-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, XzaL61Ek0xIzley6Of1fCq6sWqGpGmALCf58XBcbmEmwIS9AqgLMCENYzNsClLTP 0g+gL03xKiks9hO21xwOfw== 0000912057-94-001660.txt : 19940513 0000912057-94-001660.hdr.sgml : 19940513 ACCESSION NUMBER: 0000912057-94-001660 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERLING SOFTWARE INC CENTRAL INDEX KEY: 0000716714 STANDARD INDUSTRIAL CLASSIFICATION: 7372 IRS NUMBER: 751873956 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08465 FILM NUMBER: 94527343 BUSINESS ADDRESS: STREET 1: 8080 N CENTRAL EXPWY STE 1100 CITY: DALLAS STATE: TX ZIP: 75206 BUSINESS PHONE: 2148918600 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1994 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 Number) 8080 NORTH CENTRAL EXPRESSWAY, SUITE 1100 DALLAS, TEXAS 75206 (Address of principal executive offices) (214) 891-8600 (Registrant's telephone number, including area code) 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title Shares Outstanding as of April 30, 1994 ------------------------------ ----------------------------------------- Common Stock, $.10 par value 20,160,902 -1- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Index to Financial Statements PAGE Sterling Software, Inc. Consolidated Balance Sheets at March 31, 1994 and September 30, 1993. . . . . . . . . . . . . . . . . . . . . . 3 Sterling Software, Inc. Consolidated Statements of Operations for the Three and Six Months Ended March 31, 1994 and 1993 . . . . . . . . . . 4 Sterling Software, Inc. Consolidated Statements of Stockholders' Equity for the Six Months Ended March 31, 1994 and 1993. . . . . . . . 5 Sterling Software, Inc. Consolidated Statements of Cash Flows for the Six Months Ended March 31, 1994 and 1993 . . . . . . . . . . . . . 6 Sterling Software, Inc. Notes to Consolidated Financial Statements . . . . 7 -2- STERLING SOFTWARE, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share information)
A S S E T S March 31, September 30, 1994 1993 ------------- -------------- (Unaudited) Current assets: Cash and equivalents . . . . . . . . . . . . . . . . . . . $ 62,601 $ 29,752 Marketable securities. . . . . . . . . . . . . . . . . . . 29,148 51,354 Accounts and notes receivable, net . . . . . . . . . . . . 118,387 112,174 Deferred income taxes. . . . . . . . . . . . . . . . . . . 9,444 8,790 Prepaid expenses and other current assets. . . . . . . . . 10,905 12,764 ---------- ---------- Total current assets . . . . . . . . . . . . . . . . . . 230,485 214,834 Property and equipment, net of accumulated depreciation of $40,219 at March 31, 1994 and $37,930 at September 30, 1993 . . . . . . . . . . . . . . . . . . . . 31,839 27,124 Computer software, net of accumulated amortization of $83,926 at March 31, 1993 and $74,720 at September 30, 1993 . . . . . . . . . . . . . . . . . . . . 58,162 59,539 Excess cost over net assets acquired, net of accumulated amortization of $17,481 at March 31, 1994 and $16,188 at September 30, 1993 . . . . . . . . . . . . . . . . . . . . 53,029 54,273 Noncurrent deferred income taxes . . . . . . . . . . . . . . 10,172 19,958 Other assets . . . . . . . . . . . . . . . . . . . . . . . . 49,434 21,933 ---------- ---------- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $433,121 $397,661 ---------- ---------- ---------- ---------- L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y Current liabilities: Current portion of long-term debt. . . . . . . . . . . . . $ 6,951 $ 3,980 Accounts payable and accrued liabilities . . . . . . . . . 72,860 88,847 Deferred revenue . . . . . . . . . . . . . . . . . . . . . 69,771 70,709 ---------- ---------- Total current liabilities. . . . . . . . . . . . . . . 149,582 163,536 Long-term notes payable. . . . . . . . . . . . . . . . . . . 116,593 116,817 Other noncurrent liabilities . . . . . . . . . . . . . . . . 25,608 20,095 Stockholders' equity: Preferred stock, $.10 par value; 10,000,000 shares authorized; 200,000 shares issued and outstanding. . . . 20 20 Common stock, $.10 par value; 50,000,000 shares authorized; 21,882,000 and 19,610,000 shares issued at March 31, 1994 and September 30, 1993, respectively . 2,188 1,961 Additional paid-in capital . . . . . . . . . . . . . . . . 189,191 169,855 Accumulated deficit. . . . . . . . . . . . . . . . . . . . (30,755) (55,065) Less treasury stock, at cost: 1,814,000 and 1,837,000 shares at March 31, 1994 and September 30, 1993, respectively . . . . . . . . . . . . . . . . . . . . . . (19,306) (19,558) ---------- ---------- Total stockholders' equity . . . . . . . . . . . . . . 141,338 97,213 ---------- ---------- $433,121 $397,661 ---------- ---------- ---------- ----------
See accompanying notes. -3- STERLING SOFTWARE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share information) (Unaudited)
Three Months Six Months Ended March 31, Ended March 31, ------------------- ------------------- 1994 1993 1994 1993 ---------- -------- ---------- ---------- Revenue: Products . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42,347 $34,269 $ 81,863 $ 71,732 Product support. . . . . . . . . . . . . . . . . . . . . . . . 32,200 29,685 64,620 58,896 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,360 33,891 76,319 66,000 ---------- -------- ---------- ---------- 113,907 97,845 222,802 196,628 Costs and expenses: Cost of sales: Products and product support . . . . . . . . . . . . . . . . 17,403 17,141 33,468 32,874 Services . . . . . . . . . . . . . . . . . . . . . . . . . . 26,725 24,978 52,034 49,872 ---------- -------- ---------- ---------- 44,128 42,119 85,502 82,746 Product development and enhancement. . . . . . . . . . . . . . 7,588 6,647 14,608 12,564 Selling, general and administrative. . . . . . . . . . . . . . 40,709 40,023 81,635 83,160 ---------- -------- ---------- ---------- 92,425 88,789 181,745 178,470 ---------- -------- ---------- ---------- Income before other income (expense), income taxes, extraordinary item and cumulative effect of a change in accounting principle . . . . . . . . . . . . . . . . . . . 21,482 9,056 41,057 18,158 Other income (expense): Interest expense . . . . . . . . . . . . . . . . . . . . . . . (1,644) (2,075) (3,299) (4,021) Investment income. . . . . . . . . . . . . . . . . . . . . . . 727 926 1,404 1,384 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 984 (60) 159 302 ---------- -------- ---------- ---------- 67 (1,209) (1,736) (2,335) ---------- -------- ---------- ---------- Income before income taxes, extraordinary item and cumulative effect of a change in accounting principle . . . . . . . . . . 21,549 7,847 39,321 15,823 Provision for income taxes . . . . . . . . . . . . . . . . . . . 8,190 2,941 14,943 5,892 ---------- -------- ---------- ---------- Income before extraordinary item and cumulative effect of a change in accounting principle . . . . . . . . . . . . . . . . 13,359 4,906 24,378 9,931 Extraordinary item - loss on early extinguishment of debt, net of applicable income taxes (Note 4). . . . . . . . . . . . (1,481) (1,481) Cumulative effect of a change in accounting principle, net of applicable income tax benefit (Note 5). . . . . . . . . . . (2,774) ---------- -------- ---------- ---------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,359 3,425 24,378 5,676 Preferred stock dividends. . . . . . . . . . . . . . . . . . . . 49 315 98 636 ---------- -------- ---------- ---------- Income applicable to common stockholders . . . . . . . . . . . . $ 13,310 $ 3,110 $ 24,280 $ 5,040 ---------- -------- ---------- ---------- ---------- -------- ---------- ---------- Income per common share: Income before extraordinary item and cumulative effect of a change in accounting principle: Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .59 $ .24 $ 1.09 $ .49 ---------- -------- ---------- ---------- ---------- -------- ---------- ---------- Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . $ .54 $ .24 $ 1.00 $ .48 ---------- -------- ---------- ---------- ---------- -------- ---------- ---------- Income before cumulative effect of a change in accounting principle: Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .59 $ .16 $ 1.09 $ .41 ---------- -------- ---------- ---------- ---------- -------- ---------- ---------- Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . $ .54 $ .16 $ 1.00 $ .41 ---------- -------- ---------- ---------- ---------- -------- ---------- ---------- Net income: Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .59 $ .16 $ 1.09 $ .27 ---------- -------- ---------- ---------- ---------- -------- ---------- ---------- Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . $ .54 $ .16 $ 1.00 $ .27 ---------- -------- ---------- ---------- ---------- -------- ---------- ---------- Average common shares outstanding. . . . . . . . . . . . . . . . 19,551 17,029 18,814 16,792 ---------- -------- ---------- ---------- ---------- -------- ---------- ----------
See accompanying notes. -4- STERLING SOFTWARE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Six Months Ended March 31, 1994 and 1993 (in thousands) (Unaudited)
Preferred Stock Common Stock Treasury Stock ---------------- ---------------- --------------- Number Number Additional Retained Number Total of Par of Par Paid-in Earnings of Stockholders' Shares Value Shares Value Capital (Deficit) Shares Cost Equity ------ ----- ------ ----- ---------- --------- ------ -------- ----------- Balance at September 30, 1992. 200 $20 18,330 $1,833 $149,448 $(13,657) 1,884 $(20,060) $117,584 Net income . . . . . . . . . . 5,676 5,676 Preferred stock dividends. . . (636) (636) Issuance of common stock pursuant to stock options, warrants and employee benefit plans. . . . . . . . . . . . 341 34 2,771 2,805 Issuance of common stock pursuant to 8% debentures. . 636 64 13,675 13,739 Issuance of common stock to retirement plan. . . . . . . 92 (18) 194 286 Other. . . . . . . . . . . . . (29) (1,266) (3) (1,295) ----- ----- ------- ------- --------- --------- ------ --------- --------- Balance at March 31, 1993. . . 200 $20 19,307 $1,931 $165,957 $ (9,883) 1,863 $(19,866) $138,159 ----- ----- ------- ------- --------- --------- ------ --------- --------- ----- ----- ------- ------- --------- --------- ------ --------- --------- Balance at September 30, 1993. 200 $20 19,610 $1,961 $169,855 $(55,065) 1,837 $(19,558) $97,213 Net income . . . . . . . . . . 24,378 24,378 Preferred stock dividends. . . (98) (98) Issuance of common stock pursuant to stock options and warrants . . . . . . . . 2,272 227 19,037 19,264 Issuance of common stock to retirement plan. . . . . . . 204 (20) 218 422 Other. . . . . . . . . . . . . 95 30 (3) 34 159 ----- ----- ------- ------- --------- --------- ------ --------- --------- Balance at March 31, 1994. . . 200 $20 21,882 $2,188 $189,191 $(30,755) 1,814 $(19,306) $141,338 ----- ----- ------- ------- --------- --------- ------ --------- --------- ----- ----- ------- ------- --------- --------- ------ --------- ---------
See accompanying notes. -5- STERLING SOFTWARE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Six Months Ended March 31, ----------------------- 1994 1993 -------- -------- Operating activities: Income before extraordinary item and cumulative effect of a change in accounting principle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,378 $ 9,931 Adjustments to reconcile income before extraordinary item and cumulative effect of a change in accounting principle to net cash provided by operating activities: Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,031 15,626 Provision for losses on accounts receivable. . . . . . . . . . . . . . . . . . . . . . 3,962 28 Provision for deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 12,190 1,545 Foreign currency transaction loss (gain) . . . . . . . . . . . . . . . . . . . . . . . (345) 249 Changes in operating assets and liabilities, net of effect of business acquisitions: Decrease (increase) in accounts and notes receivable . . . . . . . . . . . . . . . . (14,561) 1,390 Decrease (increase) in prepaids and other assets . . . . . . . . . . . . . . . . . . (551) 132 Decrease in accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . (20,037) (8,003) Increase in deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,254 4,966 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 536 (323) -------- -------- Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . 27,857 25,541 Investing activities: Purchases of property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . (8,709) (4,884) Purchases and capitalized cost of development of computer software . . . . . . . . . . . (10,119) (12,325) Purchases of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,195) (55,190) Proceeds from sales of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,221 480 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,673 849 -------- -------- Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . . (23,129) (71,070) Financing activities: Retirement and redemption of debt and capital lease obligations. . . . . . . . . . . . . (6,936) (49,660) Proceeds from issuance of debt, net of issuance costs. . . . . . . . . . . . . . . . . . 10,485 118,377 Proceeds from issuance of common stock pursuant to stock options, warrants and employee benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,264 2,805 Proceeds from the sale of lease and installment receivables. . . . . . . . . . . . . . . 5,273 1,115 Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 (540) -------- -------- Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . . . 28,158 72,097 Effect of foreign currency exchange rate changes on cash . . . . . . . . . . . . . . . . . (37) (636) -------- -------- Increase in cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,849 25,932 Cash and equivalents at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . 29,752 41,713 -------- -------- Cash and equivalents at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . $62,601 $67,645 -------- -------- -------- -------- Supplemental cash flow information: Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,575 $ 3,364 -------- -------- -------- -------- Income taxes paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,647 $ 2,821 -------- -------- -------- -------- Income tax refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 578 $ 129 -------- -------- -------- --------
See accompanying notes. -6- STERLING SOFTWARE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1994 (Unaudited) 1. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Sterling Software, Inc. and its wholly owned subsidiaries (the "Company") after elimination of all significant intercompany balances and transactions. The Company's quarterly financial data should be read in conjunction with the consolidated financial statements of the Company for the year ended September 30, 1993. 2. UNAUDITED INTERIM FINANCIAL STATEMENTS The interim consolidated financial information contained herein is unaudited but, in the opinion of management, includes all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the financial position and results of operations for the periods presented. Results of operations for the periods presented herein are not necessarily indicative of results of operations for the entire year. 3. SEGMENT INFORMATION The Company acquires, develops, markets and supports a broad range of computer software products and services in three major markets classified as Enterprise Software, Electronic Commerce and Federal Systems. Each major market is represented through decentralized business groups. The Enterprise Software Group provides enterprise-wide systems management and applications management software for large computing environments. The Electronic Commerce Group provides software and services to facilitate electronic commerce, defined by the Company as the worldwide electronic interchange of business information, including electronic data interchange software and services, data communications software and electronic payments software for financial institutions. The Federal Systems Group provides highly technical services to the federal government, generally under multi-year, cost-based contracts, primarily in support of National Aeronautics and Space Administration aerospace research projects and secure communications systems for the Department of Defense. A fourth business group, International, is responsible for sales and telephone support of the Company's products outside the United States. International Group operating results are included, as applicable, in the Company's Enterprise Software and Electronic Commerce segments in the business segment tables contained herein. International Group revenue of $26,547,000 and $25,714,000 and operating profit of $3,954,000 and $406,000 for the three months ended March 31, 1994 and 1993, respectively, has been allocated to these business segments. International Group revenue of $56,436,000 and $54,959,000 and operating profit of $8,229,000 and $1,290,000 for the six months ended March 31, 1994 and 1993, respectively, has been allocated to these business segments. -7- Financial information concerning the Company's operations, by business segment, for the three and six months ended March 31, 1994 and 1993 follows (in thousands):
Three Months Six Months Ended March 31, Ended March 31, ------------------------ ------------------------ 1994 1993 1994 1993 --------- -------- --------- --------- Revenue: Enterprise Software . . . . $ 46,378 $44,260 $ 94,263 $ 91,719 Electronic Commerce . . . . 36,797 26,432 70,976 51,675 Federal Systems . . . . . . 26,945 24,805 51,663 48,552 Corporate and other . . . . 3,787 2,348 5,900 4,682 --------- -------- --------- --------- Consolidated totals . . . $113,907 $97,845 $222,802 $196,628 --------- -------- --------- --------- --------- -------- --------- --------- Operating Profit: Enterprise Software . . . . $13,563 $ 9,365 $29,290 $ 19,517 Electronic Commerce . . . . 10,619 4,394 17,568 7,254 Federal Systems . . . . . . 1,694 1,657 3,308 3,237 Corporate and other . . . . (4,394) (6,360) (9,109) (11,850) --------- -------- --------- --------- Consolidated totals . . . $21,482 $ 9,056 $41,057 $ 18,158 --------- -------- --------- --------- --------- -------- --------- ---------
The amounts presented for "Corporate and other" include corporate expense, inter-segment eliminations and the results of operations of the Company's retail software division. 4. LONG-TERM NOTES PAYABLE In February 1993, the Company issued $115,000,000 principal amount of 5 3/4% Convertible Subordinated Debentures Due 2003 ("5 3/4% Debentures"). The 5 3/4% Debentures are unsecured general obligations of the Company and are convertible into the Company's $0.10 par value Common Stock (the "Common Stock") at any time prior to maturity at a conversion price of $28.35. Interest is payable semiannually. At the option of the Company, the 5 3/4% Debentures are redeemable, in whole or in part, at a premium after February 12, 1996. Upon a Change in Control (as defined), holders of the 5 3/4% Debentures will have the right, subject to certain restrictions and conditions, to require the Company to purchase all or any part of the 5 3/4% Debentures at the principal amount, plus accrued interest. The 5 3/4% Debentures are subordinated to all existing and future Senior Indebtedness (as defined) of the Company. In February 1993, the Company also called for redemption its 8% Convertible Senior Subordinated Debentures ("8% Debentures") at a price equal to 103.2% of the principal amount. Holders of $13,739,000 principal amount of 8% Debentures elected to convert their 8% Debentures into 636,054 shares of Common Stock. The remaining $38,894,000 principal amount of 8% Debentures were redeemed on March 4, 1993 for $40,165,000, including interest of $26,000. The conversion and redemption of the 8% Debentures resulted in an extraordinary loss of $1,481,000, net of applicable income taxes of $987,000. If the conversion of $13,739,000 principal amount of 8% Debentures was assumed to have been consummated on October 1, 1992, the pro forma net income per common share amount for the six- month period ended March 31, 1993 would have been $.29 per share on a fully diluted basis. -8- 5. CHANGE IN ACCOUNTING FOR POSTRETIREMENT BENEFITS During the fourth quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS No. 106"), which requires that the expected cost of postretirement benefits be charged to expense during the years the employee renders service. The effect of adopting the new standard as of October 1, 1992 was a charge of $2,774,000, representing the accumulated benefit obligation existing at that date, net of related income tax benefit of $1,813,000. This charge is shown as the cumulative effect of a change in accounting principle. The results for the six months ended March 31, 1993 have been restated for the cumulative effect of the adoption of the new standard and the ratable portion of the 1993 effect of the adoption of the new standard. -9- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MERGER WITH SYSTEMS CENTER, INC. On July 1, 1993, Sterling Software, Inc. ("Sterling Software") acquired Systems Center, Inc. ("Systems Center"), a Delaware corporation based in Reston, Virginia which developed, marketed and supported systems software products, in a merger (the "Merger") accounted for as a pooling of interests, resulting in the combined company, hereafter defined as the "Company." The merger of the equity interests has been given retroactive effect and the Company's financial statements for periods prior to the Merger represent the combined financial statements of the previously separate entities adjusted to conform Systems Center's fiscal years and accounting policies to those used by Sterling Software. In connection with the Merger, the Company eliminated duplicate facilities and equipment, reduced its workforce and wrote off certain software products which would not be actively marketed by the Company. There were no restructuring charges incurred in the first six months of 1994 in excess of the restructuring charges accrued in the fourth quarter of 1993. Since September 30, 1993, there has been no significant increase in operating expenses as a result of the restructuring of the Company and the Company does not expect there to be any material increase in costs and expenses in the second half of 1994 as a result of the Merger. In addition, future operating results are expected to continue to benefit from the reduction in workforce and elimination of duplicate facilities and equipment. Approximately $19,200,000 of cash was expended in the first six months of 1994 relating to restructuring charges accrued in the fourth quarter of 1993. Future cash expenditures related to the restructuring are anticipated to be made from cash generated from operations. THREE MONTHS ENDED MARCH 31, 1994 AND 1993 Effective with the Merger, Sterling Software changed Systems Center's fiscal year-end from December 31 to September 30, affecting the timing of sales incentives and changing the revenue pattern for products previously marketed by Systems Center. Accordingly, the Company believes that the revenue for the three months ended March 31, 1994, which is the Company's second quarter of its fiscal year, is not directly comparable to revenue for the three months ended March 31, 1993. While the change in revenue patterns did not materially impact revenues for Electronic Commerce Group ("ECG") or the Federal Systems Group ("FSG"), this change was relevant with respect to Enterprise Software Group ("ESG") revenues because the majority of the products previously marketed by Systems Center are now marketed by ESG. Revenue increased $16,062,000, or 16%, in the second quarter of 1994 over the same period of 1993 due to increases in all three of the Company's markets. Foreign revenue, which represented approximately 23% and 26% of the Company's total revenue in the second quarter of 1994 and 1993, respectively, was negatively impacted approximately $535,000 by changes in exchange rates during the second quarter of 1994, as compared to the same period of 1993. ESG revenue increased $2,118,000, or 5%, due to increased product revenue. ECG revenue increased $10,365,000, or 39%, on the strength of a $3,501,000, or 40%, increase in -10- network services revenue, a $4,307,000, or 44%, increase in product revenue and a $2,557,000, or 32%, increase in product support revenue. The increased network services revenue was due to an increase in the network services customer base, primarily in the hardlines, retail and grocery vertical markets, and increases in the network processing volume for existing customers. ECG product revenue increased primarily as a result of increased software sales of communications software and interchange software products. ECG product support revenue increased primarily as a result of an increase in the installed customer base and price increases for some products. FSG revenue increased $2,140,000 or 9%, due to higher contract billings in the Information Technology, Scientific Systems and NASA Ames divisions. Total costs and expenses increased $3,636,000, or 4%. Total cost of sales increased $2,009,000, or 5%, primarily due to a $1,202,000, or 5%, increase in federal contract costs, commensurate with the increase in FSG revenue; a $1,951,000, or 29%, increase in ECG's cost of sales due to increased amortization of capitalized software and due to increased costs, commensurate with the increase in ECG revenue; offset by a $1,907,000, or 18%, decrease in ESG's cost of sales, the majority of which is due to decreased amortization of capitalized software as a result of write-off in the fourth quarter of 1993 of certain software products which will not be actively marketed by the Company as a result of the Merger. Product development expense for the second quarter of 1994 of $7,588,000, net of $4,916,000 of costs capitalized pursuant to Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed" ("FAS No. 86"), increased $941,000, or 14%, compared to the second quarter of 1993 product development expense of $6,647,000, net of $6,061,000 of costs capitalized pursuant to FAS No. 86. The increase is due to the decrease in capitalization of software development costs. Product development expense may fluctuate from period to period depending in part upon the number and status of software development projects. Selling, general and administrative expense increased $686,000, or 2%. Income before extraordinary item and cumulative effect of an accounting change increased $8,453,000, or 172%, primarily due to higher operating profits in ECG, up 142%, and ESG, up 45%, over the same period of 1993, partially offset by an increase in federal income tax expense due to higher pretax profit. Also contributing to this increase was a decrease of $431,000 in interest expense primarily for interest accrued in the second quarter of 1993 on the unpaid and previously outstanding Systems Center Series A 9% Convertible Redeemable Preferred Stock ("Systems Center Preferred Stock") dividends. Other income and expense includes foreign currency exchange gains of approximately $700,000 in the second quarter of 1994 versus foreign currency exchange losses of approximately $115,000 in the second quarter of 1993. SIX MONTHS ENDED MARCH 31, 1994 AND 1993 Effective with the Merger, Sterling Software changed Systems Center's fiscal year-end from December 31 to September 30, affecting the timing of sales incentives and changing the revenue pattern for products previously marketed by Systems Center. Accordingly, the Company believes that the revenue for the six months ended March 31, 1994 is not directly comparable to revenue for the six months ended March 31, 1993. While the change in revenue patterns did not materially impact revenues for ECG or FSG, this change was relevant with respect to ESG revenues because the majority of the products previously marketed by Systems Center are now marketed by ESG. -11- Revenue increased $26,174,000, or 13%, in the first six months of 1994 over the same period of 1993 due to increases in all three of the Company's markets. Foreign revenue, which represented approximately 25% and 28% of the Company's total revenue in the first six months of 1994 and 1993, respectively, was negatively impacted approximately $3,000,000 by changes in exchange rates during the first six months of 1994, as compared to the same period of 1993. ESG revenue increased $2,544,000, or 3%, due to increases in product and product support revenue. ECG revenue increased $19,301,000, or 37%, on the strength of a $7,196,000, or 42%, increase in network services revenue, a $6,937,000, or 36%, increase in product revenue and a $5,168,000, or 34%, increase in product support revenue. The increase in network services revenue was due to an increase in the network services customer base, primarily in the hardlines, retail and grocery vertical markets, and increases in the network processing volume for existing customers. ECG product revenue increased primarily as a result of increased software sales of communications software, interchange software and banking systems products. ECG product support revenue increased primarily as a result of an increase in the installed customer base and price increases for some products. FSG revenue increased $3,111,000, or 6%, primarily due to higher contract billings in the Information Technology and NASA Ames divisions. Total costs and expenses increased $3,275,000, or 2%. Total cost of sales increased $2,756,000, or 3%, primarily due to a $1,925,000, or 4%, increase in federal contract costs, commensurate with the increase in FSG revenue; a $4,228,000, or 63%, increase in ECG's cost of sales due to increased amortization of capitalized software and due to increased costs, commensurate with the increase in ECG revenue; offset by a $3,715,000, or 36%, decrease in ESG's cost of sales, the majority of which is due to decreased amortization of capitalized software as a result of the write-off in the fourth quarter of 1993 of certain software products which will not be actively marketed by the Company as a result of the Merger. Product development expense for the first six months of 1994 of $14,608,000, net of $9,316,000 of costs capitalized pursuant to FAS No. 86, increased $2,044,000, or 16%, compared to the first six months of 1993 product development expense of $12,564,000, net of $12,275,000 of costs capitalized pursuant to FAS No. 86. The increase is due to the decrease in capitalization of software development costs. Product development expense may fluctuate from period to period depending in part upon the number and status of software development projects. Selling, general and administrative expense decreased $1,525,000, or 2%, reflecting reduced costs after the Company's fourth quarter 1993 restructuring due to the Merger, which eliminated duplicate corporate overhead functions and streamlined the sales and marketing functions, resulting in a reduced workforce, and eliminated duplicate facilities. Income before extraordinary item and cumulative effect of an accounting change increased $14,447,000, or 145%, primarily due to higher operating profits in ECG, up 142%, and ESG, up 50%, over the same period of 1993, partially offset by an increase in federal income tax expense due to higher pretax profit. Also contributing to this increase was a decrease in interest expense of $722,000 primarily for interest accrued in the first six months of 1993 on the unpaid and previously outstanding Systems Center Preferred Stock dividends. Other income and expense includes foreign currency exchange gains of approximately $345,000 in the first six months of 1994 versus foreign currency exchange losses of approximately $83,000 in the first six months of 1993. Other income and expense includes approximately $127,000 of loss on assets in the first -12- six months of 1994 compared to approximately $71,000 of loss on assets in the first six months of 1993. The Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS No. 106") as of October 1, 1992 and recorded a charge of $2,774,000, net of related income tax benefit of $1,813,000. This charge is shown as the cumulative effect of a change in accounting principle. See Note 5 to the Consolidated Financial Statements. LIQUIDITY AND CAPITAL RESOURCES The Company maintained a strong liquidity and financial position with $80,903,000 of working capital at March 31, 1994, which includes $62,601,000 of cash and equivalents and $29,148,000 of marketable securities. Net cash flows from operations increased $2,316,000, or 9%, in the first six months of 1994 as compared to the first six months of 1993 primarily due to higher operating profits before noncash charges. Cash flows from operations and available cash balances were used to fund operations, investment purchases and capital expenditures, including software additions. Cash and cash equivalents consist primarily of highly liquid investments in investment-grade commercial paper of various issuers, with maturities of three months or less when purchased. The Company invests excess cash in a diversified portfolio consisting of a variety of securities of both domestic and foreign issuers including medium term notes, U.S. government obligations, investment fund partnerships and certificates of deposit, which may include both investment grade and non-investment grade securities. Certain of these investments are managed by Maverick Capital, Ltd. ("Maverick"), including a $15 million investment in an investment fund partnership managed by Maverick. Maverick is owned and managed by a group of individuals, five of whom are directors of the Company. All marketable securities and long-term investments are classified as available-for-sale securities. Securities totaling $35,496,000 that the Company intends to hold for more than one year are included in "Other Assets." During the first six months of 1994, software expenditures, the majority of which were costs capitalized pursuant to FAS No. 86, were $10,119,000 compared to $12,325,000 in the first six months of 1993. ECG represented $6,055,000 of the total software expenditures during the first six months of 1994, primarily for enhancements of communications software products, interchange software products and costs to add new network services features. ESG represented $4,064,000 of the total software expenditures during the first six months of 1994, primarily for the development of systems management, storage management and applications management products and product enhancements. Property and equipment purchases of $8,709,000 in the first six months of 1994 include purchases made in ECG for equipment upgrades for network processing systems and computer equipment purchases to support the continuing growth in ECG. ESG's and FSG's property and equipment additions were primarily computer equipment purchases. Property and equipment purchases were $4,884,000 in the first six months of 1993. Net purchases of $5,974,000 in marketable securities and long- term investments in the first six months of 1994 were generally from the net cash provided by operating activities and proceeds from issuances of common stock pursuant to the exercise of stock options and warrants. -13- At March 31, 1994, after the utilization of $2 million for letters of credit, $33 million was available for borrowing on the Company's $35 million revolving credit and term loan agreement ("Loan Agreement.") Borrowings, if any, outstanding on December 31, 1994 will be payable in eight equal quarterly payments. There were no amounts borrowed or outstanding on the Loan Agreement during the six months ended March 31, 1994, however, the Company's international operations borrowed $10,485,000 during the first six months of 1994 on separate lines of credit, primarily for foreign exchange exposure management and working capital requirements. Payments of $6,417,000 were made during the first six months of 1994 on these lines of credit. Other debt payments related to capital leases. Proceeds from the exercise of stock options and warrants were $19,264,000 during the first six months of 1994, compared to $2,805,000 during the first six months of 1993. At March 31, 1994, the Company's capital resource commitments consisted of commitments under lease arrangements for office space and equipment. The Company intends to meet such obligations primarily from internally generated funds. No significant commitments exist for future capital expenditures. The Company believes available balances of cash, cash equivalents and marketable securities combined with cash flows from operations and amounts available under credit and term loan agreements are sufficient to meet the Company's cash requirements for the foreseeable future. OTHER MATTERS In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("FAS No. 112"), which requires employers to recognize the cost of postemployment benefits on an accrual basis, if certain defined conditions are met. Postemployment benefits are all types of benefits provided to former or inactive employees, their beneficiaries, and covered dependents. The Company will be subject to the provisions of FAS No. 112 beginning in the fiscal year ending September 30, 1995. However, the Company does not believe the provisions of FAS No. 112 will have a significant impact on the Company's financial position and results of operations in the year of adoption, as the majority of the postemployment benefits are a result of certain employment contracts. Payments under these contracts are contingent upon future events, the occurrence of which is not presently contemplated. -14- PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Stockholders (the "Meeting") on March 17, 1994. The stockholders of the Company voted on and approved the following proposals: 1. The election of three Class A Directors for terms expiring in 1997. 2. Amendments to the Company's Incentive Stock Option Plan (the "Incentive Plan") and Non-Statutory Stock Option Plan (the "Non- Statutory Plan") (i) to increase the number of shares of Common Stock available for issuance upon exercise of options granted thereunder from 1,500,000 to 1,750,000 and 2,500,000 to 4,000,000, respectively, (ii) to extend the terms of such plans to December 31, 2003, in the case of the Incentive Plan, and December 31, 2011, in the case of the Non-Statutory Plan, and (iii) in certain other respects, as set forth in the Company's Proxy Statement for the Meeting. 3. Adoption of the 1994 Non-Statutory Stock Option Plan (the "1994 Non- Statutory Plan"). The proposals were approved by the following votes: 1. ELECTION OF DIRECTORS NAME FOR WITHHELD ---- --- -------- Robert J. Donachie 17,928,100 504,202 Evan A. Wyly 17,904,538 527,764 Robert E. Cook 17,832,051 600,251 2. AMENDMENTS TO THE INCENTIVE PLAN AND THE NON-STATUTORY PLAN FOR AGAINST ABSTENTIONS BROKER NON-VOTES --- ------- ----------- ---------------- 12,182,953 4,681,245 187,789 1,380,315 3. ADOPTION OF THE 1994 NON-STATUTORY PLAN FOR AGAINST ABSTENTIONS BROKER NON-VOTES --- ------- ----------- ---------------- 10,232,251 6,615,310 204,426 1,380,315 -15- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed as part of this Quarterly Report on Form 10-Q: 2(a) --Agreement and Plan of Merger dated as of March 31, 1993 among the Company, Systems Center, Inc. and SSI Acquisition Corporation ("Agreement and Plan of Merger") (1) 2(b) --First Amendment to Agreement and Plan of Merger (10) 4(a) --Certificate of Incorporation of the Company (2) 4(b) --Certificate of Amendment of Certificate of Incorporation of the Company (10) 4(c) --Certificate of Amendment of Certificate of Incorporation of the Company (3) 4(d) --Restated Bylaws of the Company (4) 4(e) --Form of Common Stock Certificate (5) 4(f) --Form of Certificate of Designation, Preferences, Rights and Limitations with respect to Series B Junior Preferred Stock (10) 4(g) --Form of Indenture between the Company and Bank of America Texas, National Association, as Trustee, including the form of 5 3/4% Convertible Subordinated Debenture attached as Exhibit A thereto (6) 4(h) --Preferred Stock and Warrant Purchase Agreement dated June 25, 1991 among Systems Center, Inc. and the Investors named therein (7) 10(a) --Stock Option Agreement dated as of March 31, 1993 between the Company and Systems Center, Inc. (1) 10(b) --Form of Stockholder Agreement dated as of March 31, 1993 between the Company and certain stockholders of Systems Center, Inc. (1) 10(c) --Form of Sterling Software, Inc. Stockholder Agreement between Systems Center, Inc. and certain directors and/or stockholders of the Company (1) 10(d) --Amended Incentive Stock Option Plan of the Company (12) 10(e) --Amended Non-Statutory Stock Option Plan of the Company (12) 10(f) --Supplemental Executive Retirement Plan II of Informatics General Corporation (10) 10(g) --Form of Supplemental Executive Retirement Plan II Agreement (the "SERP II Agreement") (10) 10(h) --Amendment to SERP II Agreement (10) 10(i) --Form of Employment Agreement with Jeannette P. Meier, George H. Ellis and Phillip A. Moore (10) 10(j) --Form of Amendment No. 1 to Employment Agreement with Jeannette P. Meier, George H. Ellis and Phillip A. Moore (10) 10(k) --Employment Agreement with Sam Wyly (10) 10(l) --Employment Agreement with Charles J. Wyly, Jr. (10) 10(m) --Employment Agreement with Sterling L. Williams (10) 10(n) --Form of Amendment No. 1 to Employment Agreement with Charles J. Wyly, Jr. and Sterling L. Williams (10) 10(o) --Amendment No. 1 to Employment Agreement with Sam Wyly (10) -16- 10(p) --Amendment No. 2 to Employment Agreement with Sam Wyly (10) 10(q) --Consultation Agreement with REC Enterprises, Inc. (10) 10(r) --Employment Agreement with William D. Plumb (10) 10(s) --Employment Agreement with William D. Plumb (10) 10(t) --Form of Employment Agreement with Edward J. Lott, Warner C. Blow, Werner L. Frank and Geno P. Tolari (10) 10(u) --Employment Agreement with Sterling L. Williams (1) 10(v) --Form of Employment Agreement with Jeannette P. Meier, George H. Ellis, Phillip A. Moore, Warner C. Blow and Geno P. Tolari (1) 10(w) --Employment Agreement with Werner L. Frank (1) 10(x) --Form of Series B Warrant Agreement (10) 10(y) --Form of Amendment to Series B Warrant Agreement (January 1988) (10) 10(z) --Form of Amendment to Series B Warrant Agreement (May 1989) (10) 10(aa) --Form of Series E Warrant Agreement (10) 10(bb) --Form of Amendment to Series E Warrant Agreement (May 1989) (10) 10(cc) --Form of Series F Warrant Agreement (10) 10(dd) --Form of Amendment to Series F Warrant Agreement (May 1989) (10) 10(ee) --Amended and Restated Revolving Credit and Term Loan Agreement dated June 8, 1990 between the Company and The First National Bank of Boston and BankOne Texas N.A. ("Loan Agreement") (10) 10(ff) --First Amendment to Loan Agreement dated as of October 16, 1990 (10) 10(gg) --Second Amendment to Loan Agreement dated as of September 19, 1991 (10) 10(hh) --Third Amendment to Loan Agreement dated as of December 31, 1991 (10) 10(ii) --Fourth Amendment to Loan Agreement dated as of June 15, 1992 (10) 10(jj) --Fifth Amendment to Loan Agreement dated as of July 31, 1992 (10) 10(kk) --Sixth Amendment to Loan Agreement dated as of August 31, 1992 (10) 10(ll) --Seventh Amendment to Loan Agreement dated as of September 9, 1992 (10) 10(mm) --Eighth Amendment to Loan Agreement dated as of September 30, 1992 (10) 10(nn) --Ninth Amendment to Loan Agreement dated as of October 13, 1992 (10) 10(oo) --Tenth Amendment to Loan Agreement dated as of December 17, 1992 (1) 10(pp) --Form of Eleventh Amendment to Loan Agreement dated as of March 29, 1993 (10) 10(qq) --Twelfth Amendment to Loan Agreement dated as of June 30, 1993 (10) 10(rr) --Form of Thirteenth Amendment to Loan Agreement dated as of November 10, 1993 (10) -17- 10(ss) --Form of Fourteenth Amendment to Loan Agreement dated as of November 22, 1993 (10) 10(tt) --Fifteenth Amendment to Loan Agreement dated as of December 21, 1993 (11) 10(uu) --Sixteenth Amendment to Loan Agreement dated as of December 30, 1993 (11) 10(vv) --Seventeenth Amendment to Loan Agreement dated as of January 31, 1994 (11) 10(ww) --Eighteenth Amendment to Loan Agreement dated as of March 15, 1994 (12) 10(xx) --1992 Executive Compensation Plan for Group Presidents (10) 10(yy) --1993 Executive Compensation Plan for Group Presidents (1) 10(zz) --1994 Executive Compensation Plan for Group Presidents (10) 10(aaa) --Form of Series G Warrant Agreement (10) 10(bbb) --Amended 1992 Non-Statutory Stock Option Plan (3) 10(ccc) --Form of Indemnity Agreement between the Company and each of its directors and officers (10) 10(ddd) --Systems Center, Inc. Restated and Amended Restricted Stock Plan (8) 10(eee) --Systems Center, Inc. Amended and Restated Nondiscretionary Restricted Stock Plan (8) 10(fff) --Systems Center, Inc. 1982 Stock Option Plan (8) 10(ggg) --Systems Center, Inc. 1992 Stock Incentive Plan (8) 10(hhh) --Systems Center, Inc. 1983 Stock Plan (8) 10(iii) --Systems Center, Inc. Share Option Scheme (8) 10(jjj) --Registration Rights Agreement dated as of July 1, 1993 among the Company and the Selling Stockholders (9) 10(kkk) --1994 Non-Statutory Stock Option Plan (12) 11(a) --Computation of Earnings Per Share, Three Months Ended March 31, 1994 (12) 11(b) --Computation of Earnings Per Share, Three Months Ended March 31, 1993 (12) 11(c) --Computation of Earnings Per Share, Six Months Ended March 31, 1994 (12) 11(d) --Computation of Earnings Per Share, Six Months Ended March 31, 1993 (12) 15 --None 18 --None 19 --None 22 --None 23 --None 24 --None 27 --None 99 --None -18- (b) Reports on Form 8-K. None. - ---------------- (1) Previously filed as an exhibit to the Company's Registration Statement No. 33-62028 on Form S-4 and incorporated herein by reference. (2) Previously filed as an exhibit to the Company's Registration Statement No. 2-82506 on Form S-1 and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Registration Statement No. 33-69926 on Form S-8 and incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Registration Statement No. 33-47131 on Form S-8 and incorporated herein by reference. (5) Previously filed as an exhibit to the Company's Registration Statement No. 2-86825 on Form S-1 and incorporated herein by reference. (6) Previously filed as an exhibit to the Company's Registration Statement No. 33-57428 on Form S-3 and incorporated herein by reference. (7) Previously filed as an exhibit to the Quarterly Report on Form 10-Q of Systems Center, Inc. for the quarter ended June 30, 1991 and incorporated herein by reference. (8) Previously filed as an exhibit to the Company's Registration Statement No. 33-65402 on Form S-8 and incorporated herein by reference. (9) Previously filed as an exhibit to the Company's Registration Statement No. 33-71706 on Form S-3 and incorporated herein by reference. (10) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 and incorporated herein by reference. (11) Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1993 and incorporated herein by reference. (12) Filed herewith. -19- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STERLING SOFTWARE, INC. Date: May 11, 1994 /s/ Sterling L. Williams ------------------------------------------ Sterling L. Williams President, Chief Executive Officer and Director (Principal Executive Officer) Date: May 11, 1994 /s/ George H. Ellis ------------------------------------------ George H. Ellis Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) - 20 -
EXHIBIT INDEX Sequentially Exhibit Numbered No. Description Page - ------- ------------------------------------------------------------- ------------ 2(a) -- Agreement and Plan of Merger dated as of March 31, 1993 among the Company, Systems Center, Inc. and SSI Acquisition Corporation ("Agreement and Plan of Merger") (1) 2(b) -- First Amendment to Agreement and Plan of Merger (10) 4(a) -- Certificate of Incorporation of the Company (2) 4(b) -- Certificate of Amendment of Certificate of Incorporation of the Company (10) 4(c) -- Certificate of Amendment of Certificate of Incorporation of the Company (3) 4(d) -- Restated Bylaws of the Company (4) 4(e) -- Form of Common Stock Certificate (5) 4(f) -- Form of Certificate of Designation, Preferences, Rights and Limitations with respect to Series B Junior Preferred Stock (10) 4(g) -- Form of Indenture between the Company and Bank of America Texas, National Association, as Trustee, including the form of 5 3/4% Convertible Subordinated Debenture attached as Exhibit A thereto (6) 4(h) -- Preferred Stock and Warrant Purchase Agreement dated June 25, 1991 among Systems Center, Inc. and the Investors named therein (7) 10(a) -- Stock Option Agreement dated as of March 31, 1993 between the Company and Systems Center, Inc. (1) 10(b) -- Form of Stockholder Agreement dated as of March 31, 1993 between the Company and certain stockholders of Systems Center, Inc. (1) 10(c) -- Form of Sterling Software, Inc. Stockholder Agreement between Systems Center, Inc. and certain directors and/or stockholders of the Company (1) 10(d) -- Amended Incentive Stock Option Plan of the Company (12) 10(e) -- Amended Non-Statutory Stock Option Plan of the Company (12) 10(f) -- Supplemental Executive Retirement Plan II of Informatics General Corporation (10) 10(g) -- Form of Supplemental Executive Retirement Plan II Agreement (the "SERP II Agreement") (10) 10(h) -- Amendment to SERP II Agreement (10) 10(i) -- Form of Employment Agreement with Jeannette P. Meier, George H. Ellis and Phillip A. Moore (10) 10(j) -- Form of Amendment No. 1 to Employment Agreement with Jeannette P. Meier, George H. Ellis and Phillip A. Moore (10) 10(k) -- Employment Agreement with Sam Wyly (10) -21- 10(l) -- Employment Agreement with Charles J. Wyly, Jr. (10) 10(m) -- Employment Agreement with Sterling L. Williams (10) 10(n) -- Form of Amendment No. 1 to Employment Agreement with Charles J. Wyly, Jr. and Sterling L. Williams (10) 10(o) -- Amendment No. 1 to Employment Agreement with Sam Wyly (10) 10(p) -- Amendment No. 2 to Employment Agreement with Sam Wyly (10) 10(q) -- Consultation Agreement with REC Enterprises, Inc. (10) 10(r) -- Employment Agreement with William D. Plumb (10) 10(s) -- Employment Agreement with William D. Plumb (10) 10(t) -- Form of Employment Agreement with Edward J. Lott, Warner C. Blow, Werner L. Frank and Geno P. Tolari (10) 10(u) -- Employment Agreement with Sterling L. Williams (1) 10(v) -- Form of Employment Agreement with Jeannette P. Meier, George H. Ellis, Phillip A. Moore, Warner C. Blow and Geno P. Tolari (1) 10(w) -- Employment Agreement with Werner L. Frank (1) 10(x) -- Form of Series B Warrant Agreement (10) 10(y) -- Form of Amendment to Series B Warrant Agreement (January 1988) (10) 10(z) -- Form of Amendment to Series B Warrant Agreement (May 1989) (10) 10(aa) -- Form of Series E Warrant Agreement (10) 10(bb) -- Form of Amendment to Series E Warrant Agreement (May 1989) (10) 10(cc) -- Form of Series F Warrant Agreement (10) 10(dd) -- Form of Amendment to Series F Warrant Agreement (May 1989) (10) 10(ee) -- Amended and Restated Revolving Credit and Term Loan Agreement dated June 8, 1990 between the Company and The First National Bank of Boston and BankOne Texas N.A. ("Loan Agreement") (10) 10(ff) -- First Amendment to Loan Agreement dated as of October 16, 1990 (10) 10(gg) -- Second Amendment to Loan Agreement dated as of September 19, 1991 (10) 10(hh) -- Third Amendment to Loan Agreement dated as of December 31, 1991 (10) 10(ii) -- Fourth Amendment to Loan Agreement dated as of June 15, 1992 (10) 10(jj) -- Fifth Amendment to Loan Agreement dated as of July 31, 1992 (10) 10(kk) -- Sixth Amendment to Loan Agreement dated as of August 31, 1992 (10) 10(ll) -- Seventh Amendment to Loan Agreement dated as of September 9, 1992 (10) -22- 10(mm) -- Eighth Amendment to Loan Agreement dated as of September 30, 1992 (10) 10(nn) -- Ninth Amendment to Loan Agreement dated as of October 13, 1992 (10) 10(oo) -- Tenth Amendment to Loan Agreement dated as of December 17, 1992 (1) 10(pp) -- Form of Eleventh Amendment to Loan Agreement dated as of March 29, 1993 (10) 10(qq) -- Twelfth Amendment to Loan Agreement dated as of June 30, 1993 (10) 10(rr) -- Form of Thirteenth Amendment to Loan Agreement dated as of November 10, 1993 (10) 10(ss) -- Form of Fourteenth Amendment to Loan Agreement dated as of November 22, 1993 (10) 10(tt) -- Fifteenth Amendment to Loan Agreement dated as of December 21, 1993 (11) 10(uu) -- Sixteenth Amendment to Loan Agreement dated as of December 30, 1993 (11) 10(vv) -- Seventeenth Amendment to Loan Agreement dated as of January 31, 1994 (11) 10(ww) -- Eighteenth Amendment to Loan Agreement dated as of March 15, 1994 (12) 10(xx) -- 1992 Executive Compensation Plan for Group Presidents (10) 10(yy) -- 1993 Executive Compensation Plan for Group Presidents (1) 10(zz) -- 1994 Executive Compensation Plan for Group Presidents (10) 10(aaa) -- Form of Series G Warrant Agreement (10) 10(bbb) -- Amended 1992 Non-Statutory Stock Option Plan (3) 10(ccc) -- Form of Indemnity Agreement between the Company and each of its directors and officers (10) 10(ddd) -- Systems Center, Inc. Restated and Amended Restricted Stock Plan (8) 10(eee) -- Systems Center, Inc. Amended and Restated Nondiscretionary Restricted Stock Plan (8) 10(fff) -- Systems Center, Inc. 1982 Stock Option Plan (8) 10(ggg) -- Systems Center, Inc. 1992 Stock Incentive Plan (8) 10(hhh) -- Systems Center, Inc. 1983 Stock Plan (8) 10(iii) -- Systems Center, Inc. Share Option Scheme (8) 10(jjj) -- Registration Rights Agreement dated as of July 1, 1993 among the Company and the Selling Stockholders (9) 10(kkk) -- 1994 Non-Statutory Stock Option Plan (12) 11(a) -- Computation of Earnings Per Share, Three Months Ended March 31, 1994 (12) 11(b) -- Computation of Earnings Per Share, Three Months Ended March 31, 1993 (12) -23- 11(c) -- Computation of Earnings Per Share, Six Months Ended March 31, 1994 (12) 11(d) -- Computation of Earnings Per Share, Six Months Ended March 31, 1993 (12) 15 -- None 18 -- None 19 -- None 22 -- None 23 -- None 24 -- None 27 -- None 99 -- None - ----------------- (1) Previously filed as an exhibit to the Company's Registration Statement No. 33-62028 on Form S-4 and incorporated herein by reference. (2) Previously filed as an exhibit to the Company's Registration Statement No. 2-82506 on Form S-1 and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Registration Statement No. 33-69926 on Form S-8 and incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Registration Statement No. 33-47131 on Form S-8 and incorporated herein by reference. (5) Previously filed as an exhibit to the Company's Registration Statement No. 2-86825 on Form S-1 and incorporated herein by reference. (6) Previously filed as an exhibit to the Company's Registration Statement No. 33-57428 on Form S-3 and incorporated herein by reference. (7) Previously filed as an exhibit to the Quarterly Report on Form 10-Q of Systems Center, Inc. for the quarter ended June 30, 1991 and incorporated herein by reference. (8) Previously filed as an exhibit to the Company's Registration Statement No. 33-65402 on Form S-8 and incorporated herein by reference. (9) Previously filed as an exhibit to the Company's Registration Statement No. 33-71706 on Form S-3 and incorporated herein by reference. (10) Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 and incorporated herein by reference. (11) Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1993 and incorporated herein by reference. (12) Filed herewith.
-24- EX-10.(D) 2 EXHIBIT 10(D) INCENTIVE STOCK PLAN Exhibit 10(d) STERLING SOFTWARE, INC. INCENTIVE STOCK OPTION PLAN (AS AMENDED, THROUGH JANUARY 31, 1994) 1. PURPOSE. The purpose of the Incentive Stock Option Plan of Sterling Software, Inc. (the "Plan") is to provide key employees with a proprietary interest in Sterling Software, Inc., a Delaware corporation, and its subsidiaries (the "Company") through the granting of options ("Option" or "Options") to purchase shares of the Company's authorized Common Stock, par value $0.10 per share ("Common Stock"), in order to: a. Increase the interest in the Company's welfare of those key employees who share primary responsibility for the management, growth and protection of the business of the Company; b. Furnish an incentive to such employees to continue their services for the Company; and c. Provide a means through which the Company may attract able persons to enter its employment. It is intended that Options issued pursuant to this Plan shall constitute incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986. With respect to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent that any provision of the Plan or action of the Committee (as defined in Section 2) fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 2. ADMINISTRATION. The Plan shall be administered by the Board of Directors of the Company (the "Board of Directors" or "Board") or by a Stock Option Committee (the "Stock Option Committee") consisting of such number of directors as are appointed by the Board from time to time in accordance with the requirements of Rule 16b-3. As used herein, "Committee" shall mean the Board or the duly appointed Stock Option Committee, as applicable. No member of the Committee shall take any action with respect to Options granted to such member. The Board of Directors shall choose an additional member or members of the Board to serve on the Committee for the sole purpose of making decisions pursuant to the Plan with regard to the member of the Committee receiving the Options. Except as otherwise provided by the terms of this Plan or by the Board, the Committee shall have all the power and authority of the Board hereunder. The Committee shall have full and final authority in its discretion, but subject to the provisions of the Plan, to determine from time to time the individuals to whom Options shall be granted and the number of shares to be covered by each Option; to determine the time or times at which Options shall be granted; to interpret the Plan and the instruments by which Options will be evidenced; to make, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the instruments by which Options shall be evidenced; with the consent of the Participant (as defined in Section 3), to modify or amend any Option agreement or waive any conditions or restrictions applicable to any Option or the exercise thereof; and to make all other determinations necessary or advisable for the administration of the Plan. 3. ELIGIBILITY. The Committee may, from time to time, select particular employees from among those key employees of the Company and any subsidiary of the Company to whom Options are to be granted, and upon the grant of such Options, the selected employees shall become Participants in the Plan. As used herein the term "Participant" means an eligible employee as described in this Section who accepts an Option, or the estate, personal representative or beneficiary thereof having the right to exercise an Option pursuant to its terms. Employees are eligible hereunder if they are employed by the 1 Company or any of its subsidiaries on a full-time basis and are compensated for such employment by a regular salary. There shall be included as eligible employees members of the Board who are also salaried officers or employees of the Company. 4. NUMBER OF SHARES AVAILABLE FOR OPTIONS. The shares of Common Stock subject to Options granted pursuant to the Plan shall be either shares of authorized but unissued Common Stock or shares of Common Stock reacquired by the Company. Shares that by reason of the expiration of an Option, or for any other reason, are no longer subject to purchase pursuant to an Option granted under the Plan, and shares from time to time rendered in payment of the exercise price of Options, may be made subject to additional Options granted pursuant to the Plan. The maximum aggregate number of shares of Common Stock that may be issued from time to time pursuant to the exercise of Options granted pursuant to the Plan shall be 1,750,000; provided that the Committee may adjust the number of shares available for Options, the number of shares subject to and the exercise price of Options granted hereunder to effect a change in capitalization of the Company, such as a stock dividend, stock split, share combination, exchange of shares, merger, consolidation, reorganization, liquidation, or the like, of or by the Company. 5. THE GRANT OF OPTIONS. Options granted hereunder shall be evidenced by written stock option agreements containing such terms and provisions as are recommended and approved from time to time by the Committee, but subject to and not more favorable than the terms of the Plan. The Committee may from time to time require additional terms which the Committee deems necessary or advisable. The Company shall execute stock option agreements upon instruction from the Committee. 6. MAXIMUM AMOUNT OF STOCK SUBJECT TO OPTIONS. The maximum aggregate fair market value (determined as of the time the Option is granted) of the Common Stock with respect to which Options are exercisable for the first time by any employee during any calendar year (under all incentive stock option plans of the Company and its subsidiaries) shall not exceed $100,000. This limitation shall apply to all Options granted under the Plan after December 31, 1986. 7. OPTION EXERCISE PRICE. The purchase price of Common Stock subject to an Option granted pursuant to the Plan shall be determined by the Committee on the date of the grant. The price shall not be less than 100% of the fair market value of the Common Stock on the date of the grant of the Option; provided, however, that if the Participant owns more than 10% combined voting power of all of the outstanding capital stock of the Company on the date of the grant, the exercise price shall not be less than 110% of the fair market value of the Common Stock on the date of grant. The Committee shall determine the fair market value of the Common Stock on the date of the grant, and shall set forth the determination in its minutes. 8. EXERCISE OF OPTION. a. Options granted under the Plan may not be exercisable while there is outstanding any incentive stock option previously granted to the Participant. An Option will be considered outstanding until such Option is exercised in full or expires by reason of lapse of time. This Section 8.a. shall not apply to any Option granted to any employee pursuant to the Plan after December 31, 1986. b. An Option may not be exercised, nor may Common Stock be issued pursuant to the exercise of an Option, if any requisite action, approval or consent of any governmental authority of any kind having jurisdiction over the exercise of the Option shall not have been taken or secured. The term of each Option shall not be more than ten years from the date of grant; provided, however, that in the case of a Participant who owns greater than 10% of the Common Stock of the Company at the time the Option is granted, the term of the Option shall not be more than five years from the date of grant. 9. PAYMENT. Full payment for Common Stock purchased upon the exercise of the Option shall be made at the time of exercise. No Common Stock shall be issued until full payment has been made and a Participant shall have none of the rights of a stockholder until shares of Common Stock are 2 issued to him. Any federal, state or local taxes required to be paid or withheld at the time of exercise shall also be paid or withheld in full prior to any delivery of shares of Common Stock upon exercise. Payment may be made in cash, in shares of Common Stock then owned by the Participant, or in any other form of valid consideration, or a combination of any of the foregoing, as required by the Committee in its discretion. Shares of Common Stock tendered in payment of the exercise price of any Options may be reissued to the Participant who tendered the shares of Common Stock as part of the shares of Common Stock issuable upon exercise of other Options granted from time to time pursuant to the Plan. 10. TIME OF GRANTING OF OPTION. The grant of an Option pursuant to the Plan shall occur only when a written Option agreement shall have been duly executed and delivered by or on behalf of the Company to the Participant. Such Option shall not be effective unless granted on or before December 31, 2003. 11. NON-TRANSFERABILITY OF OPTIONS. Options granted under the Plan shall not be transferable otherwise than by will or the laws of descent and distribution and may only be exercised during the lifetime of the Participant by such Participant. 12. RIGHTS IN EVENT OF DEATH OR DISABILITY OF PARTICIPANT. The Committee shall have discretion to include in each Option agreement such provisions regarding exercisability of the Options following the death or disability of the Participant as it, in its sole discretion, deems to be appropriate. 13. NOTICE UPON DISPOSITION. Participants shall immediately notify the Company upon sale of any Common Stock acquired pursuant to the exercise of an Option granted under the Plan if such sale occurs within two years from the date of the grant of the Option, or one year from the date of the exercise of the Option. 14. STOCK PURCHASED FOR INVESTMENT. At the discretion of the Committee, any Option agreement may provide that the Option holder shall, by accepting an Option, represent and agree on behalf of himself and his transferees by will or the laws of descent and distribution that all shares of Common Stock purchased upon the exercise of the Option will be acquired for investment and not for resale or distribution, and that upon each exercise of any portion of an Option, the person entitled to exercise the same shall furnish evidence satisfactory to the Company (including a written and signed representation) to the effect that the shares of Common Stock are being acquired in good faith and for investment and not for resale or distribution. 15. TERMINATION OF OPTION RIGHTS AND AWARDS. The Committee may provide in each Option agreement for the circumstances under which Options granted hereunder may terminate for any reason that the Committee, in its sole discretion, deems appropriate. 16. AMENDMENT OR DISCONTINUATION. The Plan may be amended, altered or discontinued by the Board or, if the Board has specifically delegated this authority to the Committee, by the Committee, without approval of the stockholders; provided that the Board or the Committee shall not have the power or authority, without approval of the stockholders, to change the employees or class of employees who are eligible to participate or the aggregate number of shares which may be issued pursuant to the exercise of the Options. In the event any law, or any rule or regulation issued or promulgated by the Internal Revenue Service, Securities and Exchange Commission, National Association of Security Dealers, Inc., any stock exchange upon which the Common Stock is listed for trading or other governmental or quasi-governmental agency having jurisdiction over the Company, its Common Stock or the Plan requires the Plan to be amended, the Plan will be amended at that time and all Options then outstanding will be subject to such amendment. 17. EMPLOYMENT. This Plan and any Option granted under this Plan do not confer upon the Participant any right to be employed or to continue in the employ of the Company, nor does it in any way interfere with the right of the Company to terminate the employment of the Participant at any time. 3 18. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option pursuant to the Plan shall not impose any obligation upon the Participant to exercise such Option. 19. TERMINATION. Unless sooner terminated by action of the Board, or, if the Board has specifically delegated its authority to terminate the Plan to the Committee, by the Committee, the Plan shall terminate on December 31, 2003, and no Options may be granted pursuant to the Plan after such date. 20. USE OF PROCEEDS. The proceeds derived from the sale of stock pursuant to Options granted under the Plan shall constitute general funds of the Company. 21. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective and shall be deemed to have been adopted on January 31, 1994, subject only to ratification by the holders of at least a majority of the outstanding shares of voting stock of the Company twelve months before or after such date. 22. LIMITATIONS ON OPTIONS GRANTED TO DIRECTORS. The following limitations shall apply to Options granted to directors in order to comply with Rule 16b-3(b)(1)(iii) promulgated under the Exchange Act: a. In addition to the limitations included in Sections 6 and 8 hereof, the maximum aggregate number of shares of Common Stock which may be issued pursuant to Options granted to all directors as a group under this Plan shall not exceed 50% of the aggregate shares of Common Stock for which Options may be granted under the Plan, subject to adjustment as provided in Section 4 hereof; b. The purchase price for shares of Common Stock acquired pursuant to the exercise, in whole or in part, of any Option shall be 100% of the fair market value of the Common Stock on the date of grant of such Option; c. Options granted to directors pursuant to the Plan may be granted only during the term of the Plan; d. Options granted to directors pursuant to the Plan shall not be exercisable for a period of twelve calendar months from the date of grant of such Options; and e. Options granted to directors pursuant to the Plan shall expire no later than five (5) years from the date on which the Options are granted. The limitations set forth in this Section 22 shall cease to apply effective as of the date of the Company's adoption with respect to this Plan of Rule 16b-3 as promulgated under the Exchange Act effective May 1991. STERLING SOFTWARE, INC. By: _____/s/_STERLING L. WILLIAMS_____ Sterling L. Williams PRESIDENT AND CHIEF EXECUTIVE OFFICER 4 EX-10.(E) 3 EXHIBIT 10(E) NON-STATUTORY STOCK PLAN Exhibit 10(e) STERLING SOFTWARE, INC. NON-STATUTORY STOCK OPTION PLAN (AS AMENDED, THROUGH JANUARY 31, 1994) 1. PURPOSE. The purpose of the Non-Statutory Stock Option Plan of Sterling Software, Inc. (the "Plan") is to provide key employees and advisors with a proprietary interest in Sterling Software, Inc., a Delaware corporation, and its subsidiaries (the "Company") through the granting of options ("Option" or "Options") to purchase shares of the Company's authorized Common Stock, par value $0.10 per share ("Common Stock"), in order to: a. Increase the interest in the Company's welfare of those key employees and advisors who share primary responsibility for the management, growth and protection of the business of the Company; b. Recognize the contributions made by certain key employees and advisors to the Company's growth during its development stage; c. Furnish an incentive to such key employees and advisors to continue their services for the Company; and d. Provide a means through which the Company may attract able persons to engage as key employees and advisors. With respect to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent that any provision of the Plan or action by the Committee (as defined in Section 2) fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 2. ADMINISTRATION. The Plan shall be administered by the Board of Directors of the Company (the "Board of Directors" or "Board") or by a Stock Option Committee (the "Stock Option Committee") consisting of such number of directors as are appointed by the Board from time to time in accordance with the requirements of Rule 16b-3. As used herein, "Committee" shall mean the Board or the duly appointed Stock Option Committee, as applicable. No member of the Committee shall take any action with respect to Options granted to such member. The Board of Directors shall choose an additional member or members of the Board to serve on the Committee for the sole purpose of making decisions pursuant to the Plan with regard to the member of the Committee receiving the Options. Except as otherwise provided by the terms of this Plan or by the Board, the Committee shall have all the power and authority of the Board hereunder. The Committee shall have full and final authority in its discretion, but subject to the provisions of the Plan, to determine from time to time the individuals to whom Options shall be granted and the number of shares to be covered by each Option; to determine the time or times at which Options shall be granted; to interpret the Plan and the instruments by which Options will be evidenced; to make, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the instruments by which Options shall be evidenced; with the consent of the Participant (as defined in Section 3), to modify or amend any Option agreement or waive any conditions or restrictions applicable to any Option or the exercise thereof; and to make all other determinations necessary or advisable for the administration of the Plan. Non-employee members of the Board ("non-employee directors") shall not be eligible to receive Options under the Plan except as expressly provided in Section 22. 3. PARTICIPANTS. The Committee may, from time to time, select particular key employees and advisors of the Company, or of any subsidiary of the Company, to whom Options are to be granted, and upon the grant of such Options, the selected key employees and advisors shall become Participants in 1 the Plan. As used herein, the term "Participant" means a key employee or advisor who accepts an Option, or the estate, personal representative or beneficiary thereof having the right to exercise an Option pursuant to its terms. 4. SHARES SUBJECT TO THE PLAN. The shares of Common Stock subject to Options granted pursuant to the Plan shall be either shares of authorized but unissued Common Stock or shares of Common Stock reacquired by the Company. Shares that by reason of the expiration of an Option, or for any other reason, are no longer subject to purchase pursuant to an Option granted under the Plan, and shares from time to time rendered in payment of the exercise price of Options, may be made subject to additional Options granted pursuant to the Plan. The maximum aggregate number of shares of Common Stock that may be issued from time to time pursuant to the Plan shall be 4,000,000; provided that the Committee may adjust the number of shares available for Options, the number of shares subject to and the exercise price of Options granted hereunder to effect a change in capitalization of the Company, such as a stock dividend, stock split, reverse stock split, share combination, exchange of shares, merger, consolidation, reorganization, liquidation, or the like, of or by the Company. 5. GRANT OF OPTIONS. Options granted hereunder shall be evidenced by written stock option agreements containing such terms and provisions as are recommended and approved from time to time by the Committee, but subject to and not more favorable than the terms of the Plan. The Committee may from time to time require additional terms which the Committee deems necessary or advisable. The Company shall execute stock option agreements upon instruction from the Committee. 6. MAXIMUM AMOUNT OF STOCK SUBJECT TO OPTIONS. Subject to Section 21, the maximum aggregate fair market value (determined as of the time the Option is granted) of the Common Stock for which any Participant may be granted Options in any calendar year shall be determined by the Committee in its discretion. 7. OPTION EXERCISE PRICE. The purchase price of Common Stock subject to an Option granted pursuant to the Plan shall be no less than the fair market value of the Common Stock on the date of grant. 8. RESTRICTIONS. The Committee may, but need not, at the time of granting of an Option or at any subsequent time impose such restrictions, if any, on issuance, voluntary disposition and release from escrow of any Options including, without limitation, permitting exercise of Options only in installments over a period of years. 9. PAYMENT. Full payment for Common Stock purchased upon the exercise of an Option shall be made at the time of exercise. No Common Stock shall be issued until full payment has been made and a Participant shall have none of the rights of a shareholder until shares of Common Stock are issued to him. Any federal, state or local taxes required to be paid or withheld at the time of exercise shall also be paid or withheld in full prior to any delivery of shares of Common Stock upon exercise. Payment may be made in cash, in shares of Common Stock then owned by the Participant, or in any other form of valid consideration, or a combination of any of the foregoing, as required by the Committee in its discretion. Shares of Common Stock tendered in payment of the exercise price of any Options may be reissued to the Participant who tendered the shares of Common Stock as part of the shares of Common Stock issuable upon exercise of other Options granted from time to time pursuant to the Plan. 10. TRANSFERABILITY OF OPTIONS. Options granted under the Plan shall not be transferable other than by will or the laws of descent and distribution, or pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended (the "Code"), or Title I of the Employee Retirement Income Security Act ("ERISA"), or the rules thereunder. The designation by the holder of an Option of a beneficiary shall not constitute a transfer of the Option. 11. TIME OF GRANTING OF AN OPTION. The grant of an Option pursuant to the Plan shall occur only when a written Option agreement shall have been duly executed and delivered by or on behalf of the Company to the Participant. 2 12. RIGHTS IN EVENT OF DEATH OR DISABILITY OF PARTICIPANT. The Committee shall have discretion to include in each Option agreement such provisions regarding exercisability of the Options following the death or disability of the Participant as it, in its sole discretion, deems to be appropriate. 13. TERMINATION OF OPTION RIGHTS AND AWARDS. The Committee may provide in each Option agreement for the circumstances under which Options granted hereunder may terminate for any reason that the Committee, in its sole discretion, deems appropriate. 14. STOCK PURCHASED FOR INVESTMENT. At the discretion of the Committee, any Option agreement may provide that the Option holder shall, by accepting an Option, represent and agree on behalf of himself and his transferees by will or the laws of descent and distribution that all shares of Common Stock purchased upon the exercise of the Option will be acquired for investment and not for resale or distribution, and that upon each exercise of any portion of an Option, the person entitled to exercise the same shall furnish evidence satisfactory to the Company (including a written and signed representation) to the effect that the shares of Common Stock are being acquired in good faith and for investment and not for resale or distribution. 15. AMENDMENT OR DISCONTINUATION. The Plan may be amended, altered or discontinued by the Board or, if the Board has specifically delegated this authority to the Committee, by the Committee, without approval of the stockholders. In the event any law, or any rule or regulation issued or promulgated by the Internal Revenue Service, Securities and Exchange Commission, National Association of Securities Dealers, Inc., any stock exchange upon which the Common Stock is listed for trading or other governmental or quasi-governmental agency having jurisdiction over the Company, its Common Stock or the Plan requires the Plan to be amended, the Plan will be amended at that time and all Options then outstanding will be subject to such amendment. 16. EMPLOYMENT. This Plan and any Option granted under this Plan do not confer upon the Participant any right to be employed or to continue employment with the Company. 17. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option pursuant to the Plan shall not impose any obligation upon the Participant to exercise such Option. 18. TERMINATION. Unless sooner terminated by action of the Board or, if the Board has specifically delegated its authority to terminate the Plan to the Committee, by the Committee, the Plan shall terminate on December 31, 2011, and no Options may be granted pursuant to the Plan after such date. 19. USE OF PROCEEDS. The proceeds derived from the sale of stock pursuant to Options granted under the Plan shall constitute general funds of the Company. 20. EFFECTIVE DATE OF THE PLAN. The Plan shall be effective, as amended, immediately upon approval of the Board of Directors of the Company. 21. LIMITATIONS ON OPTIONS GRANTED TO DIRECTORS. The following limitations shall apply to Options granted to directors in order to comply with Rule 16b-3(b)(1)(iii) promulgated under the Exchange Act: a. In addition to the limitations included in Section 6 hereof, the maximum aggregate number of shares of Common Stock which may be issued pursuant to Options granted to all directors as a group under this Plan shall not exceed 50% of the aggregate shares of Common Stock for which Options may be granted under the Plan, subject to adjustment as provided in Section 4 hereof; b. The purchase price for shares of Common Stock acquired pursuant to the exercise, in whole or in part, of any Option shall be 100% of the fair market value of the Common Stock on the date of grant of such Option; c. Options granted to directors pursuant to the Plan may be granted only during the term of the Plan; 3 d. Options granted to directors pursuant to the Plan shall not be exercisable for a period of twelve calendar months from the date of grant of such Options; and e. Options granted to directors pursuant to the Plan shall expire no later than five (5) years from the date on which the Options are granted. The limitations set forth in this Section 21 shall cease to apply effective as of the date of the Company's adoption with respect to this Plan of Rule 16b-3 as promulgated under the Exchange Act effective May 1991 ("New Rule 16b-3"). 22. AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS. Grants to non-employee directors on or after the date of the Company's adoption with respect to this Plan of New Rule 16b-3 shall be solely pursuant to the following formula: each non-employee director elected or appointed to the Board will receive, at the time of his or her initial election or appointment, an automatic grant of Options to purchase 40,000 shares of Common Stock. In addition, during the term of this Plan, each non-employee director will receive an additional automatic grant of Options to purchase 40,000 shares of Common Stock every five years on the anniversary date of his or her initial election or appointment to the Board, beginning on the fifth anniversary of his or her initial election or appointment to the Board; provided that such non-employee director has served continuously as a director of the Company since the date of his or her initial election or appointment to the Board. The exercise price of each such Option will be equal to the fair market value of the Common Stock on the date of grant. Each such Option will become exercisable in cumulative annual installments of one-fourth of the shares covered by the grant, commencing one year after the date of grant, and will expire five years from the date of grant; provided that each such Option will become immediately exercisable with respect to 100% of the shares covered by the grant in the event of a change of control. A change of control is deemed to occur (i) when any person, other than Sam Wyly or Charles J. Wyly, Jr., or an affiliate of either of them, becomes the beneficial owner of securities of the Company representing 20% or more of the combined voting power of the Company's outstanding securities, (ii) if, during any three consecutive years, individuals who constitute the Board of Directors at the beginning of such period cease to constitute a majority of the Board of Directors or (iii) upon the occurrence of any event that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act. This section shall not be amended more than once in any six-month period, other than to comport with changes in the Code or ERISA, or the rules thereunder. STERLING SOFTWARE, INC. By: _____/s/_STERLING L. WILLIAMS_____ Sterling L. Williams PRESIDENT AND CHIEF EXECUTIVE OFFICER 4 EX-10.(KKK) 4 EXHIBIT 10(KKK) 1994 NON-STATUTORY STOCK PLAN Exhibit 10(kkk) STERLING SOFTWARE, INC. 1994 NON-STATUTORY STOCK OPTION PLAN 1. PURPOSE. The purpose of the 1994 Non-Statutory Stock Option Plan of Sterling Software, Inc. (the "Plan") is to provide employees and key advisors with a proprietary interest in Sterling Software, Inc., a Delaware corporation, and its subsidiaries (the "Company") through the granting of options ("Option" or "Options") to purchase shares of the Company's authorized Common Stock, par value $0.10 per share ("Common Stock"), in order to: a. Increase the interest in the Company's welfare of those employees and key advisors who share primary responsibility for the management, growth and protection of the business of the Company; b. Recognize the contributions made by certain employees and key advisors to the Company's growth during its development stage; c. Furnish an incentive to such employees and key advisors to continue their services for the Company; and d. Provide a means through which the Company may attract able persons to engage as employees and key advisors. 2. ADMINISTRATION. The Plan has been established and shall be administered by a committee of two or more members of the Board of Directors of the Company (the "Board of Directors" or "Board") who are not employees of the Company or any of its subsidiaries (the "Committee"). Except as otherwise provided by the terms of this Plan or by the Board, the Committee shall have all the power and authority of the Board hereunder. The Committee shall have full and final authority in its discretion, but subject to the provisions of the Plan, to determine from time to time the individuals to whom Options shall be granted and the number of shares to be covered by each Option; to determine the time or times at which Options shall be granted; to interpret the Plan and the instruments by which Options will be evidenced; to make, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the instruments by which Options shall be evidenced; with the consent of the Participant (as defined in Section 3), to modify or amend any Option agreement or waive any conditions or restrictions applicable to any Option or the exercise thereof and to make all other determinations necessary or advisable for the administration of the Plan. 3. PARTICIPANTS. The Committee may, from time to time, select particular employees and key advisors, including officers and directors, of the Company, or of any subsidiary of the Company, to whom Options are to be granted, and upon the grant of such Options, the selected employees and key advisors shall become Participants in the Plan. As used herein, the term "Participant" means an employee or key advisor who accepts an Option, or the estate, personal representative or beneficiary thereof having the right to exercise an Option pursuant to its terms. 4. SHARES SUBJECT TO THE PLAN. The shares of Common Stock subject to Options granted pursuant to the Plan shall be either shares of authorized but unissued Common Stock or shares of Common Stock reacquired by the Company. The maximum aggregate number of shares of Common Stock available for issuance from time to time pursuant to the Plan shall be 1,250,000; provided that the Committee may adjust the number of shares available for Options, the number of shares subject to and the exercise price of Options granted hereunder to effect a change in capitalization of the Company, such as a stock dividend, stock split, reverse stock split, share combination, exchange of shares, merger, consolidation, reorganization, liquidation, or the like, of or by the Company. The maximum aggregate number of shares of Common Stock with respect to which Options may be granted to any Participant during the term of the Plan shall not exceed 50% of the total number of 1 shares of Common Stock that may be issued from time to time under the Plan. Shares that by reason of the expiration of an Option, or for any other reason, are no longer subject to purchase pursuant to an Option granted under the Plan, and shares from time to time rendered in payment of the exercise price of Options, may be made subject to additional Options granted pursuant to the Plan. 5. GRANT OF OPTIONS. Options granted hereunder shall be evidenced by written stock option agreements containing such terms and provisions as are recommended and approved from time to time by the Committee, but subject to and not more favorable than the terms of the Plan. The Committee may from time to time require additional terms which the Committee deems necessary or advisable. The Company shall execute stock option agreements upon instruction from the Committee. 6. MAXIMUM AMOUNT OF STOCK SUBJECT TO OPTIONS. Subject to Section 4, the maximum aggregate fair market value (determined as of the time the Option is granted) of the Common Stock for which any Participant may be granted Options in any calendar year shall be determined by the Committee in its discretion. 7. OPTION EXERCISE PRICE. The purchase price of Common Stock subject to an Option granted pursuant to the Plan shall be no less than the fair market value of the Common Stock on the date of grant. 8. RESTRICTIONS. The Committee may, but need not, at the time of granting of an Option or at any subsequent time impose such restrictions, if any, on issuance, voluntary disposition and release from escrow of any Options including, without limitation, permitting exercise of Options only in installments over a period of years. 9. PAYMENT. Full payment for Common Stock purchased upon the exercise of an Option shall be made at the time of exercise. No Common Stock shall be issued until full payment has been made and a Participant shall have none of the rights of a shareholder until shares of Common Stock are issued to him. Any federal, state or local taxes required to be paid or withheld at the time of exercise shall also be paid or withheld in full prior to any delivery of shares of Common Stock upon exercise. Payment may be made in cash, in shares of Common Stock then owned by the Participant, or in any other form of valid consideration, or a combination of any of the foregoing, as required by the Committee in its discretion. Shares of Common Stock tendered in payment of the exercise price of any Options may be reissued to the Participant who tendered the shares of Common Stock as part of the shares of Common Stock issuable upon exercise of other Options granted from time to time pursuant to the Plan. 10. TRANSFERABILITY OF OPTIONS. Options granted under the Plan may be transferred by the holder thereof upon five days prior written notice to the Company. 11. TIME OF GRANTING OF AN OPTION. The grant of an Option pursuant to the Plan shall occur only when a written Option agreement shall have been duly executed and delivered by or on behalf of the Company to the Participant. 12. RIGHTS IN EVENT OF DEATH OR DISABILITY OF PARTICIPANT. The Committee shall have discretion to include in each Option agreement such provisions regarding exercisability of the Options following the death or disability of the Participant as it, in its sole discretion, deems to be appropriate. 13. STOCK PURCHASED FOR INVESTMENT. At the discretion of the Committee, any Option agreement may provide that the Option holder shall, by accepting an Option, represent and agree on behalf of himself and his transferees by will or the laws of descent and distribution that all shares of Common Stock purchased upon the exercise of the Option will be acquired for investment and not for resale or distribution, and that upon each exercise of any portion of an Option, the person entitled to exercise the same shall furnish evidence satisfactory to the Company (including a written and signed representation) to the effect that the shares of Common Stock are being acquired in good faith and for investment and not for resale or distribution. 2 14. TERMINATION OF OPTION RIGHTS AND AWARDS. The Committee may provide in each Option agreement for the circumstances under which Options granted hereunder may terminate for any reason that the Committee, in its sole discretion, deems to be appropriate. 15. AMENDMENT OR DISCONTINUATION. The Plan may be amended, altered or discontinued by the Board or, if the Board has delegated this authority to the Committee, by the Committee, without approval of the stockholders. In the event any law, or any rule or regulation issued or promulgated by the Internal Revenue Service, Securities and Exchange Commission, National Association of Securities Dealers, Inc., any stock exchange upon which the Common Stock is listed for trading or other governmental or quasi-governmental agency having jurisdiction over the Company, its Common Stock or the Plan requires the Plan to be amended, the Plan will be amended at that time and all Options then outstanding will be subject to such amendment. 16. EMPLOYMENT. This Plan and any Option granted under this Plan do not confer upon the Participant any right to be employed or to continue employment with the Company. 17. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option pursuant to the Plan shall not impose any obligation upon the Participant to exercise such Option. 18. TERMINATION. Unless sooner terminated by action of the Board or, if the Board has specifically delegated its authority to terminate the Plan to the Committee, by the Committee, the Plan shall terminate on December 31, 2011, and no Options may be granted pursuant to the Plan after such date. 19. USE OF PROCEEDS. The proceeds derived from the sale of stock pursuant to Options granted under the Plan shall constitute general funds of the Company. 20. EFFECTIVE DATE OF THE PLAN. The Plan shall be effective as of the 31st day of January, 1994. STERLING SOFTWARE, INC. Dated: As of January 31, 1994 By: _____/s/_STERLING L. WILLIAMS_____ Sterling L. Williams PRESIDENT AND CHIEF EXECUTIVE OFFICER 3 EX-10.(WW) 5 EXHIBIT 10(WW) EIGHTEENTH AMENDMENT AGREEMENT EIGHTEENTH AMENDMENT AGREEMENT dated as of March 15, 1994 (this "Amendment") by and among STERLING SOFTWARE, INC., a Delaware corporation (the "Company"), the direct and indirect subsidiaries of the Company listed on the signature pages hereto (collectively, the "Sterling Subsidiaries"), THE FIRST NATIONAL BANK OF BOSTON and BANK ONE, TEXAS, NATIONAL ASSOCIATION (collectively, the "Banks") and THE FIRST NATIONAL BANK OF BOSTON, as agent (the "Agent") for the Banks, amending certain provisions of an Amended and Restated Revolving Credit and Term Loan Agreement dated as of June 8, 1990 (as heretofore amended the "Loan Agreement") by and among the Company, the Banks and the Agent. Terms not otherwise defined herein which are defined in the Loan Agreement shall have the respective meanings herein assigned to such terms in the Loan Agreement. WHEREAS, upon the terms and subject to the conditions contained herein, the Company, the Agent and the Banks wish to amend certain provisions of the Loan Agreement; NOW, THEREFORE, in consideration of the mutual agreements contained in the Loan Agreement, herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. AMENDMENTS TO SECTION 1.1 OF THE LOAN AGREEMENT. Section 1.1 of the Loan Agreement is hereby amended by deleting the definition of "Eligible Investments" in its entirety and substituting in lieu thereof the following new definition: "ELIGIBLE INVESTMENTS. Investments which are deemed to be current under generally accepted accounting principles." SECTION 2. AMENDMENT TO SECTION 10.4 OF THE LOAN AGREEMENT. Section 10.4 of the Loan Agreement is hereby deleted in its entirety, and the following new Section 10.4 is substituted in lieu thereof: "SECTION 10.4. NET WORTH. The Company shall not cause or permit its Consolidated New Worth at the end of any fiscal quarter of the Company to be less than (a) $85,000,000, PLUS (b) on a cumulative basis, commencing with the fiscal quarter ending December 31, 1993 75% of the excess of Consolidated Net Income for each fiscal quarter (calculated without deduction for any net losses) after preferred stock dividends actually paid by the Company since September 30, 1993, as adjusted from time to time to reflect stock splits, distributions, or other recapitalizations or reclassifications, PLUS (c) 100% of the net proceeds received by the Company of any new equity issued by the Company since September 30, 1993." SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed to be effective as of March 15, 1994 (the "Effective Date") upon the receipt by the Agent, on or before March 18, 2 l994, of facsimile copies of original counterparts (to be followed promptly by original counterparts) or originals counterparts of this Amendment, duly executed by each of the Company, the Sterling Subsidiaries, the Agent and the Banks. SECTION 4. REPRESENTATION AND WARRANTIES; NO DEFAULT; AUTHORIZATION. The Company hereby represents and warrants to each of the Agent and the Banks as follows: (a) Each of the representations and warranties of the Company and the Sterling Subsidiaries contained in the Loan Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with the Loan Agreement, the other Loan Documents or this Amendment was true as of the date as of which it was made and is true as and at the date of this Amendment, and no Default or Event of Default has occurred and is continuing as of the date of this Amendment; and (b) This Amendment has been duly authorized, executed and delivered by the Company and each of the Sterling Subsidiaries and shall be in full force and effect upon the satisfaction of the conditions set forth in Section 3 hereof, and the agreements of the Company and each of the Sterling Subsidiaries party hereto contained herein, in the Loan Agreement, as amended, respectively constitute the legal, valid and binding obligations of the Company and each of the Sterling Subsidiaries party hereto, enforceable against the Company or such Sterling Subsidiaries in accordance with their respective terms. SECTION 5. RATIFICATION, ETC. Except as expressly amended hereby, the Loan Agreement, the other Loan Documents and all documents, instruments and agreements related thereto are hereby ratified and confirmed in all respects and shall continue in full force and effect. All references in the Loan Agreement or such other Loan Documents or in any related agreement or instrument to the Loan Agreement or such other Loan Documents shall hereafter refer to such agreements as amended hereby and as previously amended, if previously amended, pursuant to the provisions of the Loan Agreement. SECTION 6. IMPLIED WAIVER. Except as expressly provided herein, nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligations of the Company or any right of the Agent or the Banks consequent thereon. SECTION 7. COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL FOR ALL PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICTS OF LAW). 3 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a document under seal as of the date first above written. THE FIRST NATIONAL BANK OF BOSTON Individually and as Agent By:_________________________________ Title: BANK ONE, TEXAS, NATIONAL ASSOCIATION By:_________________________________ Michael Silverman Vice President STERLING SOFTWARE By:_________________________________ Vicki L. Hill Vice President, Treasurer Each of the undersigned hereby acknowledges the foregoing Amendment as of the Effective Date and agrees that its obligations under the Guaranty will extend to the Loan Agreement, as so amended. STERLING SOFTWARE (MIDWEST), INC. (formerly Creative Data Systems, Inc.) By:_________________________________ Vicki L. Hill Assistant Treasurer 4 STERLING SOFTWARE (NORTHERN AMERICA), INC. (formerly Directions, Inc.) By:_________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (UNITED STATES), INC. (formerly Zanthe, Inc. Dylakor, Inc. and Answer Systems, Inc. By:_________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (AMERICA), INC. (formerly Ordernet Services, Inc.) By:_________________________________ Vicki L. Hill Assistant Treasurer STERLING CHECK LIQUIDATION, INC. By:_________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (U.S.A.), INC. (formerly Systems Software Marketing, Inc. and Software Laboratories, Inc.) By:_________________________________ Vicki L. Hill Assistant Treasurer 5 STERLING DISTRIBUTION SERVICES, INC. By:_________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (US), INC. (formerly known as Sterling Federal Systems, Inc. and Sterling IMD, lnc.) By:_________________________________ Vicki L. Hill Assistant Treasurer SYSTEMS CENTER, INC. (formerly Sterling Software, Inc., a Wyoming corporation) By:_________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE LEASING COMPANY By:_________________________________ Vicki L. Hill President STERLING SOFTWARE INTERNATIONAL, INC. By:_________________________________ Vicki L. Hill Assistant Treasurer 6 STERLING ZEROONE, INC. By:_________________________________ Vicki L. Hill Assistant Treasurer ZEROONE SYSTEMS, INC. By:_________________________________ Vicki L. Hill Treasurer STERLING SOFTWARE (UNITED STATES OF AMERICA), INC. By:_________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (NORTH AMERICA), INC. By:_________________________________ Vicki L. Hill Assistant Treasurer STERLING SOFTWARE (U.S. OF AMERICA), INC. By:_________________________________ Vicki L. Hill Assistant Treasurer EX-11 6 EXHIBIT 11(A)
STERLING SOFTWARE, INC. EXHIBIT 11(a) COMPUTATION OF EARNINGS PER SHARE THREE MONTHS ENDED MARCH 31, 1994 (in thousands, except per share information) Fully Earnings: Primary Diluted ------------- ------------- Earnings applicable to common stockholders . . . . . . . . . . . . . . . . . . $13,310 $13,310 Add: Interest expense on amounts outstanding for the 5 3/4% Convertible Subordinated Debentures (net of applicable income taxes) . . . . . . . 1,042 ------------- ------------- $13,310 $14,352 ------------- ------------- ------------- ------------- Shares: Weighted average of shares outstanding . . . . . . . . . . . . . . . . . . . . 19,551 19,551 Add common shares issued on assumed exercise of options and warrants . . . . . 6,992 6,992 Less common shares assumed repurchased . . . . . . . . . . . . . . . . . . . . (3,803) (3,803) ------------- ------------- 22,740 22,740 ------------- ------------- Common shares issued on assumed conversion of 5 3/4% Convertible Subordinated Debentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,056 ------------- 26,796 ------------- ------------- Earnings per common share: Primary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .59 ------------- ------------- Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .54 ------------- -------------
EX-11 7 EXHIBIT 11(B) STERLING SOFTWARE, INC. EXHIBIT 11(b) COMPUTATION OF EARNINGS PER SHARE THREE MONTHS ENDED MARCH 31, 1993 (in thousands, except per share information)
Fully Primary Diluted -------- -------- Earnings: Earnings applicable to common stockholders . . . . . . . . . . $ 3,110 $ 3,110 Add: Interest expense on amounts outstanding for the 8% Convertible Senior Subordinated Debentures and 5 3/4% Convertible Subordinated Debentures (net of applicable income taxes) . . . . . 147 723 Interest expense on use of proceeds from assumed conversion of options and warrants to pay off amounts outstanding on Systems Center, Inc. line of credit (net of applicable income taxes). . . . . . 85 -------- -------- $ 3,257 $ 3,918 -------- -------- -------- -------- Shares: Weighted average of shares outstanding . . . . . . . . . . . . 17,029 17,029 Add common shares issued on assumed exercise of options and warrants . . . . . . . . . . . . . . 6,439 6,439 Less common shares assumed repurchased . . . . . . . . . . . . (3,489) (3,489) -------- -------- 19,979 19,979 -------- -------- Common shares issued on assumed conversion of 8% Convertible Senior Subordinated Debentures . . . . . . . . . . . . . . . . 346 Common shares issued on assumed conversion of 5 3/4% Convertible Subordinated Debentures. . . . . . . . . . . . . . . . . . . . 2,520 -------- 22,845 -------- -------- Earnings per common share: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .16 -------- -------- Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . $ .16 -------- --------
EX-11 8 EXHIBIT 11(C) STERLING SOFTWARE, INC. EXHIBIT 11(c) COMPUTATION OF EARNINGS PER SHARE SIX MONTHS ENDED MARCH 31, 1994 (in thousands, except per share information)
Fully Primary Diluted -------- -------- Earnings: Earnings applicable to common stockholders . . . . . . . . . . $24,280 $24,280 Add: Interest expense on amounts outstanding for the 5 3/4% Convertible Subordinated Debentures (net of applicable income taxes) . . . . . . . . . . . . . . . . . . . . 2,107 Interest income on investment of proceeds from assumed conversion of options and warrants (net of applicable income taxes) . . . . . . . . . . . . . . . . . . . . 90 68 -------- -------- $24,370 $26,455 -------- -------- -------- -------- Shares: Weighted average of shares outstanding . . . . . . . . . . . . 18,814 18,814 Add common shares issued on assumed exercise of options and warrants . . . . . . . . . . . . . . . . . . . . 7,653 7,653 Less common shares assumed repurchased . . . . . . . . . . . . (4,014) (4,014) -------- -------- 22,453 22,453 -------- -------- Common shares issued on assumed conversion of 5 3/4% Convertible Subordinated Debentures. . . . . . . . . . . . . . . . . . . . 4,056 -------- 26,509 -------- -------- Earnings per common share: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.09 -------- -------- Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . $1.00 -------- --------
EX-11 9 EXHIBIT 11(D) STERLING SOFTWARE, INC. EXHIBIT 11(d) COMPUTATION OF EARNINGS PER SHARE SIX MONTHS ENDED MARCH 31, 1993 (in thousands, except per share information)
Fully Primary Diluted --------- -------- Earnings: Earnings applicable to common stockholders . . . . . . . . . . $ 5,040 $ 5,040 Add: Interest expense on amounts outstanding for the 8% Convertible Senior Subordinated Debentures and 5 3/4% Convertible Subordinated Debentures (net of applicable income taxes) . . . . . . . . . . . . . . . . . . . . 325 881 Interest expense on use of proceeds from assumed conversion of options and warrants to pay off amounts outstanding on Systems Center, Inc. line of credit (net of applicable income taxes) . . . . . . . . . . . . . . . . . . . . 148 --------- --------- $ 5,365 $ 6,069 --------- --------- --------- --------- Shares: Weighted average of shares outstanding . . . . . . . . . . . . 16,792 16,792 Add common shares issued on assumed exercise of options and warrants . . . . . . . . . . . . . . . . . . . . . . . . . . 6,401 6,401 Less common shares assumed repurchased . . . . . . . . . . . . (3,489) (3,489) --------- --------- 19,704 19,704 --------- --------- Common shares issued on assumed conversion of 8% Convertible Senior Subordinated Debentures. . . . . . . . . . . . . . . . . . . . 493 Common shares issued on assumed conversion of 5 3/4% Convertible Subordinated Debentures. . . . . . . . . . . . . . . . . . . . 1,246 --------- 21,443 --------- --------- Earnings per common share: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .27 Fully diluted. . . . . . . . . . . . . . . . . . . . . . . . . -------- -------- $ .27 --------- ---------
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