusted annually,
upward or downward, to the extent that the increase or decrease, if any, in the
Consumer Price Index for the preceding calendar year compared to the Consumer
Price Index for the next preceding calendar year exceeds 5%. Amounts paid under
SERP II are taxable as income. SERP II is not funded and benefits are paid as
they become due. Benefits under SERP II are paid in the form of a joint and 50%
survivor annuity.
The following table shows the estimated annual benefits payable upon the
retirement at age 65 to Mr. Tolari under SERP II for the indicated level of
three-year average annual compensation and various periods of service. The
amounts shown in the table may be subject to the annuity offset, the amount of
which depends on the pay history of Mr. Tolari and the return on amounts held in
the Savings Plan.
Years of Service
--------------------------------------------------------------
Remuneration 15 20 25 30 35
-- -- -- -- --
$600,000 $180,000 $240,000 $300,000 $300,000 $300,000
700,000 210,000 280,000 350,000 350,000 350,000
800,000 240,000 320,000 400,000 400,000 400,000
900,000 270,000 360,000 450,000 450,000 450,000
Executive and Stock Option Committee Interlocks and Insider Participation
During fiscal 1999, the members of the Executive Committee were primarily
responsible for determining executive compensation, and the members of the 1996
Special Stock Option Committee made decisions related to stock option grants to
executive officers. The following directors, who also are members of the
Executive Committee, 1996 Stock Option Committee, 1999 Stock Option Committee
and/or 1996 Special Stock Option Committee, participated in meetings with
respect to executive officer compensation matters: Sam Wyly, Charles J. Wyly,
Jr., Sterling L. Williams, Robert J. Donachie and Alan W. Steelman. Each of Sam
Wyly, Charles J. Wyly, Jr. and Sterling L. Williams is an executive officer of
the Company.
Sam Wyly and Charles J. Wyly, Jr. are executive officers of both the Company
and Michaels Stores, Inc., members of the executive committees and the boards of
directors of the Company, Sterling Commerce, Inc. and Michaels Stores, Inc.,
members of the stock option committees of the Company and Sterling Commerce,
Inc. and members of the board of directors of Scottish Annuity & Life Holdings,
Ltd. Sam Wyly and Charles J. Wyly, Jr. are also members of the compensation
committee of the Michaels Stores, Inc. board of directors. Sterling L. Williams
is an executive officer of the Company and a member of the executive and stock
option committees of both the Company and Sterling Commerce, Inc. Accordingly,
Sam Wyly and Charles J. Wyly, Jr. have participated in decisions related to
compensation of executive officers of each of the Company, Sterling Commerce,
Inc. and Michaels Stores, Inc. and Sterling L. Williams has participated in
decisions related to compensation of executive officers of each of the Company
and Sterling Commerce, Inc. Evan A. Wyly, a director of the Company, who served
as an officer of the Company until November 1998, is also a
6
<PAGE>
director of Michaels Stores, Inc. and Sterling Commerce, Inc. See Item 13.
''Certain Relationships and Related Transactions.''
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding the beneficial
ownership of Common Stock by each director of the Company, each of the Named
Executive Officers, the directors and executive officers of the Company as a
group and each person or entity known by the Company to own 5% or more of the
outstanding shares of Common Stock. The persons and entities named in the table
have sole voting and investment power with respect to all shares of Common Stock
owned by them, except as otherwise noted.
<TABLE>
<CAPTION>
Shares of
Common Stock
Owned Beneficially (1)
----------------------
Percent of
Name Number Class
---- -------- ----------
<S> <C> <C> <C>
Sam Wyly.............................................................. 2,678,481 (2) 3.1%
Sterling L. Williams.................................................. 3,607,520 (3) 4.2%
Charles J. Wyly, Jr................................................... 2,300,746 (4) 2.7%
Paul V. Barber........................................................ 0 *
Robert J. Donachie.................................................... 65,700 (5) *
Michael C. French..................................................... 26,600 (6) *
F. L. "Mike" Harvey................................................... 2,015 (7) *
Donald R. Miller, Jr.................................................. 80,000 (8) *
Alan W. Steelman...................................................... 50,077 (9) *
Geno P. Tolari........................................................ 512,215 (10) *
Evan A. Wyly.......................................................... 309,305 (11) *
All current directors and executive officers as a group (15 persons).. 10,206,572 (12) 11.3%
AXA Conseil Vie Assurance Mutuelle and related entities, AXA and
The Equitable Companies Incorporated.............................. 9,208,467 (13) 11.2%
Wellington Management Company, LLP.................................... 8,427,920 (14) 10.2 %
</TABLE>
- ----------
* Less than 1%.
(1) The number of shares shown includes outstanding shares owned by the person
or entity indicated on December 31, 1999 and shares underlying options
owned by such person on December 31, 1999 that were exercisable within 60
days of such date. Persons holding shares of Common Stock pursuant to the
Savings Plan generally have sole voting power, but not investment power,
with respect to such shares.
(2) Includes 1,875,000 shares of Common Stock that may be acquired upon
exercise of options granted under the 1996 Option Plan, options to purchase
150,000 of which are currently held of record by the marital trust of Sam
Wyly's spouse. Also includes 521,458 shares of Common Stock owned by family
trusts of which Sam Wyly is trustee and 277,224 shares of Common Stock held
of record by a limited partnership of which Sam Wyly is a general partner.
Also includes 4,799 shares of Common Stock held pursuant to the Savings
Plan.
(3) Includes 3,600,000 shares of Common Stock that may be acquired upon
exercise of options granted under the 1996 Option Plan, 520 shares of
Common Stock held pursuant to the Savings Plan and 6,000 shares of Common
Stock owned by family trusts of which Sterling Williams is trustee. Also
includes 1,000 shares owned by Mr. Williams' spouse of which Mr. Williams
disclaims beneficial ownership.
(4) Includes 900,000 shares of Common Stock that may be acquired upon exercise
of options granted under the 1996 Option Plan, all of which are currently
held of record by a limited partnership of which Charles J. Wyly, Jr. is
general partner. Also includes 513,148 shares of Common Stock held of
record by such limited partnership and 883,398 shares of Common Stock owned
by family trusts of which Charles J. Wyly, Jr. is trustee. Also includes
4,200 shares of Common Stock held pursuant to the Savings Plan.
(5) Includes 50,000 shares of Common Stock that may be acquired upon exercise
of options granted under the 1996 Option Plan and 4,500 shares held in a
retirement account directed by Mr. Donachie.
(6) Consists of 25,000 shares of Common Stock that may be acquired upon
exercise of options granted under the 1996 Option Plan and 1,600 shares
held in a retirement account directed by Mr. French.
(7) Includes 284 shares of Common Stock held pursuant to the Savings Plan.
(8) Consists of 75,000 shares of Common Stock that may be acquired upon
exercise of options granted under the 1996 Option Plan and 5,000 shares
held by a family partnership of which Donald R. Miller, Jr. is a general
partner.
(9) Consists of 50,000 shares of Common Stock that may be acquired upon
exercise of options granted under the 1996 Option Plan and 77 shares held
in an individual retirement account for the benefit of Mr. Steelman's son.
(10) Includes 500,000 shares of Common Stock that may be acquired upon exercise
of options granted under the 1996 Option Plan and 9,964 shares of Common
Stock held pursuant to the Savings Plan.
(11) Consists of 158,880 shares of Common Stock held by a family limited
partnership of which Evan Wyly is a general partner, 150,000 shares of
Common Stock that may be acquired upon exercise of options granted under
the 1996 Option Plan and held of record by such partnership and 425 shares
held pursuant to the Savings Plan.
(footnotes continued on following page)
7
<PAGE>
(12) Includes 489,050 shares of Common Stock that may be acquired upon exercise
of options granted under the 1996 Option Plan and 18,478 shares of Common
Stock held pursuant to the Savings Plan, in each case by executive officers
of the Company not named in the table above.
(13) Based on a Schedule 13G/A filed February 16, 1999 by AXA Conseil Vie
Assurance Mutuelle (formerly Alpha Assurances Vie Mutuelle), AXA Assurances
I.A.R.D. Mutuelle, AXA Assurances Vie Mutuelle and AXA Courtage Assurance
Mutuelle, as a group, AXA (formerly AXA-UAP) and The Equitable Companies
Incorporated. It was reported that four subsidiaries of The Equitable
Companies Incorporated, The Equitable Life Assurance Society of the United
States, Alliance Capital Management L.P., Donaldson, Lufkin & Jenrette
Securities Corporation and Wood, Struthers and Winthrop Management Corp.,
are deemed to have sole voting power with respect to 2,122,501 shares,
shared voting power with respect to 6,897,301 shares, sole dispositive
power with respect to 9,124,627 shares and shared dispositive power with
respect to 78,840 shares. The address of AXA Conseil Vie Assurance
Mutuelle is 100-101 Terrasse Boieldieu, 92042 Paris La Defense, France; the
address of AXA Assurances I.A.R.D. Mutuelle and AXA Assurances Vie Mutuelle
is 21, rue de Chateaudun, 75009 Paris, France; the address of AXA Courtage
Assurance Mutuelle is 26, rue Louis le Grand, 75002 Paris, France; the
address of AXA is 9 Place Vendome, 750081 Paris, France; and the address of
The Equitable Companies Incorporated is 1290 Avenue of the Americas New
York, New York 10104. The information regarding beneficial ownership of
Common Stock by this group is included in reliance on a report filed with
the Securities and Exchange Commission (the "SEC") by such parties, except
that the percentage of Common Stock beneficially owned is based upon the
Company's calculations made in reliance upon the number of shares of Common
Stock reported to be beneficially owned by such parties in such report and
the number of shares of Common Stock outstanding on December 31, 1999.
(14) Based on a Schedule 13G/A filed on October 18, 1999 by Wellington
Management Company, LLP ("Wellington"). Wellington has shared voting power
with respect to 5,932,014 shares and shared dispositive power with respect
to 8,427,920 shares. The address of Wellington is 75 State Street, Boston,
Massachusetts 02109. The information regarding beneficial ownership of
Common Stock by Wellington is included in reliance on a report filed with
the SEC by Wellington, except that the percentage of Common Stock
beneficially owned is based upon the Company's calculations made in
reliance upon the number of shares of Common Stock reported to be
beneficially owned by such person in such report and the number of shares
of Common Stock outstanding on December 31, 1999.
8
<PAGE>
Item 13. Certain Relationships and Related Transactions.
Pursuant to a consulting arrangement with the Company, Michael C. French, a
director of the Company, received from the Company a non-refundable retainer of
$17,500 per month during fiscal 1999 for his assistance in significant
acquisitions and other Company-related matters. Mr. French received $1,000 per
month as an employee of the Company, which amount is deducted from amounts paid
to him as a retainer. Jones, Day, Reavis & Pogue, a law firm for which Mr.
French is currently a consultant, has provided legal services to the Company.
Such firm does not charge the Company for any time spent by Mr. French on
Company-related matters.
Deutsche Banc Alex. Brown, an investment banking firm for which Paul V.
Barber, a director of the Company, served as a Managing Director until September
1998, has provided investment banking and financial advisory services to the
Company.
In February 1998, the Company's Information Technology Division entered into
an agreement with GreenMountain.com ("GreenMountain"), a Vermont-based supplier
of renewable electricity. Under that agreement, the Company provides
GreenMountain with network management services and other information systems
consulting services. In addition, in early 1999, GreenMountain entered into
another agreement with the Company's Information Technology Division for the
1999 calendar year which expanded the scope of the Company's services to include
programming and operational support for data transmissions with all utility
companies with which GreenMountain interfaces, development of an enterprise
database for GreenMountain's information network and other software development
projects for an approximate contract amount of $4.4 million. Since the
beginning of fiscal 1999, GreenMountain has incurred charges totaling $3,604,000
for services provided by that Division under such agreements. Sam Wyly is
Chairman and a director, and Evan A. Wyly is Vice Chairman and a director, of
GreenMountain.
Since July 1999, Mr. Williams has leased an apartment owned by the Company
in Paris, France for a monthly rental of $5,000.
9
<PAGE>
PART IV
<TABLE>
<CAPTION>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
3. Exhibits:
<S> <C>
2.1 Asset Purchase Agreement, dated April 18, 1997, by and between Texas Instrument Incorporated and the
Company (2), (3)
2.2 Amendment No. 1 to Asset Purchase Agreement, dated June 19, 1997, by and between Texas Instruments Incorporated,
the Company and certain subsidiaries of the Company, and Amendment No. 2 to Asset Purchase Agreement, dated
June 28, 1997, by and between Texas Instruments Incorporated, the Company and certain subsidiaries of the
Company (4)
2.3 Agreement and Plan of Merger, dated as of May 27, 1998, among the Company, Sterling Software (Connecticut), Inc.
and Mystech Associates, Inc. (2), (5)
2.4 Agreement and Plan of Merger, dated as of June 20, 1998, among the Company, Sterling Software (Southern), Inc.
and Synon Corporation (2), (6)
2.5 Agreement and Plan of Merger, dated as of August 27, 1998, among the Company, Sterling Software (Southern), Inc.
and Cayenne Software, Inc. (1), (2)
2.6 Asset Purchase Agreement, dated as of March 6, 1999, between the Company Logic Corporation, Sterling Software
(U.S.A.), Inc., Nathan C. Thompson and Michael J. Sausa (2), (7)
2.7 Agreement and Plan of Merger, dated as of March 23, 1999, among the Company, Sterling Software (Southwest), Inc.
and Interlink Computer Sciences, Inc. (2), (8)
2.8 Agreement and Plan of Merger, dated as of July 12, 1999, among the Company, Sterling Software (Arizona), Inc. and
CoreData, Inc. (1), (2)
2.9 Agreement and Plan of Merger, dated as of July 15, 1999, among the Company, Sterling Software Acquisition Corp.
and Information Advantage, Inc. (2), (15)
3.1 Restated Certificate of Incorporation of the Company (1)
3.2 Restated Bylaws of the Company (1)
4.1 Form of Common Stock Certificate (10)
4.2 Rights Agreement, dated December 18, 1996, by and between the Company and The First National Bank of Boston, as
Rights Agent (11)
4.3 First Amendment to Rights Agreement, dated as of March 12, 1998, by and between the Company and BankBoston, N.A.,
as Rights Agent (12)
10.1 Supplemental Executive Retirement Plan II regarding benefits of Geno P. Tolari under former Informatics
General Corporation Supplemental Executive Retirement Plan II (13), (14)
10.2 Sterling Software, Inc. Amended and Restated Employee Stock Purchase Plan (effective as of March 20, 1998)
(9), (14)
10.3 Sterling Software, Inc. Deferred Compensation Plan (restated effective December 21, 1998) (14), (18)
10.4 Sterling Software, Inc. Amended and Restated 1996 Stock Option Plan (1), (14)
10.5 Form of Stock Option Agreement between the Company and each of Sam Wyly and Charles J. Wyly, Jr. (14), (16)
10.6 Form of Stock Option Agreement between the Company and Sterling L. Williams (14), (16)
10.7 Form of Stock Option Agreement between the Company and Geno P. Tolari (14), (16)
10.8 Form of Stock Option Agreement between the Company and F.L. "Mike" Harvey (1), (14)
10.9 Form of Amendment to Stock Option Agreement, dated March 20, 1998, between the Company and each of its executive
officers (9), (14)
10.10 Fiscal 1999 Executive Compensation Plan for Group Presidents (14), (22)
10.11 Fiscal 2000 Executive Compensation Plan for Group Presidents (1), (14)
10.12 Consulting Agreement, dated October 1, 1996, between the Company and Michael C. French (14), (17)
10.13 CEO Agreement, dated November 15, 1999, between the Company and Sterling L.
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Williams (13), (14)
10.14 Form of Change-in-Control Severance Agreement, dated November 15, 1999, between the Company and each of Sam Wyly,
Charles J. Wyly, Jr. and Sterling L. Williams (13), (14)
10.15 Form of Change-in-Control Severance Agreement, dated November 15, 1999, between the Company and
Geno P. Tolari (13), (14)
10.16 Form of Change-in-Control Severance Agreement, dated October 22, 1999, between the Company and F.L. "Mike" Harvey
(1), (14)
10.17 Form of Severance Agreement, dated November 15, 1999, between the Company and Geno P. Tolari (13), (14)
10.18 Form of Severance Agreement, dated June 30, 1997, between the Company and F.L. "Mike" Harvey (1), (14)
10.19 Form of Amendment to Severance Agreement, dated August 15, 1997, between the Company and F.L. "Mike" Harvey
(14), (16)
10.20 Form of Indemnity Agreement between the Company and each of its directors and officers (1)
10.21 Third Amended and Restated Revolving Credit Agreement, dated July 1, 1997, by and among the Company,
BankBoston, N.A. and Bank One, Texas, National Association and BankBoston, N.A. as agent for itself and Bank One,
Texas, National Association (19)
10.22 Tax Allocation Agreement, dated March 4, 1996, between the Company and Sterling Commerce, Inc. (20)
10.23 Indemnification Agreement, dated March 4, 1996, between the Company and Sterling Commerce, Inc. (21)
10.24 Agreement dated September 19, 1996 by Sterling Commerce, Inc. for the benefit of the Company (17)
21.1 Subsidiaries of the Company (1)
23.1 Consent of Ernst & Young LLP (1)
27.1 Financial Data Schedule (1)
</TABLE>
______________________________
(1) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1999 and incorporated herein by
reference (SEC File No. 99746823).
(2) In accordance with Item 601 of Regulation S-K, the schedules and exhibits
relating to the agreement have been omitted. The Company will furnish
supplementally to the Securities and Exchange Commission such schedules and
exhibits upon request.
(3) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997 and incorporated herein by
reference (SEC File No. 97605952).
(4) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated June 30, 1997, as amended, and incorporated herein by reference (SEC
File No. 97633732).
(5) Previously filed as Appendix A to the Proxy Statement/Prospectus forming a
part of the Company's Registration Statement No. 333-53747 dated May 28,
1999 and incorporated herein by reference (SEC File No. 98632583).
(6) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated June 21, 1998 and incorporated herein by reference (SEC File No.
98652676).
(7) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999 and incorporated herein by
reference (SEC File No. 99617213).
(8) Previously filed as an exhibit to the Company's Tender Offer Statement on
Schedule 14D-1 dated March 30, 1999 and incorporated herein by reference
(SEC File No. 99579124).
(9) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 and incorporated herein by
reference (SEC File No. 98602908).
(10) Previously filed as an exhibit to the Company's Registration Statement No.
2-86825 and incorporated herein by reference (SEC File No. S766400).
(11) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated December 18, 1996 and incorporated herein by reference (SEC File No.
96682898).
11
<PAGE>
(12) Previously filed as an exhibit to the Company's Registration Statement No.
on Form 8-A/A filed April 3, 1998 and incorporated herein by reference (SEC
File No. 98587026).
(13) Filed herewith.
(14) Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this form pursuant to Item 14(c) of Form 10-K.
(15) Previously filed as an exhibit to the Company's Tender Offer Statement on
Schedule 14D-1 dated July 21, 1999 and incorporated herein by reference
(SEC File No. 99667898).
(16) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1997 and incorporated herein by
reference (SEC File No. 97724719).
(17) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1996 and incorporated herein by
reference (SEC File No. 96672084).
(18) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1998 and incorporated herein by
reference (SEC File No. 99531526).
(19) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997 and incorporated herein by
reference (SEC File No. 97660034).
(20) Previously filed as an exhibit to Registration Statement No. 33-80595 filed
by Sterling Commerce, Inc. and incorporated herein by reference (File/ID
#001-14196, SEC File No. 96042701).
(21) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 filed by Sterling Commerce, Inc. and
incorporated herein by reference (File ID #001-14196, SEC File No.
96560893).
(22) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1998 and incorporated herein by
reference (SEC File No. 98755025).
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-K/A, Amendment No. 1 to its Annual
Report on Form 10-K, to be signed on its behalf by the undersigned, thereunto
duly authorized.
STERLING SOFTWARE, INC.
Date: January 28, 2000 By /s/ STERLING L. WILLIAMS
-----------------------------------------------
Sterling L. Williams
President, Chief Executive Officer and Director
(Principal Executive Officer)
Date: January 28, 2000 /s/ R. LOGAN WRAY
-----------------------------------------------
R. Logan Wray
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
13
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
2.1 Asset Purchase Agreement, dated April 18, 1997, by and between Texas Instruments
Incorporated and the Company (2), (3)
2.2 Amendment No. 1 to Asset Purchase Agreement, dated June 19, 1997, by and between
Texas Instruments Incorporated, the Company and certain subsidiaries of the Company,
and Amendment No. 2 to Asset Purchase Agreement, dated June 28, 1997, by and between
Texas Instruments Incorporated, the Company and certain subsidiaries of the Company
(4)
2.3 Agreement and Plan of Merger, dated as of May 27, 1998, among the Company, Sterling
Software (Connecticut), Inc. and Mystech Associates, Inc. (2), (5)
2.4 Agreement and Plan of Merger, dated as of June 20, 1998, among the Company, Sterling
Software (Southern), Inc. and Synon Corporation (2), (6)
2.5 Agreement and Plan of Merger, dated as of August 27, 1998, among the Company,
Sterling Software (Southern), Inc. and Cayenne Software, Inc. (1), (2)
2.6 Asset Purchase Agreement, dated as of March 6, 1999, between the Company, Spectra
Logic Corporation, Sterling Software (U.S.A.), Inc., Nathan C. Thompson and Michael
J. Sausa (2), (7)
2.7 Agreement and Plan of Merger, dated as of March 23, 1999, among the Company,
Sterling Software (Southwest), Inc. and Interlink Computer Sciences, Inc. (2), (8)
2.8 Agreement and Plan of Merger, dated as of July 12, 1999, among the Company, Sterling
Software (Arizona), Inc. and CoreData, Inc. (1), (2)
2.9 Agreement and Plan of Merger, dated as of July 15, 1999, among the Company, Sterling
Software Acquisition Corp. and Information Advantage, Inc. (2), (15)
3.1 Restated Certificate of Incorporation of the Company (1)
3.2 Restated Bylaws of the Company (1)
4.1 Form of Common Stock Certificate (10)
4.2 Rights Agreement, dated December 18, 1996, by and between the Company and The First
National Bank of Boston, as Rights Agent (11)
4.3 First Amendment to Rights Agreement, dated as of March 12, 1998, by and between the
Company and BankBoston, N.A., as Rights Agent (12)
10.1 Supplemental Executive Retirement Plan II regarding benefits of Geno P. Tolari under former
Informatics General Corporation Supplemental Executive Retirement Plan II (13), (14)
10.2 Sterling Software, Inc. Amended and Restated Employee Stock Purchase Plan (effective
as of March 20, 1998) (9), (14)
10.3 Sterling Software, Inc. Deferred Compensation Plan (restated effective December 21,
1998) (14), (18)
10.4 Sterling Software, Inc. Amended and Restated 1996 Stock Option Plan (1), (14)
10.5 Form of Stock Option Agreement between the Company and each of Sam Wyly and Charles
J. Wyly, Jr. (14), (16)
10.6 Form of Stock Option Agreement between the Company and Sterling L. Williams (14),
(16)
10.7 Form of Stock Option Agreement between the Company and Geno P. Tolari (14), (16)
10.8 Form of Stock Option Agreement between the Company and F.L. "Mike" Harvey (1), (14)
10.9 Form of Amendment to Stock Option Agreement, dated March 20, 1998, between the
Company and each of its executive officers (9), (14)
10.10 Fiscal 1999 Executive Compensation Plan for Group Presidents (14), (22)
10.11 Fiscal 2000 Executive Compensation Plan for Group Presidents (1), (14)
10.12 Consulting Agreement, dated October 1, 1996, between the Company and Michael C.
French (14), (17)
10.13 CEO Agreement, dated November 15, 1999, between the Company and Sterling L. Williams
(13), (14)
10.14 Form of Change-in-Control Severance Agreement, dated November 15, 1999, between the
Company and each of Sam Wyly, Charles J. Wyly, Jr. and Sterling L. Williams (13),
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C>
(14)
10.15 Form of Change-in-Control Severance Agreement, dated November 15, 1999, between the
Company and Geno P. Tolari (13), (14)
10.16 Form of Change-in-Control Severance Agreement, dated October 22, 1999, between the
Company and F.L. "Mike" Harvey (1), (14)
10.17 Form of Severance Agreement, dated November 15, 1999, between the Company and Geno
P. Tolari (13), (14)
10.18 Form of Severance Agreement, dated June 30, 1997, between the Company and F.L.
"Mike" Harvey (1), (14)
10.19 Form of Amendment to Severance Agreement, dated August 15, 1997, between the Company
and F.L. "Mike" Harvey (14), (16)
10.20 Form of Indemnity Agreement between the Company and each of its directors and
officers (1)
10.21 Third Amended and Restated Revolving Credit Agreement, dated July 1, 1997, by and
among the Company, BankBoston, N.A. and Bank One, Texas, National Association and
BankBoston, N.A. as agent for itself and Bank One, Texas, National Association (19)
10.22 Tax Allocation Agreement, dated March 4, 1996, between the Company and Sterling
Commerce, Inc. (20)
10.23 Indemnification Agreement, dated March 4, 1996, between the Company and Sterling
Commerce, Inc. (21)
10.24 Agreement dated September 19, 1996 by Sterling Commerce, Inc. for the benefit of the
Company (17)
21.1 Subsidiaries of the Company (1)
23.1 Consent of Ernst & Young LLP (1)
27.1 Financial Data Schedule (1)
</TABLE>
______________________________
(1) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1999 and incorporated herein by
reference (SEC File No. 99746823).
(2) In accordance with Item 601 of Regulation S-K, the schedules and exhibits
relating to the agreement have been omitted. The Company will furnish
supplementally to the Securities and Exchange Commission such schedules and
exhibits upon request.
(3) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997 and incorporated herein by
reference (SEC File No. 97605952).
(4) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated June 30, 1997, as amended, and incorporated herein by reference (SEC
File No. 97633732).
(5) Previously filed as Appendix A to the Proxy Statement/Prospectus forming a
part of the Company's Registration Statement No. 333-53747 dated May 28,
1999 and incorporated herein by reference (SEC File No. 98632583).
(6) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated June 21, 1998 and incorporated herein by reference (SEC File No.
98652676).
(7) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999 and incorporated herein by
reference (SEC File No. 99617213).
(8) Previously filed as an exhibit to the Company's Tender Offer Statement on
Schedule 14D-1 dated March 30, 1999 and incorporated herein by reference
(SEC File No. 99579124).
(9) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 and incorporated herein by
reference (SEC File No. 98602908).
(10) Previously filed as an exhibit to the Company's Registration Statement No.
2-86825 and incorporated herein by reference (SEC File No. S766400).
(11) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated December 18, 1996 and incorporated herein by reference (SEC File No.
96682898).
(12) Previously filed as an exhibit to the Company's Registration Statement No.
on Form 8-A/A filed April 3, 1998 and incorporated herein by reference (SEC
File No. 98587026).
(13) Filed herewith.
15
<PAGE>
(14) Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this form pursuant to Item 14(c) of Form 10-K.
(15) Previously filed as an exhibit to the Company's Tender Offer Statement on
Schedule 14D-1 dated July 21, 1999 and incorporated herein by reference
(SEC File No. 99667898).
(16) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1997 and incorporated herein by
reference (SEC File No. 97724719).
(17) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1996 and incorporated herein by
reference (SEC File No. 96672084).
(18) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1998 and incorporated herein by
reference (SEC File No. 99531526).
(19) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997 and incorporated herein by
reference (SEC File No. 97660034).
(20) Previously filed as an exhibit to Registration Statement No. 33-80595 filed
by Sterling Commerce, Inc. and incorporated herein by reference (File/ID
#001-14196, SEC File No. 96042701).
(21) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996 filed by Sterling Commerce, Inc. and
incorporated herein by reference (File ID #001-14196, SEC File No.
96560893).
(22) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1998 and incorporated herein by
reference (SEC File No. 98755025).
16
<PAGE>
EXHIBIT 10.1
STERLING SOFTWARE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN II
-----------------------------------------
PREAMBLE
--------
The purpose of this Supplemental Executive Retirement Plan (this "Plan") is to
continue the benefits accrued by Geno P. Tolari under the Informatics General
Corporation Supplemental Executive Retirement Plan II (the "Previous Plan").
This Plan amends and supersedes, effective as of January 1, 1990, the Previous
Plan in its entirety with respect to the Previous Plan benefits of Geno P.
Tolari.
SECTION I
---------
Definitions
-----------
1.1 "Basic Plan Benefit" has the meaning set forth in Section 3.1.
1.2 "Code" means the Internal Revenue Code of 1986, as may be amended from
time to time.
1.3 "Committee" means the Executive Committee of the Board of Directors of the
Company (excluding, however, the Participant), which has been given
authority by the Board of Directors to administer this Plan.
1.4 "Company" means Sterling Software, Inc.
1.5 "CPI" means the Consumer Price Index or appropriate equivalent index as
determined by the Committee.
1.6 "Earnings" means base salary payable plus cash incentive compensation
payable for a calendar year, but excluding all incentive cash compensation
in excess of 50% of base salary in the calendar year in which such
incentive awards are received by the Participant or, if the Participant
elects to defer receipt of all or part of such incentive awards pursuant
to the Company's Deferred Compensation Plan or otherwise, in the calendar
year in which such incentive awards first would have been received by the
Participant, averaged over the highest consecutive three years of Service.
Notwithstanding any provision contained herein, the limitation for
recognition of incentive cash compensation as "Earnings" contained in the
previous sentence shall be applied to the Participant's base salary for
his last full calendar year of Service in determining such limitation with
respect to the Participant's incentive compensation for his last full
calendar year of Service. Salary deferred by the election of the
Participant pursuant to the Company's Deferred Compensation Plan or
otherwise shall be included in Earnings in the calendar year for which
such salary relates (i.e., the year in which the related services are
performed), cash incentive compensation so deferred shall be included in
Earnings in the calendar year in which, but for such deferral, such
incentive compensation first would have been received, and deferred
compensation (both salary and incentive compensation) that is included in
<PAGE>
Earnings pursuant to this sentence shall not be included in Earnings when
it is later actually received by the Participant. For example, annual
incentive cash compensation is earned in calendar year 1995 in the amount
of $80,000 and is paid in calendar year 1996. The $80,000 paid in 1996 is
compared to a $120,000 1996 base salary. Since $80,000 is greater than
$60,000 (50% of 1996 base salary) only $60,000 of the award will be used
towards Earnings for 1995 under the Plan. The Earnings for 1995 would be
the same even if the Participant deferred receipt of all or a portion of
the $80,000 or $120,000 until some time after 1996. "Monthly Earnings"
means Earnings divided by twelve.
1.7 "Informatics Plan" means the Informatics General Corporation Retirement
Plan, a terminated money purchase pension plan.
1.8 "Participant" means Geno P. Tolari.
1.9 "Plan" means the Sterling Software, Inc. Supplemental Executive Retirement
Plan II.
1.10 "Retirement" means the termination of the Participant's employment with
the Company on one of the retirement dates specified in Section 2.1.
1.11 "Service" means the Participant's months of service from October 5, 1970,
his date of hire by Informatics General Corporation, to Retirement. Such
service will include without duplication periods of employment with
Informatics General Corporation; the Company; and any of their
subsidiaries, affiliates, or successors. If the Participant becomes
disabled and is receiving long-term disability benefits from the Company's
Long-Term Disability Plan, such period shall be considered Service under
this Plan.
1.12 "Severance Agreement" means either or both of the Severance Agreement
dated November 15, 1999 and/or the Change in Control Severance Agreement
dated November 15, 1999, both between the Company and the Participant, as
well as any amendments made to such agreements.
1.13 "Surviving Spouse" means the Participant's spouse married to him for at
least one year prior to the earlier of the Participant's death or
Retirement.
1.14 The singular may include the plural, unless the context clearly indicates
the contrary.
SECTION II
----------
Eligibility for Benefits
------------------------
2.1 Subject to Section IV of this Plan, the Participant is eligible to retire
and receive a benefit under this Plan beginning on one of the following
dates.
(a) "Normal Retirement Date," which is the first day of the month
following the month in which the Participant reaches age 65.
2
<PAGE>
(b) "Early Retirement Date," which is the first day of any month before
the Normal Retirement Date or Disability Retirement Date, following
the month in which the Participant reaches age 55 and has 15 or more
years of Service.
(c) "Postponed Retirement Date," with the Committee's consent, which is
the first day of the month following the Participant's Normal
Retirement Date in which the Participant terminates employment with
the Company.
(d) "Disability Retirement Date," which is the first day of the month in
which the Participant begins receiving a long-term disability benefit
from the Company's Long-Term Disability Plan.
SECTION III
-----------
Amount of Benefit
-----------------
3.1 The monthly retirement benefit payable to the Participant if he retires at
his Normal Retirement Date or his Postponed Retirement Date under the Plan
will equal the lessor of (i) or (ii), where
(i) is equal to 1/6 of 1% times months of Service times Monthly
Earnings; and
(ii) is equal to 50% of Monthly Earnings less the Basic Plan Benefit (as
hereinafter defined).
For purposes of the Plan, the term "Basic Plan Benefit" means the monthly
annuity payment (as hereinafter determined), payable (x) in the form of a
50% joint and survivor annuity to the Participant if he has a Surviving
Spouse at the Normal Retirement Date or Postponed Retirement Date; or (y)
if the Participant does not have a Surviving Spouse at such time, in the
form of a single life annuity, that could be provided by the accumulation
with interest of 3% of Compensation for each calendar year of the
Participant's Service beginning with the calendar year in which he first
participated in the Informatics Plan and ending on the later of the
Participant's Normal Retirement Date or his Postponed Retirement Date.
For purposes of this Section, (1) the term "Applicable Rate" means an
annual rate of interest equal to:
(a) for periods prior to January 1, 1990, the rate credited to
contributions under the Informatics Plan for such years, and
(b) for periods after December 31, 1989, the average rate of return
credited for each completed calendar year under the fixed income
investment option of the Sterling Software, Inc. Savings and Security
(401k) Plan with the highest quality rating (excluding cash
equivalents or money marked options). The Applicable Rate for the
calendar year in which retirement occurs shall be the annual rate of
interest on
3
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30-year Treasury securities for the month of November preceding such
calendar year.
(2) the term "Compensation" means the Participant's taxable wages as
reported on Form W-2 up to any limit under Section 401(a)(17) of the Code
or any successor provision; and (3) all annuity amounts will be determined
by using the annual rate of interest on 30-year Treasury securities for
the month of November preceding the calendar year in which benefit
payments begin and the applicable mortality table as prescribed by the
Secretary of the Treasury under Section 417(e)(3) of the Code or any
successor provision.
3.2 The monthly benefit payable to the Participant if he retires on an Early
Retirement Date will equal the benefit determined in Section 3.1, except
that the 50% multiplier described in Section 3.1(ii) will be multiplied by
a fraction, the numerator of which is Service as of his Early Retirement
Date and the denominator of which is his Service projected to his Normal
Retirement Date. For example, if the Participant was 35 when hired and
retired early at age 55, his annual benefit would be determined as the
lessor of (i) or (ii), where
(i) is equal to 1/6 of 1% times months of Service at Early Retirement
Date times Monthly Earnings at Early Retirement Date; and
(ii) is equal to 33-1/3% of Monthly Earnings less the Basic Plan
Benefit;
where 33-1/3% is equal to 50% multiplied by the fraction 240/360; and
where 240 is his Service to age 55 and 360 is the service he would have
had if he had continued to work to age 65, his Normal Retirement Date. The
monthly benefit determined under this Section 3.2 will become payable on
the Participant's Normal Retirement Date. For purposes of determining the
Basic Plan Benefit under this section, all amounts to be determined under
paragraphs (a), (b) and (c) of Section 3.1 shall be determined as of the
Participant's Early Retirement Date. At the Committee's discretion,
payments may begin any time after the Participant's Early Retirement Date
and prior to his Normal Retirement Date and such monthly benefit shall be
actuarially reduced based on the interest and mortality assumptions
contained in clause (3) of the last sentence of Section 3.1.
3.3 The monthly benefit payable at a Postponed Retirement Date will be equal
to the monthly benefit determined in accordance with Section 3.1 based on
Service, Earnings, and the Participant's Basic Plan Benefit, as of the
Participant's Postponed Retirement Date.
3.4 If the Participant becomes disabled and if he receives long-term
disability benefits from the Company's Long-Term Disability Plan, the
monthly benefit payable at Normal Retirement Date to the Participant under
this Plan will be equal to the monthly benefit determined in accordance
with Section 3.1 based on Service to Normal Retirement Date and Earnings
and the Participant's Basic Plan Benefit as of the Participant's date of
disability.
4
<PAGE>
3.5 The monthly benefit payable at a Disability Retirement Date will be equal
to 66-2/3% of the Participant's Monthly Earnings as of his Disability
Retirement Date, in excess of $7,500. Such benefit, payable monthly, shall
commence on the date the Participant begins receiving a long-term
disability benefit from the Company's Long-Term Disability Plan and will
be payable as long as the Participant continues to receive a long-term
disability benefit from such plan. Benefits from this Plan, payable as a
result of a disability, will stop when benefits from the Long-Term
Disability Plan cease. At age 65, benefits will commence in accordance
with Section 3.4.
3.6 The benefits payable under the Plan, as determined in accordance with the
appropriate preceding section of this Section III, except those determined
in accordance with Section 3.5, will be payable in equal monthly
installments, adjusted if appropriate as provided in Section 3.7, during
the Participant's lifetime with benefits ceasing upon the Participant's
death; however, if, at the time of the Participant's death, he has a
Surviving Spouse, such Surviving Spouse shall receive a benefit equal to
50% of the Participant's benefit as so adjusted, commencing on the first
day of the month following the later of the month in which the surviving
Spouse reaches age 55 or the month in which the Participant dies with such
payments continuing to the death of the Surviving Spouse.
3.7 Any benefits payable hereunder, except those determined in Section 3.5,
shall be adjusted upward annually, effective each March 1, beginning with
the March 1 occurring at least 12 months after entitlement to benefit
payments first occurs, to the extent that the CPI for the preceding
calendar year exceeds a 5% increase from the next preceding calendar year.
Any benefits payable hereunder shall be adjusted downward annually,
effective each March 1, beginning with the March 1 occurring at least 12
months after entitlement to benefit payments first occurs, to the extent
that any decrease in the CPI for the preceding calendar year over the CPI
for the next preceding calendar year exceeds 5%; provided, however, that,
in no event shall the Participant's monthly benefit be less than the
monthly benefit paid to him during the first month after entitlement to
benefit payments first occurs.
3.8 To the extent that the Participant's employment is terminated in a manner
that entitles him to severance benefits under the provisions of the
Severance Agreement, (a) his benefit under this Plan shall be calculated
by giving the Participant credit as Service for the number of months for
which the Participant is entitled to severance benefits pursuant to the
terms of the Severance Agreement; and (b) any severance benefits to which
the Participant is entitled pursuant to the terms of the Severance
Agreement shall not be included in the calculation of "Earnings."
SECTION IV
----------
Payment of Retirement Benefits
------------------------------
4.1 Benefits payable in accordance with Section III, except Section 3.5, will
commence on the Participant's Normal or Postponed Retirement Date or upon
a date determined by the Committee in accordance with Section 3.2. The
last payment will be on the first day of
5
<PAGE>
the month in which the Participant dies unless he has a Surviving Spouse
in accordance with Section 3.6.
SECTION V
---------
Death Benefits Payable
----------------------
5.1 If the Participant dies before Retirement, excluding Disability
Retirement, his Surviving Spouse will receive a monthly benefit equal to
50% of the amount of the Participant's monthly benefit determined in
accordance with Section 3.1 as if the Participant had retired and
commenced receiving a benefit on the first day of the month following the
date of his death.
5.2 A surviving Spouse's benefits will be payable monthly, and will commence
on the first day of the month following the later of the month in which
the Surviving Spouse reaches age 55 or the month in which the Participant
dies. The last payment will be on the first day of the month in which the
Surviving Spouse dies. Cost of living adjustments determined as described
in Section 3.7 will apply to a Surviving Spouse's benefits.
SECTION VI
----------
Miscellaneous
-------------
6.1 Nothing contained herein will confer upon the Participant the right to be
retained in the service of the Company, nor will it interfere with the
right of the Company to discharge or otherwise deal with the Participant
without regard to the existence of this Plan.
6.2 This Plan is unfunded, and the Company will make Plan benefit payments
solely on a current disbursement basis.
6.3 To the maximum extent permitted by law, no benefit under this Plan shall
be assignable or subject in any manner to alienation, sale, transfer,
claims of creditors, pledge, attachment, or encumbrance of any kind.
6.4 The Committee may adopt rules and regulations to assist it in the
administration of the Plan.
6.5 The Participant shall receive a copy of this Plan.
6.6 The Plan will be construed and governed in all respects in accordance with
applicable federal law and, to the extent not preempted by such federal
law, in accordance with the laws of the State of Texas, including without
limitation, the Texas statute of limitations, but without giving effect to
the principles of conflicts of laws of such State.
6.7 Subject to the following provisions of this Section 6.7, this Plan may be
terminated or from time to time amended by the Committee in its
discretion. Notwithstanding the preceding sentence or any other provision
herein to the contrary, (a) this Plan may not be terminated or
6
<PAGE>
amended if such termination or amendment would reduce or adversely affect
benefits previously accrued hereunder, and (b) from and after the date of
a Change in Control (as that term is defined below), this Plan may not be
terminated or amended in any manner that could reasonably be expected to
have an adverse effect on the Participant or his Surviving Spouse, without
the prior written consent of the Participant or such Surviving Spouse. As
used herein, the term "Change in Control" shall mean the occurrence of any
of the following events:
(i) The Company is merged, consolidated or reorganized into
or with another corporation or other legal person, and as a result of
such merger, consolidation or reorganization less than two-thirds of
the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors ("Voting Stock") of
such corporation or person immediately after such transaction are
held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal
person, and less than two-thirds of the combined voting power of the
then-outstanding Voting Stock of such corporation or person is held
in the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-
1 (or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), disclosing that any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing 20% or
more of the combined voting power of the then-outstanding Voting
Stock of the Company;
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of
the Company has occurred or will occur in the future pursuant to any
then-existing contract or transaction; or
(v) If, at any time during any period of two consecutive
years, individuals who at the beginning of any such period constitute
the directors of the Company cease for any reason to constitute at
least a majority thereof; provided, however, that for purposes of
this clause (v) each director (other than a director whose initial
assumption of office is in connection with an actual or threatened
election contest) who is first elected, or first nominated for
election by the Company's stockholders, by a vote of at least two-
thirds of the directors of the Company (or a committee thereof) then
still in office who were directors of the Company at the beginning of
any such period will be deemed to have been a director of the Company
at the beginning of such period.
Notwithstanding the foregoing provisions of clauses (iii) or (iv), unless
otherwise determined in
7
<PAGE>
a specific case by majority vote of the board of directors of the Company,
a "Change in Control" shall not be deemed to have occurred for purposes of
clause (iii) or (iv) solely because (A) the Company, (B) an entity in
which the Company directly or indirectly beneficially owns 50% or more of
the outstanding Voting Stock (a "Subsidiary"), or (C) any Company-
sponsored employee stock ownership plan or any other employee benefit plan
of the Company or any Subsidiary either files or becomes obligated to file
a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form
or report or item therein) under the Exchange Act disclosing beneficial
ownership by it of shares of Voting Stock of the Company, whether in
excess of 20% or otherwise, or because the Company reports that a change
in control of the Company has occurred or will occur in the future by
reason of such beneficial ownership or any increase or decrease thereof.
STERLING SOFTWARE, INC.
By: /s/ Don J. McDermett, Jr.
----------------------------------
Don J McDermett, Jr.
Senior Vice President & General
Counsel
8
<PAGE>
EXHIBIT 10.13
CEO AGREEMENT
THIS CEO AGREEMENT ("Agreement") is made and entered into as of the 15th
day of November, 1999, by and between Sterling Software, Inc., a Delaware
corporation ("Sterling Software"), and Sterling L. Williams, an individual
("Williams").
RECITALS:
WHEREAS, Sterling Software acquires, develops, markets and supports a broad
range of products and services; and
WHEREAS, Sterling Software desires to continue to retain Williams as its
President and Chief Executive Officer; and
WHEREAS, Williams is willing to continue to accept such responsibilities;
NOW, THEREFORE, in consideration of the premises and covenants contained
herein and other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
AGREEMENTS:
1. Employment. Williams agrees to render such managerial services as are
----------
customarily required of the President and Chief Executive Officer, and
Sterling Software agrees to utilize such services on the terms and
conditions contained herein. Sterling Software acknowledges that
Williams serves as Chairman of the Board of Directors and as a
consultant to Sterling Commerce, Inc. ("Sterling Commerce"). Sterling
Software agrees that such service to Sterling Commerce is not
inconsistent with this Agreement, the level of Executive's
compensation at Sterling Software having been determined by Sterling
Software with knowledge of Williams' service to Sterling Commerce and
the demands on Williams' time and attention required by such service.
2. Compensation and Benefits. As consideration for Williams' agreement
-------------------------
to enter into this Agreement and the services to be performed
hereunder, Williams shall be paid an annual salary, which shall be
$875,000 during Sterling Software's fiscal year ending September 30,
2000 ("Fiscal 2000"), which amount shall be subject such future
increases as shall be mutually agreeable. Williams shall also be
entitled to earn additional compensation in the nature of bonuses,
deferred compensation and other incentive compensation as mutually
agreed. For Fiscal 2000, Williams shall be entitled to an incentive
cash bonus of $425,000. During the term of this Agreement, Williams
shall be entitled to participate in all
-1-
<PAGE>
Employee Benefits (as hereinafter defined). In addition, Williams
shall be entitled to such additional personal benefits and perquisites
as may be mutually agreed. As used herein, "Employee Benefits" means
the perquisites, benefits and service credit for perquisites or
benefits as provided under any and all employee perquisite or benefit
policies, plans, programs or arrangements in which Williams is
entitled to participate as of the date of this Agreement, including
without limitation any stock option, stock purchase, stock
appreciation, savings, pension, 401(k), employee stock ownership
(ESOP), employee stock purchase (ESPP), supplemental executive
retirement, or other retirement income or welfare benefit, deferred
compensation, incentive compensation, group or other life, health,
medical/hospital or other insurance (whether funded by actual
insurance or self-insured by Sterling Software), disability, salary
continuation, expense reimbursement, executive automobile, corporate
aircraft usage, tax and financial planning, club memberships,
incentive travel, tax reimbursement and other employee benefit
policies, plans, programs or arrangements that may now exist or any
successor policies, plans, programs or arrangements that may be
adopted hereafter by Sterling Software.
3. Term. The base term of this Agreement shall commence on the date
----
first set forth above and shall continue in effect until such time as
this Agreement is automatically converted into a consulting agreement
pursuant to subparagraph 5(i) hereof; thereafter, the consulting
agreement shall continue for a period of seven years.
4. Termination of Employment. The parties acknowledge that Williams is
-------------------------
employed "at will" and may be terminated by Sterling Software at any
time with or without cause.
5. Consulting Agreement.
--------------------
(i) This Agreement shall be automatically converted into a
consulting agreement in the event that (a) Sterling Software
terminates Williams' employment with or without cause, or (b)
Williams terminates his employment as a result of a reduction in
Williams' salary, other compensation or his benefits or
perquisites, in each case below the level in effect for the
immediately preceding twelve month period; or as a result of
Williams' determination, in his sole judgment, that there has
been a significant reduction in the nature or scope of Williams'
authorities or duties.
(ii) The consulting agreement may be terminated by Williams in
writing at any time, but any compensation which has been paid as
of the date of termination shall be deemed to have been earned
and there shall be no repayment of any sums previously paid. In
addition, Williams shall have the right to terminate the
consulting agreement in accordance with
-2-
<PAGE>
paragraph 6 hereof. Sterling Software may terminate the
consulting agreement upon Williams' death.
(iii) During the term of the consulting agreement, Williams shall
serve in an advisory capacity to the Executive Committee of the
Board of Directors of Sterling Software, reporting directly to
the Executive Committee for the purpose of making operational,
strategic and financial recommendations affecting the general
welfare of Sterling Software. Williams shall make himself
available for a reasonable amount of such consulting and
advisory services during normal business hours and upon
reasonable notice, at such times and places as shall be
mutually agreed upon. In no event shall Williams expend in
excess of thirty (30) days per year performing such services
for Sterling Software.
(iv) Any and all confidential information of Sterling Software to
which Williams may become privy in the performance of his
consulting services shall be treated as confidential by him and
shall not be communicated to or discussed with any party who is
not an officer or director of Sterling Software, unless
Williams is specifically authorized to do so by the Executive
Committee of the Board of Directors of Sterling Software.
During the term of the consulting agreement, Williams shall not
use any information delivered to him by Sterling Software for
his personal gain.
(v) During the term of the consulting agreement, Williams shall not
act as a financial consultant or advisor to any other person,
partnership, corporation or other business association in the
computer industry (software, hardware or services) without the
prior written consent of Sterling Software, such consent not to
be unreasonably withheld; provided, however, that Williams'
continued service to Sterling Commerce shall not be prohibited
by this subparagraph (v).
(vi) As consideration for his advisory and consulting services,
Williams shall be entitled to receive all of the compensation
and to participate in all Employee Benefits (or the cash
equivalent thereof) described in paragraph 2 hereof; provided,
--------
however, that in no event will Sterling Software be required to
-------
make any new grants of options to Williams under any Sterling
Software stock option plan after conversion of this Agreement
into a consulting agreement. In the event this Agreement is
automatically converted into a consulting agreement pursuant to
subparagraph (i) hereof, the level of Williams' compensation
shall be the greater of the compensation and benefits of the
type described in paragraph 2 hereof in effect on the date of
his termination or the compensation and benefits of the type
described in paragraph 2 hereof in effect twelve (12) months
prior to the date of termination. This compensation shall be
paid during the term of the consulting agreement without regard
to whether Sterling
-3-
<PAGE>
Software utilizes the services of Williams for the maximum
thirty (30) days per year specified in subparagraph (iii)
hereof, or does not avail itself of his services at any time
during the term hereof. In addition, Williams shall be
reimbursed for all other authorized expenses, such as food and
first class travel and lodging, which are incurred at the
direction of Sterling Software consistent with the terms
hereof. During the term of the consulting agreement, Sterling
Software shall make available to Williams all office facilities
of Sterling Software, including secretarial, telephone and
office space, or reimburse Williams for the cost of obtaining
comparable facilities from third parties.
6. Change-in-Control. Sterling Software and Williams are parties to a
-----------------
Change-in-Control Severance Agreement, dated the date hereof (as such
agreement may be amended from time to time, the "Change-in-Control
Agreement"). Notwithstanding anything contained in this Agreement to
the contrary, in the event William's employment with Sterling Software
is terminated under circumstances in which this Agreement would
automatically be converted into a consulting agreement and Williams
would otherwise be entitled to receive payments and benefits under
both this Agreement and the Change-in-Control Agreement, Williams
shall have the right to elect to have this Agreement converted into a
consulting agreement pursuant to the terms hereof or to receive
payments and benefits under the Change-in-Control Agreement, but not
both. Within five business days following the termination of
William's employment with Sterling Software under circumstances in
which this paragraph 6 would apply, Sterling Software shall provide
Williams, in writing, a reasonably detailed determination of the
payments and other benefits under each of such consulting agreement
and the Change-in-Control Agreement. Williams shall make the election
provided for in this paragraph 6 within thirty calendar days after
William's receipt of the written determination referred to in the
preceding sentence; provided, however, that if such election is not so
made within such 30-day period, Williams shall be irrevocably deemed
to have elected to receive payments and benefits under the Change-in-
Control Agreement. Prior to the date on which Williams makes or is
deemed to have made the election referred to above, he shall receive
all of the compensation and to participate in all of the Employee
Benefits provided for in paragraph 5(vi) of this Agreement as if it
had been converted to a consulting agreement.
In the event of a Change-in-Control following the conversion of this
Agreement into a consulting agreement, Williams shall have the option
of terminating the consulting agreement in writing at any time
following such Change-in-Control. Upon such termination of the
consulting agreement, Williams shall be entitled to receive in one
lump sum the aggregate of all unpaid compensation, and the cash
equivalent of all foregone Employee Benefits, in each case as provided
for in subparagraph 5(vi), through the unexpired portion of the seven
(7) year consulting agreement. Such lump sum shall be payable within
ninety (90) days following
-4-
<PAGE>
Williams' notice of termination of the consulting agreement. Upon such
termination by Williams, Williams shall have no further obligations
pursuant to subparagraphs 5(iii) or (v).
7. Termination of Prior Agreements. Upon the execution and delivery of
-------------------------------
this Agreement, the CEO Agreement between Williams and Sterling
Software, dated February 12, 1996, as amended to the date hereof,
shall terminate automatically and shall thereafter be of no further
force or effect. Except with respect to the Change-in-Control
Agreement, this Agreement supersedes all prior agreements,
arrangements and understandings with respect to the subject matter
hereof.
9. Miscellaneous.
-------------
(i) Notices, demands, payments, reports and correspondence shall be
addressed to the parties hereto at the address for such party
set forth below or such other places as may from time to time
be designated in writing to the other party. Notices hereunder
shall be deemed to be given on the date such notices are
actually received.
If to Sterling Software, to: 300 Crescent Court
Suite 1200
Dallas, Texas 75201
Attention: President
If to Williams, to: Mr. Sterling L. Williams
c/o Sterling Software, Inc.
300 Crescent Court
Suite 1200
Dallas, Texas 75201
(ii) This Agreement shall be binding upon Sterling Software and
Williams and their respective successors, assigns, heirs and
personal representatives.
(iii) The substantive laws of the State of Delaware shall govern the
validity, construction, enforcement and interpretation of the
provisions of this Agreement.
[Remainder of page intentionally left blank -- signature page follows.]
-5-
<PAGE>
Executed by the parties hereto as of the date first set forth above.
--------------------------------------------
Sterling L. Williams
STERLING SOFTWARE, INC.
By: ---------------------------------------
Don J. McDermett, Jr.
Senior Vice President & General Counsel
-6-
<PAGE>
EXHIBIT 10.14
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement"), dated as of
November 15, 1999, by and between Sterling Software, Inc., a Delaware
corporation (the "Company"), and --------------- (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company and is expected
to make major contributions to the profitability, growth and financial strength
of the Company;
WHEREAS, the Company recognizes that, as is the case of most companies, the
possibility of a Change in Control (as hereinafter defined) exists;
WHEREAS, the Company desires to assure itself of both present and future
continuity of management and desires to establish certain minimum severance
benefits for certain of its senior executives, including the Executive,
applicable in the event of a Change in Control; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to remain in the ongoing employ of the Company;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms: In addition to terms defined elsewhere herein,
---------------------
the following terms have the following meanings when used in this Agreement with
initial capital letters:
(a) "Base Pay" means the sum of (i) the Executive's annual fixed or
base compensation, as may be determined from time to time by the Company,
whether acting through its Board of Directors (the "Board") or a committee
thereof, its President and CEO or otherwise, and (ii) the annual fees, if
any, paid or payable to the Executive in respect of his service during any
fiscal year of the Company as a member of the Board and any committee
thereof.
(b) "Change in Control" means the occurrence during the Term of any
of the following events:
(i) The Company is merged, consolidated or reorganized into
or with another corporation or other legal person, and as a result of
such merger, consolidation or reorganization less than two-thirds of
the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors ("Voting Stock") of
such corporation or person immediately after such transaction are
held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal
person, and less than two-thirds of the combined voting power of the
then-outstanding Voting Stock of such corporation or
1
<PAGE>
person is held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), disclosing that any person (as the term "person" is
used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has
become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing 20% or
more of the combined voting power of the then-outstanding Voting
Stock of the Company;
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of
the Company has occurred or will occur in the future pursuant to any
then-existing contract or transaction; or
(v) If, at any time during any period of two consecutive
years, individuals who at the beginning of any such period constitute
the Directors of the Company cease for any reason to constitute at
least a majority thereof; provided, however, that for purposes of
this clause (v) each Director (other than a Director whose initial
assumption of office is in connection with an actual or threatened
election contest) who is first elected, or first nominated for
election by the Company's stockholders, by a vote of at least two-
thirds of the Directors of the Company (or a committee thereof) then
still in office who were Directors of the Company at the beginning of
any such period will be deemed to have been a Director of the Company
at the beginning of such period.
Notwithstanding the foregoing provisions of Sections 1(b)(iii) or 1(b)(iv),
unless otherwise determined in a specific case by majority vote of the
Board, a "Change in Control" shall not be deemed to have occurred for
purposes of Section 1(b)(iii) or 1(b)(iv) solely because (A) the Company,
(B) an entity in which the Company directly or indirectly beneficially owns
50% or more of the outstanding Voting Stock (a "Subsidiary"), or (C) any
Company-sponsored employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either files or becomes
obligated to file a report or a proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange Act disclosing
beneficial ownership by it of shares of Voting Stock of the Company,
whether in excess of 20% or otherwise, or because the Company reports that
a change in control of the Company has occurred or will occur in the future
by reason of such beneficial ownership or any increase or decrease thereof.
(c) "Employee Benefits" means the perquisites, benefits and service
credit for perquisites or benefits as provided under any and all employee
perquisite or benefit policies, plans, programs or arrangements in which
the Executive is entitled to participate, including without limitation any
stock option, stock purchase, stock appreciation, savings, pension, 401(k),
employee stock ownership (ESOP), employee stock purchase (ESPP),
supplemental
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executive retirement, or other retirement income or welfare benefit,
deferred compensation, incentive compensation, group or other life, health,
medical/hospital or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense
reimbursement, executive automobile, corporate aircraft usage, tax and
financial planning, club memberships, incentive travel, tax reimbursement
and other employee benefit policies, plans, programs or arrangements that
may now exist or any successor policies, plans, programs or arrangements
that may be adopted hereafter by the Company.
(d) "Incentive Pay" means the aggregate annual bonus, incentive or
other payments of cash compensation, in addition to Base Pay, made or
authorized or contemplated to be made in regard to services rendered by the
Executive in any fiscal year pursuant to any bonus, incentive compensation,
profit-sharing, performance, discretionary pay or similar agreement,
policy, plan, program or arrangement (whether or not funded) of the Company
or any successor thereto.
(e) "Severance Period" means the period of time commencing on the
date of the first occurrence of a Change in Control and continuing until
the earliest of (i) the seventh anniversary of the occurrence of the Change
in Control, or (ii) the Executive's death; provided, however, that
commencing on each anniversary of the Change in Control, the Severance
Period will automatically be extended for an additional year unless, not
later than 90 calendar days prior to such anniversary date, either the
Company or the Executive shall have given written notice to the other that
the Severance Period is not to be so extended.
(f) "Term" means the period commencing as of the date first set
forth above and expiring as of the later of (i) the close of business on
December 31, 2004, or (ii) the expiration of the Severance Period;
provided, however, that (A) commencing on January 1, 2001 and each January
1 thereafter, the Term of this Agreement will automatically be extended for
an additional year unless, not later than September 30 of the immediately
preceding year, the Company or the Executive shall have given written
notice that it or the Executive, as the case may be, does not wish to have
the Term extended and (B) subject to the last sentence of Section 8, if,
prior to a Change in Control, the Executive ceases for any reason to be an
employee of the Company or any Subsidiary, thereupon without further action
the Term shall be deemed to have expired and this Agreement will
immediately terminate and be of no further effect.
2. Operation of Agreement: This Agreement will be effective and binding
----------------------
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs. Upon the occurrence of a Change in Control at any time
during the Term, without further action, this Agreement shall become immediately
operative.
3. Termination Following a Change in Control: (a) In the event of the
-----------------------------------------
occurrence of a Change in Control, the Executive's employment may be terminated
by the Company during the Severance Period. If, during the Severance Period,
the Executive's employment is terminated by the Company or any Subsidiary other
than as a result of the Executive's death, the Executive will be entitled to the
compensation and benefits provided by Section 4 hereof.
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(b) In the event of the occurrence of a Change in Control, the
Executive may terminate his or her employment with the Company during the
Severance Period, with the right to the compensation and benefits as provided in
Section 4, upon the occurrence of one or more of the following events
(regardless of whether any other reason for such termination exists or has
occurred, including without limitation, other employment):
(i) Failure to elect or reelect or otherwise to maintain the
Executive in the office of the Company which the Executive held
immediately prior to a Change in Control, or the removal of the
Executive as a Director of the Company (or any successor thereto) if
the Executive shall have been a Director of the Company immediately
prior to the Change in Control;
(ii) (A) A significant adverse change in the nature or scope
of the authorities, powers, functions, responsibilities or duties
attached to the position which the Executive held immediately prior
to the Change in Control, (B) a reduction in the aggregate amount of
the Executive's Base Pay or Incentive Pay as in effect for the
Executive immediately prior to the occurrence of a Change in Control
or such higher amount of Base Pay or Incentive Pay as may thereafter
be determined by the Company, whether acting through the Board or a
committee thereof, its President and CEO or otherwise, or (C) the
termination or denial of the Executive's rights to Employee Benefits
or a reduction in the scope or value thereof, any of which is not
remedied by the Company within 10 calendar days after receipt by the
Company of written notice from the Executive of such change,
reduction, termination or denial, as the case may be;
(iii) A determination by the Executive (which determination
will be conclusive and binding upon the parties hereto provided it
has been made in good faith and in all events will be presumed to
have been made in good faith unless otherwise shown by the Company by
clear and convincing evidence) that a change in circumstances has
occurred following a Change in Control, including, without
limitation, a change in the scope of the business or other activities
for which the Executive was responsible immediately prior to the
Change in Control, which has rendered the Executive substantially
unable to carry out, has substantially hindered the Executive's
performance of, or has caused the Executive to suffer a substantial
reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to the position held by the
Executive immediately prior to the Change in Control, which situation
is not remedied within 10 calendar days after written notice to the
Company from the Executive of such determination. For the avoidance
of doubt, but without limiting the generality of the foregoing, if
the Company or its successor following a Change in Control ceases to
be an independent, publicly held, New York Stock Exchange-listed
company, the Executive may in good faith determine that such
circumstance, in and of itself, constitutes a substantial reduction
in his authorities, powers, functions, responsibilities or duties;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all
of its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or
otherwise) to which all or substantially all of its business and/or
assets have been transferred (directly or by operation of law)
assumed all duties and obligations of the Company under this
Agreement pursuant to Section 10(a);
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(v) The Company relocates its principal executive offices, or
requires the Executive to have his principal location of work
changed, to any location which is in excess of 25 miles from the
location thereof immediately prior to the Change in Control, or
requires the Executive to travel away from his office in the course
of discharging his responsibilities or duties hereunder at least 20%
more (in terms of aggregate days in any calendar year or in any
calendar quarter when annualized for purposes of comparison to any
prior year) than was required of the Executive in any of the three
full years immediately prior to the Change in Control without, in
either case, his prior written consent; or
(vi) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company or
any successor thereto.
(c) A termination by the Company pursuant to Section 3(a) or by the
Executive pursuant to Section 3(b) will not affect any rights which the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights shall
be governed by the terms thereof. Notwithstanding anything in this
Agreement to the contrary, in the event that the Company and the Executive
are parties to any other severance or similar agreement (a "Severance
Agreement") pursuant to which the Executive is entitled to receive payments
and/or benefits upon the termination of his employment with the Company,
and the Executive's employment with the Company is terminated under
circumstances in which the Executive would otherwise be entitled to receive
payments and benefits under both this Agreement and a Severance Agreement,
the Executive shall have the right to elect to receive payments and
benefits under either this Agreement or a Severance Agreement, but not both
(except that the Executive may in all events receive all payments and
benefits to which he or she is entitled under a Severance Agreement during
the period between the Termination Date and the Election Date (as such
terms are defined below)). Within five business days following the date of
the termination of the Executive's employment with the Company under the
circumstances described in the preceding sentence, which shall be the
effective date of such termination if the termination is pursuant to
Section 3(a) or such other date that may be specified by the Executive if
the termination is pursuant to Section 3(b), the Company shall provide the
Executive, in writing, a reasonably detailed determination of the payments
and other benefits under each of this Agreement and the applicable
Severance Agreement. The Executive shall make the election provided for in
this Section 3(c) by providing the Company written notice thereof within 30
days after the Executive's receipt of the written determination referred to
in the preceding sentence; provided, however, that if such election is not
so made within such 30-day period, the Executive shall be irrevocably
deemed to have elected to receive payments and benefits under this
Agreement (the date on which such election is so made or deemed to have
been made being the "Election Date").
4. Severance Compensation and Benefits: (a) If, following the occurrence
-----------------------------------
of a Change in Control, the Company terminates the Executive's employment during
the Severance Period pursuant to Section 3(a) (other than as a result of the
Executive's death), or if the Executive terminates his employment during the
Severance Period pursuant to Section 3(b), the Company will:
(i) pay to the Executive, within five business days after the
Termination Date (or, in the event that the circumstance described in
Section 3(c) hereof is applicable, within
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five business days after the Election Date), a lump sum payment (the
"Severance Payment") in an amount equal to seven times the sum of (A) Base
Pay (the aggregate amount and the components of which shall be determined
based on the highest rate in effect for any period prior to the Termination
Date), plus (B) Incentive Pay in an amount equal to the higher of (i) the
highest annual amount of Incentive Pay paid to or earned by the Executive
with respect to any fiscal year during the three fiscal years immediately
preceding the fiscal year in which the Termination Date occurs, and (ii)
100% of the Incentive Pay amount payable upon the attainment of 100% of the
objective(s) and 100% of the targeted or planned amount(s) specified in or
pursuant to the applicable agreement, policy, plan, program or arrangement,
whether or not attained as of such Termination Date, for such Executive for
the fiscal year in which the Termination Date occurs; provided however,
that in the event that the circumstance described in Section 3(c) hereof is
applicable, the Severance Payment shall be reduced by the aggregate amount
of all cash payments, if any, previously received by the Executive pursuant
to the Severance Agreement prior to the Election Date. For purposes of this
Agreement, the term "Termination Date" means the effective date of the
termination of Executive's employment with the Company if the termination
is pursuant to Section 3(a) hereof or such other date as may be specified
by the Executive if the termination is pursuant to Section 3(b) hereof.
(ii) (A) for 84 months following the Termination Date (the
"Continuation Period"), arrange at its sole expense, to provide the
Executive with Employee Benefits that are substantially similar to the
better of (when considered in the aggregate) (X) those Employee Benefits
which the Executive was receiving or entitled to receive immediately prior
to the Change in Control, or (Y) those Employee Benefits which the
Executive was receiving or entitled to receive immediately prior to the
Termination Date, and (B) such Continuation Period will be considered
service with the Company for the purpose of determining service credits
under or in respect of any Employee Benefits applicable to the Executive,
his dependents or his beneficiaries; provided that for purposes of this
Section 4(a)(ii), Employee Benefits shall not include any Incentive Pay and
nothing in this Section 4(a) shall be construed to require the Company to
make any new grants of stock options to the Executive. If and to the
extent that any Employee Benefit described in subsection (A) or (B) of this
Section 4(a)(ii) cannot be paid or provided under any applicable law or
regulation or under the terms of any policy, plan, program or arrangement
of the Company, then the Company will take all action necessary to ensure
that such Employee Benefit is provided through other means to the
Executive, his dependents and beneficiaries, as applicable, or the Company
shall timely pay to the Executive a lump sum amount in cash equal to the
fair market value of such foregone Employee Benefit. Notwithstanding the
immediately preceding sentence, the Company shall make any payment that may
be necessary to ensure that the Executive's after tax position with respect
to any Employee Benefits received pursuant to this Section 4(a)(ii) is not
worse than the Executive's after-tax position in the event such Employee
Benefits had been provided to the Executive while he was employed by the
Company.
(iii) for the life of the Executive and his or her spouse,
arrange, at the Company's sole cost and expense, and at no cost to the
Executive and his or her spouse, to provide (A) the Executive and his or
her spouse with the "Benefits" provided to the Executive and his or her
spouse under Section 4.01(b)(ii) of the Company's Employee Health Benefit
Plan, as amended as of December 31, 1999 (the "Health Plan"), it being
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acknowledged that the Executive met the requirements of Section 4.01(b)(ii)
of the Health Plan as of the "Retiree Record Date", and (B) the Executive
with the opportunity to elect to receive health benefits for his or her
eligible dependents pursuant to Section 4.01(b)(iv) of the Health Plan. The
terms "Benefits" and "Retiree Record Date" shall have the respective
meanings ascribed to such terms in the Health Plan.
(iv) for 84 months following the Termination Date, make
available to the Executive office facilities and support reasonably
comparable to that made available to the Executive immediately prior to the
Termination Date (including secretarial support, telephone, office
equipment, office space and furnishings), or reimburse the Executive for
the cost of obtaining comparable office facilities and support from third
parties and pay the Executive any amount required to defray any incremental
tax liability incurred by the Executive as the result of such
reimbursement.
(b) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit required
to be made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest equal
to the so-called composite "prime rate" as quoted from time to time during the
relevant period in the Southwest Edition of The Wall Street Journal. Such
-----------------------
interest will be payable as it accrues on demand. Any change in such prime rate
will be effective on and as of the date of such change.
(c) Notwithstanding any other provision of this Agreement to the
contrary, the parties' respective rights and obligations under this Section 4
and under Sections 5 and 7 will survive any termination or expiration of this
Agreement or the termination of the Executive's employment following a Change in
Control for any reason whatsoever.
5. Certain Additional Payments by the Company: (a) Anything in this
------------------------------------------
Agreement to the contrary notwithstanding, in the event that this Agreement
shall become operative and it shall be determined (as hereafter provided) that
all or any portion of any payment or distribution by the Company or any of its
affiliates to or for the benefit of the Executive pursuant to the terms of this
Agreement or otherwise, including under any stock option or other agreement,
plan, policy, program or arrangement (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (or any successor provision thereto), by reason of being
considered "contingent on a change in ownership or control" of the Company,
within the meaning of Section 280G of the Code (or any successor provision
thereto), or to any similar tax imposed by state or local law, or any interest
or penalties with respect to such tax (such tax or taxes, together with any
such interest and penalties, being hereafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment or payments (collectively, a "Gross-Up Payment"); provided, however,
that no Gross-Up Payment shall be made with respect to the Excise Tax, if any,
attributable to (i) any incentive stock option, as defined by Section 422 of the
Code ("ISO") granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in tandem with an
ISO described in clause (i). The Gross-Up Payment shall be in an amount such
that, after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.
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(b) Subject to the provisions of Section 5(f), all determinations
required to be made under this Section 5, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a Gross-
Up Payment is required to be paid by the Company to the Executive and the amount
of such Gross-Up Payment, if any, shall be made by a nationally recognized
accounting firm (the "Accounting Firm") selected by the Executive in his sole
discretion. The Executive shall direct the Accounting Firm to submit its
determination and detailed supporting calculations to both the Company and the
Executive within 30 calendar days after the Termination Date, if applicable, and
any such other time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is payable by
the Executive, the Company shall pay the required Gross-Up Payment to the
Executive within five business days after receipt of such determination and
calculations with respect to any Gross-Up Payment to the Executive. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall, at the same time as it makes such determination, furnish the Company and
the Executive a written opinion to the effect that the Executive has substantial
authority not to report any Excise Tax on his federal, state or local income or
other tax return. As a result of the uncertainty in the application of Section
4999 of the Code (or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax law at the time of
any determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made (an
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its remedies pursuant
to Section 5(f) and the Executive thereafter is required to make a payment of
any Excise Tax, the Executive shall direct the Accounting Firm to determine the
amount of the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and the Executive as
promptly as possible. Any such Underpayment shall be promptly paid by the
Company to, or for the benefit of, the Executive within five business days after
receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the Accounting
Firm access to and copies of any books, records and documents in the possession
of the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by this Section 5. Any determination by the Accounting Firm as to
the amount of any Gross-Up Payment or Underpayment shall be binding upon the
Company and the Executive.
(d) The federal, state and local income or other tax returns filed
by the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax returns,
if relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment. If prior
to the filing of the Executive's federal income tax return, or corresponding
state or local tax return, if relevant, the Accounting Firm determines that the
amount of the Gross-Up Payment should be reduced, the Executive shall within
five business days pay to the Company the amount of such reduction.
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(e) The fees and expenses of the Accounting Firm for its services
in connection with the determinations and calculations contemplated by this
Section 5 shall be borne by the Company. If such fees and expenses are initially
paid by the Executive, the Company shall reimburse the Executive the full amount
of such fees and expenses within five business days after receipt from the
Executive of a statement therefor and reasonable evidence of his payment
thereof.
(f) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as promptly as practicable but no later than 10
business days after the Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the 30-calendar-day period following the date
on which he gives such notice to the Company and (ii) the date that any payment
of amount with respect to such claim is due. If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive, subject to the provisions of Section 5(h) of
this Agreement, shall:
(i) provide the Company with any written records or documents
in his possession relating to such claim reasonably requested by the
Company;
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 5(f), the Company shall control all proceedings taken in connection
with the contest of any claim contemplated by this Section 5(f) and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that the Executive may participate therein at his own cost
and expense) and may, at its option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay the tax claimed and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income or other tax, including interest
or penalties with respect thereto, imposed with respect to such advance; and
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provided further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested
claim shall be limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and the Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 5(f), the Executive receives any refund with
respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 5(f)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial or refund prior to the expiration of 30 calendar days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of any such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid by the Company to
the Executive pursuant to this Section 5.
(h) Any information provided by Executive to the Company under this
Section 5 shall be treated confidentially by the Company and will not be
provided by the Company to any other person than the Company's professional
advisors without the Executive's prior written consent except as required by
law.
6. No Mitigation Obligation: The Company hereby acknowledges that it
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will be difficult and may be impossible for the Executive to find reasonably
comparable employment within a reasonable time period following the Termination
Date. In addition, the Company acknowledges that its severance pay plans and
policies applicable in general to its salaried employees typically do not
provide for mitigation, offset or reduction of any severance payments received
thereunder. Accordingly, the payment of the severance compensation by the
Company to the Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable, and the Executive will not
be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise, nor will any profits, income, earnings
or other benefits from any source whatsoever create any mitigation, offset,
reduction or any other obligation on the part of the Executive hereunder or
otherwise.
7. Legal Fees and Expenses: It is the intent of the Company that the
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Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of the Executive's
rights under this Agreement by litigation or otherwise because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, if it should appear to the
Executive that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
or threatens to take any action to declare this Agreement void or unenforceable,
or institutes any litigation or other action or proceeding designed to deny, or
to recover from, the Executive the benefits provided or intended to be provided
to the Executive hereunder, the Company irrevocably authorizes the Executive
from time to time to retain counsel of the Executive's choice, at the expense of
the Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without
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limitation the initiation or defense of any litigation or other legal action,
whether by or against the Company or any Director, officer, stockholder or other
person affiliated with the Company, in any jurisdiction. Notwithstanding any
existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Executive's entering into an
attorney-client relationship with such counsel and irrevocably waives any
related conflict of interest on the part of such counsel, and in that connection
the Company and the Executive agree that a confidential relationship shall exist
between the Executive and such counsel. Without respect to whether the Executive
prevails, in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred by the Executive in connection
with any of the foregoing.
8. Employment Rights: Nothing expressed or implied in this Agreement
-----------------
will create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any Subsidiary
prior to or following any Change in Control. Any event or occurrence described
in Section 3(b)(i), (ii), (v) or (vi) hereof following the commencement of a
discussion with a third person that ultimately results in a Change in Control
shall be deemed to have occurred after a Change in Control for the purposes of
this Agreement.
9. Withholding of Taxes: The Company may withhold from any amounts
--------------------
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
10. Successors and Binding Agreement: (a) The Company will require any
--------------------------------
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement), but will
not otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable
by the Executive and the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 10(a) and 10(b). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments hereunder will not
be assignable, transferable or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by the Executive's
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 10(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
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11. Notices: For all purposes of this Agreement (except as otherwise
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expressly provided in this Agreement with respect to notice periods), all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
ten business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or five business days
after having been sent by a nationally recognized overnight courier service such
as Federal Express, UPS, or Purolator, addressed to the Company at 300 Crescent
Court, Suite 1200, Dallas, Texas 75201 (to the attention of the President of
the Company) and to the Executive at the Company's address, with a copy to the
Executive at his or her principal residence, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of changes of address shall be effective only upon receipt.
12. Governing Law: The validity, interpretation, construction and
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performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
13. Validity: If any provision of this Agreement or the application of
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any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
14. Miscellaneous: No provision of this Agreement may be modified, waived
-------------
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
15. Counterparts: This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
16. Termination of Prior Agreements. The Change in Control Severance
-------------------------------
Agreement between the Executive and the Company, dated October 22, 1999, as
amended to the date hereof (the "Prior Agreement"), shall terminate
automatically upon the execution and delivery of this Agreement by the parties
hereto and shall thereafter be of no further force or effect; provided, however,
that if this Agreement is held by a court of competent jurisdiction to be wholly
invalid, unenforceable or otherwise illegal, the preceding clause shall have no
effect and the Prior Agreement shall be deemed to have continued at all times in
full force and effect. Subject to the immediately preceding proviso, this
Agreement supersedes all prior agreements, arrangements and understandings with
respect to the subject matter hereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
STERLING SOFTWARE, INC.
By:
-----------------------------
Sterling L. Williams
President &
Chief Executive Officer
---------------------------------
[Name of Officer]
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EXHIBIT 10.15
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement"), dated as of
November 15, 1999, by and between Sterling Software, Inc., a Delaware
corporation (the "Company"), and Geno P. Tolari (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company and is expected
to make major contributions to the profitability, growth and financial strength
of the Company;
WHEREAS, the Company recognizes that, as is the case of most companies, the
possibility of a Change in Control (as hereinafter defined) exists;
WHEREAS, the Company desires to assure itself of both present and future
continuity of management and desires to establish certain minimum severance
benefits for certain of its senior executives, including the Executive,
applicable in the event of a Change in Control; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to remain in the ongoing employ of the Company;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms: In addition to terms defined elsewhere herein,
---------------------
the following terms have the following meanings when used in this Agreement with
initial capital letters:
(a) "Base Pay" means the Executive's annual fixed or base
compensation, as may be determined from time to time by the Company,
whether acting through its Board of Directors (the "Board") or a committee
thereof, its President and CEO or otherwise.
(b) "Change in Control" means the occurrence during the Term of any
of the following events:
(i) The Company is merged, consolidated or reorganized into
or with another corporation or other legal person, and as a result of
such merger, consolidation or reorganization less than two-thirds of
the combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors ("Voting Stock") of
such corporation or person immediately after such transaction are held
in the aggregate by the holders of Voting Stock of the Company
immediately prior to such transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal
person, and less than two-thirds of the combined voting power of the
then-outstanding Voting Stock of such corporation or person is held in
the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale or transfer;
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(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing 20% or
more of the combined voting power of the then-outstanding Voting Stock
of the Company;
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of
the Company has occurred or will occur in the future pursuant to any
then-existing contract or transaction; or
(v) If, at any time during any period of two consecutive
years, individuals who at the beginning of any such period constitute
the Directors of the Company cease for any reason to constitute at
least a majority thereof; provided, however, that for purposes of this
clause (v) each Director (other than a Director whose initial
assumption of office is in connection with an actual or threatened
election contest) who is first elected, or first nominated for
election by the Company's stockholders, by a vote of at least two-
thirds of the Directors of the Company (or a committee thereof) then
still in office who were Directors of the Company at the beginning of
any such period will be deemed to have been a Director of the Company
at the beginning of such period.
Notwithstanding the foregoing provisions of Sections 1(b)(iii) or 1(b)(iv),
unless otherwise determined in a specific case by majority vote of the
Board, a "Change in Control" shall not be deemed to have occurred for
purposes of Section 1(b)(iii) or 1(b)(iv) solely because (A) the Company,
(B) an entity in which the Company directly or indirectly beneficially owns
50% or more of the outstanding Voting Stock (a "Subsidiary"), or (C) any
Company-sponsored employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either files or becomes
obligated to file a report or a proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange Act disclosing
beneficial ownership by it of shares of Voting Stock of the Company,
whether in excess of 20% or otherwise, or because the Company reports that
a change in control of the Company has occurred or will occur in the future
by reason of such beneficial ownership or any increase or decrease thereof.
(c) "Employee Benefits" means the perquisites, benefits and service
credit for perquisites or benefits as provided under any and all employee
perquisite or benefit policies, plans, programs or arrangements in which
the Executive is entitled to participate, including without limitation any
stock option, stock purchase, stock appreciation, savings, pension, 401(k),
employee stock ownership (ESOP), employee stock purchase (ESPP),
supplemental executive retirement, or other retirement income or welfare
benefit, deferred compensation, incentive compensation, group or other
life, health, medical/hospital or other insurance (whether funded by actual
insurance or self-insured by the Company), disability, salary
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continuation, expense reimbursement, executive automobile, tax and
financial planning, club memberships, incentive travel, tax reimbursement
and other employee benefit policies, plans, programs or arrangements that
may now exist or any successor policies, plans, programs or arrangements
that may be adopted hereafter by the Company.
(d) "Incentive Pay" means the aggregate annual bonus, incentive or
other payments of cash compensation, in addition to Base Pay, made or
authorized or contemplated to be made in regard to services rendered by the
Executive in any fiscal year pursuant to any bonus, incentive compensation,
profit-sharing, performance, discretionary pay or similar agreement,
policy, plan, program or arrangement (whether or not funded) of the Company
or any successor thereto.
(e) "Severance Period" means the period of time commencing on the
date of the first occurrence of a Change in Control and continuing until
the earliest of (i) the fifth anniversary of the occurrence of the Change
in Control, or (ii) the Executive's death; provided, however, that
commencing on each anniversary of the Change in Control, the Severance
Period will automatically be extended for an additional year unless, not
later than 90 calendar days prior to such anniversary date, either the
Company or the Executive shall have given written notice to the other that
the Severance Period is not to be so extended.
(f) "Term" means the period commencing as of the date first set forth
above and expiring as of the later of (i) the close of business on December
31, 2004, or (ii) the expiration of the Severance Period; provided,
however, that (A) commencing on January 1, 2001 and each January 1
thereafter, the Term of this Agreement will automatically be extended for
an additional year unless, not later than September 30 of the immediately
preceding year, the Company or the Executive shall have given written
notice that it or the Executive, as the case may be, does not wish to have
the Term extended and (B) subject to the last sentence of Section 8, if,
prior to a Change in Control, the Executive ceases for any reason to be an
employee of the Company or any Subsidiary, thereupon without further action
the Term shall be deemed to have expired and this Agreement will
immediately terminate and be of no further effect.
2. Operation of Agreement: This Agreement will be effective and binding
----------------------
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs. Upon the occurrence of a Change in Control at any time
during the Term, without further action, this Agreement shall become immediately
operative.
3. Termination Following a Change in Control: (a) In the event of the
-----------------------------------------
occurrence of a Change in Control, the Executive's employment may be terminated
by the Company during the Severance Period. If, during the Severance Period,
the Executive's employment is terminated by the Company or any Subsidiary other
than as a result of the Executive's death, the Executive will be entitled to the
compensation and benefits provided by Section 4 hereof.
(b) In the event of the occurrence of a Change in Control, the
Executive may terminate his or her employment with the Company during the
Severance Period, with the right to the compensation and benefits as provided in
Section 4, upon the occurrence of one or more of the
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following events (regardless of whether any other reason for such termination
exists or has occurred, including without limitation, other employment):
(i) Failure to elect or reelect or otherwise to maintain the
Executive in the office of the Company which the Executive held immediately
prior to a Change in Control, or the removal of the Executive as a Director
of the Company (or any successor thereto) if the Executive shall have been
a Director of the Company immediately prior to the Change in Control;
(ii) (A) A significant adverse change in the nature or scope of
the authorities, powers, functions, responsibilities or duties attached to
the position which the Executive held immediately prior to the Change in
Control, (B) a reduction in the aggregate amount of the Executive's Base
Pay or Incentive Pay as in effect for the Executive immediately prior to
the occurrence of a Change in Control or such higher amount of Base Pay or
Incentive Pay as may thereafter be determined by the Company, whether
acting through the Board or a committee thereof, its President and CEO or
otherwise, or (C) the termination or denial of the Executive's rights to
Employee Benefits or a reduction in the scope or value thereof, any of
which is not remedied by the Company within 10 calendar days after receipt
by the Company of written notice from the Executive of such change,
reduction, termination or denial, as the case may be;
(iii) A determination by the Executive (which determination will
be conclusive and binding upon the parties hereto provided it has been made
in good faith and in all events will be presumed to have been made in good
faith unless otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred following a Change in
Control, including, without limitation, a change in the scope of the
business or other activities for which the Executive was responsible
immediately prior to the Change in Control, which has rendered the
Executive substantially unable to carry out, has substantially hindered the
Executive's performance of, or has caused the Executive to suffer a
substantial reduction in, any of the authorities, powers, functions,
responsibilities or duties attached to the position held by the Executive
immediately prior to the Change in Control, which situation is not remedied
within 10 calendar days after written notice to the Company from the
Executive of such determination. For the avoidance of doubt, but without
limiting the generality of the foregoing, if the Company or its successor
following a Change in Control ceases to be an independent, publicly held,
New York Stock Exchange-listed company, the Executive may in good faith
determine that such circumstance, in and of itself, constitutes a
substantial reduction in his authorities, powers, functions,
responsibilities or duties;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all of
its business and/or assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization, transfer or otherwise)
to which all or substantially all of its business and/or assets have been
transferred (directly or by operation of law) assumed all duties and
obligations of the Company under this Agreement pursuant to Section 10(a);
(v) The Company relocates its principal executive offices, or
requires the Executive to have his principal location of work changed, to
any location which is in excess
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of 25 miles from the location thereof immediately prior to the Change in
Control, or requires the Executive to travel away from his office in the
course of discharging his responsibilities or duties hereunder at least 20%
more (in terms of aggregate days in any calendar year or in any calendar
quarter when annualized for purposes of comparison to any prior year) than
was required of the Executive in any of the three full years immediately
prior to the Change in Control without, in either case, his prior written
consent; or
(vi) Without limiting the generality or effect of the foregoing,
any material breach of this Agreement by the Company or any successor
thereto.
(c) A termination by the Company pursuant to Section 3(a) or by
the Executive pursuant to Section 3(b) will not affect any rights which the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof. The Company and the Executive are parties to a
Severance Agreement, dated as of November 15, 1999 (as such agreement may be
amended from time to time, the "Severance Agreement"). Notwithstanding anything
contained in this Agreement to the contrary, in the event the Executive's
employment with the Company is terminated under circumstances in which the
Executive would otherwise be entitled to receive payments and benefits under
both this Agreement and the Severance Agreement, the Executive shall have the
right to elect to receive payments and benefits under either this Agreement or
the Severance Agreement, but not both (except that the Executive may in all
events receive all payments and benefits to which he or she is entitled under
the Severance Agreement during the period between the Termination Date and the
Election Date (as such terms are defined below)). Within five business days
following the date of the termination of the Executive's employment with the
Company under the circumstances described in the preceding sentence (the
"Termination Date"), which shall be the effective date of such termination if
the termination is pursuant to Section 3(a) or such other date that may be
specified by the Executive if the termination is pursuant to Section 3(b), the
Company shall provide the Executive, in writing, a reasonably detailed
determination of the payments and other benefits under each of this Agreement
and the Severance Agreement. Executive shall make the election provided for in
this Section 3(c) by providing the Company written notice thereof within 30 days
after the Executive's receipt of the written determination referred to in the
preceding sentence; provided, however, that if such election is not so made
within such 30-day period, the Executive shall be irrevocably deemed to have
elected to receive payments and benefits under this Agreement (the date on which
such election is so made or deemed to have been made being the "Election Date").
4. Severance Compensation and Benefits: (a) If, following the occurrence
-----------------------------------
of a Change in Control, the Company terminates the Executive's employment during
the Severance Period pursuant to Section 3(a) (other than as a result of the
Executive's death), or if the Executive terminates his employment during the
Severance Period pursuant to Section 3(b), the Company will:
(i) pay to the Executive, within five business days after the
Termination Date (or, in the event that the circumstance described in
Section 3(c) hereof is applicable, within five business days after the
Election Date), a lump sum payment (the "Severance Payment") in an amount
equal to five times the sum of (A) Base Pay (the aggregate amount and the
components of which shall be determined based on the highest rate in effect
for any period prior to the Termination Date), plus (B) Incentive Pay in an
amount
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equal to the higher of (i) the highest annual amount of Incentive Pay paid
to or earned by the Executive with respect to any fiscal year during the
three fiscal years immediately preceding the fiscal year in which the
Termination Date occurs, and (ii) 100% of the Incentive Pay amount payable
upon the attainment of 100% of the objective(s) and 100% of the targeted or
planned amount(s) specified in or pursuant to the applicable agreement,
policy, plan, program or arrangement, whether or not attained as of such
Termination Date, for such Executive for the fiscal year in which the
Termination Date occurs; provided however, that the Severance Payment shall
be reduced by the aggregate amount of all cash payments, if any, previously
received by the Executive pursuant to the Severance Agreement prior to the
Election Date.
(ii) (A) for 60 months following the Termination Date (the
"Continuation Period"), arrange at its sole expense, to provide the
Executive with Employee Benefits that are substantially similar to the
better of (when considered in the aggregate) (X) those Employee Benefits
which the Executive was receiving or entitled to receive immediately prior
to the Change in Control, or (Y) those Employee Benefits which the
Executive was receiving or entitled to receive immediately prior to the
Termination Date, and (B) such Continuation Period will be considered
service with the Company for the purpose of determining service credits
under or in respect of any Employee Benefits applicable to the Executive,
his dependents or his beneficiaries; provided that for purposes of this
Section 4(a)(ii), Employee Benefits shall not include any Incentive Pay and
nothing in this Section 4(a) shall be construed to require the Company to
make any new grants of stock options to the Executive. If and to the
extent that any Employee Benefit described in subsection (A) or (B) of this
Section 4(a)(ii) cannot be paid or provided under any applicable law or
regulation or under the terms of any policy, plan, program or arrangement
of the Company, then the Company will take all action necessary to ensure
that such Employee Benefit is provided through other means to the
Executive, his dependents and beneficiaries, as applicable, or the Company
shall timely pay to the Executive a lump sum amount in cash equal to the
fair market value of such foregone Employee Benefit. Notwithstanding the
immediately preceding sentence, the Company shall make any payment that may
be necessary to ensure that the Executive's after tax position with respect
to any Employee Benefits received pursuant to this Section 4(a)(ii) is not
worse than the Executive's after-tax position in the event such Employee
Benefits had been provided to the Executive while he was employed by the
Company.
(iii) for the life of the Executive and his or her spouse,
arrange, at the Company's sole cost and expense, and at no cost to the
Executive and his or her spouse, to provide (A) the Executive and his or
her spouse with retiree health benefits identical to the "Benefits" that
would have been provided to the Executive and his or her spouse under the
Company's Employee Health Benefit Plan, as amended as of December 31, 1999
(the "Health Plan"), if the Executive had met the requirements of Section
4.01(b)(ii) of the Health Plan as of the "Retiree Record Date", and (B) the
Executive with the opportunity to elect to receive "Benefits" for his or
her eligible dependents pursuant to Section 4.01(b)(iv) of the Health Plan.
The terms "Benefits" and "Retiree Record Date" shall have the respective
meanings ascribed to such terms in the Health Plan.
(iv) for 60 months following the Termination Date, make available
to the Executive office facilities and support reasonably comparable to
that made available to
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the Executive immediately prior to the Termination Date (including
secretarial support, telephone, office equipment, office space and
furnishings), or reimburse the Executive for the cost of obtaining
comparable office facilities and support from third parties and pay the
Executive any amount required to defray any incremental tax liability
incurred by the Executive as the result of such reimbursement.
(b) Without limiting the rights of the Executive at law or in equity,
if the Company fails to make any payment or provide any benefit required to be
made or provided hereunder on a timely basis, the Company will pay interest on
the amount or value thereof at an annualized rate of interest equal to the so-
called composite "prime rate" as quoted from time to time during the relevant
period in the Southwest Edition of The Wall Street Journal. Such interest will
-----------------------
be payable as it accrues on demand. Any change in such prime rate will be
effective on and as of the date of such change.
(c) Notwithstanding any other provision of this Agreement to the
contrary, the parties' respective rights and obligations under this Section 4
and under Sections 5 and 7 will survive any termination or expiration of this
Agreement or the termination of the Executive's employment following a Change in
Control for any reason whatsoever.
5. Certain Additional Payments by the Company: (a) Anything in this
------------------------------------------
Agreement to the contrary notwithstanding, in the event that this Agreement
shall become operative and it shall be determined (as hereafter provided) that
all or any portion of any payment or distribution by the Company or any of its
affiliates to or for the benefit of the Executive pursuant to the terms of this
Agreement or otherwise, including under any stock option or other agreement,
plan, policy, program or arrangement (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (or any successor provision thereto), by reason of being
considered "contingent on a change in ownership or control" of the Company,
within the meaning of Section 280G of the Code (or any successor provision
thereto), or to any similar tax imposed by state or local law, or any interest
or penalties with respect to such tax (such tax or taxes, together with any
such interest and penalties, being hereafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment or payments (collectively, a "Gross-Up Payment"); provided, however,
that no Gross-Up Payment shall be made with respect to the Excise Tax, if any,
attributable to (i) any incentive stock option, as defined by Section 422 of the
Code ("ISO") granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in tandem with an
ISO described in clause (i). The Gross-Up Payment shall be in an amount such
that, after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all determinations
required to be made under this Section 5, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a Gross-
Up Payment is required to be paid by the Company to the Executive and the amount
of such Gross-Up Payment, if any, shall be made by a nationally recognized
accounting firm (the "Accounting Firm") selected by the Executive in his sole
discretion. The Executive shall direct the Accounting Firm to submit its
determination and detailed supporting calculations to both the Company and the
Executive within 30 calendar days after the Termination Date, if applicable, and
any such other time or times as may be requested by the
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Company or the Executive. If the Accounting Firm determines that any Excise Tax
is payable by the Executive, the Company shall pay the required Gross-Up Payment
to the Executive within five business days after receipt of such determination
and calculations with respect to any Gross-Up Payment to the Executive. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall, at the same time as it makes such determination, furnish the Company and
the Executive a written opinion to the effect that the Executive has substantial
authority not to report any Excise Tax on his federal, state or local income or
other tax return. As a result of the uncertainty in the application of Section
4999 of the Code (or any successor provision thereto) and the possibility of
similar uncertainty regarding applicable state or local tax law at the time of
any determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made (an
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its remedies pursuant
to Section 5(f) and the Executive thereafter is required to make a payment of
any Excise Tax, the Executive shall direct the Accounting Firm to determine the
amount of the Underpayment that has occurred and to submit its determination and
detailed supporting calculations to both the Company and the Executive as
promptly as possible. Any such Underpayment shall be promptly paid by the
Company to, or for the benefit of, the Executive within five business days after
receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the Accounting
Firm access to and copies of any books, records and documents in the possession
of the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by this Section 5. Any determination by the Accounting Firm as to
the amount of any Gross-Up Payment or Underpayment shall be binding upon the
Company and the Executive.
(d) The federal, state and local income or other tax returns filed by
the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax returns,
if relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall within five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by this Section
5 shall be borne by the Company. If such fees and expenses are initially paid
by the Executive, the Company shall reimburse the Executive the full amount of
such fees and expenses within five business days after receipt from the
Executive of a statement therefor and reasonable evidence of his payment
thereof.
(f) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as promptly as
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practicable but no later than 10 business days after the Executive actually
receives notice of such claim and the Executive shall further apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid (in each case, to the extent known by the Executive). The
Executive shall not pay such claim prior to the earlier of (i) the expiration of
the 30-calendar-day period following the date on which he gives such notice to
the Company and (ii) the date that any payment of amount with respect to such
claim is due. If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive,
subject to the provisions of Section 5(h) of this Agreement, shall:
(i) provide the Company with any written records or documents in
his possession relating to such claim reasonably requested by the Company;
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including without limitation accepting legal representation with respect to
such claim by an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 5(f), the Company shall control all proceedings taken in connection
with the contest of any claim contemplated by this Section 5(f) and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim
(provided, however, that the Executive may participate therein at his own cost
and expense) and may, at its option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay the tax claimed and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income or other tax, including interest
or penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested
claim shall be limited to issues with respect to which a Gross-Up Payment would
be payable hereunder and the Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 5(f), the Executive receives any refund with
respect to such claim, the Executive
9
<PAGE>
shall (subject to the Company's complying with the requirements of Section 5(f))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after any taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Company pursuant to
Section 5(f), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial or refund prior to the
expiration of 30 calendar days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of any such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid by the Company to the Executive pursuant to this Section 5.
(h) Any information provided by the Executive to the Company under
this Section 5 shall be treated confidentially by the Company and will not be
provided by the Company to any other person than the Company's professional
advisors without the Executive's prior written consent except as required by
law.
6. No Mitigation Obligation: The Company hereby acknowledges that it will
------------------------
be difficult and may be impossible for the Executive to find reasonably
comparable employment within a reasonable time period following the Termination
Date. In addition, the Company acknowledges that its severance pay plans and
policies applicable in general to its salaried employees typically do not
provide for mitigation, offset or reduction of any severance payments received
thereunder. Accordingly, the payment of the severance compensation by the
Company to the Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable, and the Executive will not
be required to mitigate the amount of any payment provided for in this Agreement
by seeking other employment or otherwise, nor will any profits, income, earnings
or other benefits from any source whatsoever create any mitigation, offset,
reduction or any other obligation on the part of the Executive hereunder or
otherwise.
7. Legal Fees and Expenses: It is the intent of the Company that the
-----------------------
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of the Executive's
rights under this Agreement by litigation or otherwise because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Executive hereunder. Accordingly, if it should appear to the
Executive that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
or threatens to take any action to declare this Agreement void or unenforceable,
or institutes any litigation or other action or proceeding designed to deny, or
to recover from, the Executive the benefits provided or intended to be provided
to the Executive hereunder, the Company irrevocably authorizes the Executive
from time to time to retain counsel of the Executive's choice, at the expense of
the Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel and irrevocably
waives any related conflict of interest on the part of such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part, in connection with any of the
foregoing, the
10
<PAGE>
Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred by the Executive in connection
with any of the foregoing.
8. Employment Rights: Nothing expressed or implied in this Agreement will
-----------------
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company or any Subsidiary prior to or
following any Change in Control. Any event or occurrence described in Section
3(b)(i), (ii), (v) or (vi) hereof following the commencement of a discussion
with a third person that ultimately results in a Change in Control shall be
deemed to have occurred after a Change in Control for the purposes of this
Agreement.
9. Withholding of Taxes: The Company may withhold from any amounts
--------------------
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
10. Successors and Binding Agreement: (a) The Company will require any
--------------------------------
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement), but will
not otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive and the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 10(a) and 10(b). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments hereunder will not
be assignable, transferable or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by the Executive's
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 10(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
11. Notices: For all purposes of this Agreement (except as otherwise
-------
expressly provided in this Agreement with respect to notice periods), all
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be deemed to have been duly given when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed), or
ten business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or five business days
after having been sent by a nationally recognized overnight courier service such
as Federal Express, UPS, or Purolator, addressed to the Company at 300 Crescent
11
<PAGE>
Court, Suite 1200, Dallas, Texas 75201 (to the attention of the President of
the Company) and to the Executive at the Company's address, with a copy to the
Executive at his or her principal residence, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of changes of address shall be effective only upon receipt.
12. Governing Law: The validity, interpretation, construction and
-------------
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
13. Validity: If any provision of this Agreement or the application of
--------
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
14. Miscellaneous: No provision of this Agreement may be modified, waived
-------------
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
15. Counterparts: This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
16. Termination of Prior Agreements. The Change in Control Severance
-------------------------------
Agreement between the Executive and the Company, dated October 22, 1999, as
amended to the date hereof (the "Prior Agreement"), shall terminate
automatically upon the execution and delivery of this Agreement by the parties
hereto and shall thereafter be of no further force or effect; provided, however,
that if this Agreement is held by a court of competent jurisdiction to be wholly
invalid, unenforceable or otherwise illegal, the preceding clause shall have no
effect and the Prior Agreement shall be deemed to have continued at all times in
full force and effect. Subject to the immediately preceding proviso, this
Agreement supersedes all prior agreements, arrangements and understandings with
respect to the subject matter hereof.
[Remainder of page intentionally left blank -- signature page follows.]
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
STERLING SOFTWARE, INC.
By:
----------------------------------
Sterling L. Williams
President &
Chief Executive Officer
---------------------------------------
Geno P. Tolari
13
<PAGE>
EXHIBIT 10.17
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made and entered into as of the 15th
day of November, 1999, by and between Sterling Software, Inc., a Delaware
corporation ("Sterling Software"), and Geno P. Tolari, an individual
("Executive").
RECITALS:
WHEREAS, Sterling Software acquires, develops, markets and supports a broad
range of products and services; and
WHEREAS, Sterling Software desires to continue to retain Executive as its
Executive Vice President and Chief Operating Officer; and
WHEREAS, Executive is willing to continue to accept and fulfill such
responsibilities;
NOW, THEREFORE, in consideration of the premises and covenants contained
herein and other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
AGREEMENTS:
1. Employment. Executive agrees to render such managerial services as
----------
are customarily required of the Executive Vice President and Chief
Operating Officer.
2. Term. This Agreement shall commence on the date first set forth above
----
and shall continue in effect for sixty (60) months after the "Notice
Date" as defined in Section 3 hereof.
3. Termination of Employment. The parties acknowledge that Executive is
-------------------------
employed "at will" and may be terminated by Sterling Software at any
time with or without cause. Executive shall be entitled to
termination pay calculated in accordance with Section 4 hereof upon
receiving notice of the intended termination of Executive's employment
by Sterling Software, with or without cause.
The date on which a notice of termination is given to Executive by
Sterling Software (whether orally or in writing) shall be deemed the
"Notice Date" with the termination to be effective sixty (60) months
following the Notice Date. On the Notice Date, Executive shall be
deemed to have been assigned "no duties," shall vacate his or her
office and shall resign as an officer of Sterling Software and its
subsidiaries. Since Executive will be assigned "no duties" with
Sterling Software,
<PAGE>
Executive shall be free to pursue other employment or consulting
opportunities during the 60-month period in which Executive receives
termination pay.
4. Termination Pay. For purposes of this Agreement, if Executive's
---------------
employment is terminated pursuant to Section 3, upon receipt from
Executive (or Executive's estate or personal representative) of a
fully executed release in form reasonably acceptable to Sterling
Software, Sterling Software shall pay, or cause one of its
subsidiaries to pay, to Executive as termination pay:
(a) an amount equal to 500 hundred percent of Executive's annual base
salary rate in effect immediately prior to the Notice Date; and
(b) an amount equivalent to the product of five times:
(i) 100% of the Plan Bonus Amount (as hereinafter defined) in
effect immediately prior to the Notice Date, or
(ii) if no Plan Bonus Amount shall be in effect or readily
determinable by Sterling Software with respect to Executive
immediately prior to the Notice Date, an amount equal to
the aggregate amount of the bonus, incentive or other cash
compensation, in addition to (but not including)
Executive's annual base salary, received by Executive
pursuant to any bonus, incentive compensation, performance,
discretionary pay or similar agreement, policy, plan,
program or arrangement (whether or not funded) of Sterling
Software during the 365 days immediately prior to the
Notice Date.
As used herein, the term "Plan Bonus Amount" shall mean the
aggregate amount (calculated to avoid duplication, on an
annualized basis and with respect only to the fiscal year of
Sterling Software in which the Notice Date occurs) of the
budgeted or otherwise authorized or contemplated bonus, incentive
or other cash compensation, in addition to (but not including)
Executive's base salary, to be paid to Executive under any bonus,
incentive compensation, performance, discretionary pay or similar
agreement, policy, plan, program or arrangement (whether or not
funded) of Sterling Software upon the attainment of 100% of the
objective(s) and 100% of the planned or targeted amount(s)
specified in or pursuant to such agreement, policy, plan, program
or arrangement, whether or not attained as of the Notice Date.
In the event of Executive's death or disability following the Notice
Date, Executive, Executive's estate or Executive's personal
representative, as the case may be, shall continue to receive the
termination payments provided for in this Section 4.
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<PAGE>
5. Disbursement of Termination Pay. The aggregate amount of all
-------------------------------
termination payments that are payable to Executive as provided in
Section 4 hereof shall be determined in good faith by Sterling
Software within 15 days following the Notice Date, and such
termination payments shall be distributed by Sterling Software to
Executive in one hundred twenty (120) equal twice monthly installments
beginning thirty (30) days following the Notice Date and continuing
twice monthly thereafter.
6. Continuation of Insurance Benefits. For a period of sixty (60) months
----------------------------------
following the Notice Date, Sterling Software shall arrange to provide
Executive, at no additional charge to Executive, with life, medical,
dental, vision, health, accident and disability insurance benefits
substantially similar to those that Executive is receiving or is
entitled to receive immediately prior to the Notice Date, which
benefits shall in no event be less than those benefits in effect
immediately prior to the Notice Date.
7. Continued Participation in Employee Plans. For a period of sixty (60)
-----------------------------------------
months following the Notice Date, Executive shall, to the fullest
extent permitted by applicable law, be permitted to continue to
participate in Sterling Software's Deferred Compensation Plan, Savings
and Security (401(k)) Plan and any other similar plan that may be
adopted prior to the Notice Date for the benefit and retention of
Sterling Software's executive officers. In no event will Sterling
Software be required after the Notice Date to make any new grants of
stock options to such Executive under any Sterling Software stock
option plan or otherwise.
8. Change-in-Control. Sterling Software and Executive are parties to a
-----------------
Change-in-Control Severance Agreement, dated as of November 15, 1999
(as such agreement may be amended from time to time, the "Change-in-
Control Agreement"). Notwithstanding anything contained in this
Agreement to the contrary, in the event the Notice Date occurs under
circumstances in which Executive would otherwise be entitled to
receive payments and benefits under both this Agreement and the
Change-in-Control Agreement, Executive shall have the right to elect
to receive payments and benefits under either this Agreement or the
Change-in-Control Agreement, but not both. Within five business days
following the Notice Date under circumstances in which this Section 8
would apply, Sterling Software shall provide Executive, in writing, a
reasonably detailed determination of the payments and other benefits
under each of this Agreement and the Change-in-Control Agreement.
Executive shall make the election provided for in this Section 8
within thirty calendar days after Executive's receipt of the written
determination referred to in the preceding sentence; provided,
however, that if such election is not so made within such 30-day
period, Executive shall be irrevocably deemed to have elected to
receive payments and benefits under the
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<PAGE>
Change-in-Control Agreement. Prior to the date on which Executive
makes or is deemed to have made the election referred to above, he
shall receive all benefits under Sections 4, 5, 6 and 7 of this
Agreement as if Executive had made the election to receive benefits
and payments under this Agreement.
9. Miscellaneous.
-------------
(i) Notices, demands, payments, reports and correspondence shall be
addressed to the parties hereto at the address for such party
set forth below or such other places as may from time to time
be designated in writing to the other party. Notices hereunder
shall be deemed to be given on the date such notices are
actually received.
If to Sterling Software, to: Sterling Software, Inc.
300 Crescent Court, Suite 1200
Dallas, Texas 75201
Attention: President
If to Executive, to: Geno P. Tolari
c/o Sterling Software, Inc.
300 Crescent Court, Suite 1200
Dallas, Texas 75201
(ii) This Agreement shall be binding upon Sterling Software and
Executive and their respective successors, assigns, heirs and
personal representatives.
(iii) The substantive laws of the State of Delaware shall govern the
validity, construction, enforcement and interpretation of the
provisions of this Agreement.
(iv) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is
agreed to in writing signed by Executive and Sterling Software.
No waiver by either party hereto at any time of any breach by
the other party hereto or compliance with any condition or
provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, expressed or
implied with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections
of this Agreement.
10. Termination of Prior Agreements. Upon the execution and delivery of
-------------------------------
this Agreement, the Severance Agreement between Executive and Sterling
Software,
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<PAGE>
dated February 12, 1996, as amended to the date hereof (the "Prior
Agreement"), shall terminate automatically and shall thereafter be of
no further force or effect; provided, however, that if this Agreement
is held by a court of competent jurisdiction to be wholly invalid,
unenforceable or otherwise illegal, the preceding clause shall have no
effect and the Prior Agreement shall be deemed to have continued at
all times in force and effect. Subject to the foregoing proviso, this
Agreement supersedes all prior agreements, arrangements and
understandings with respect to the subject matter hereof, excluding,
however, the Change-in-Control Agreement.
Executed by the parties hereto as of the date first set forth above.
EXECUTIVE
------------------------------------
Geno P. Tolari
STERLING SOFTWARE, INC.
By:
---------------------------------
Sterling L. Williams,
President and
Chief Executive Officer
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