-----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, lEDQfxJgp92YT/0IqcUHL3/sIj0EIa2/tW631vbVj+0Iy6Cao+QgsjOPWnb1Lhhm dOgs0WLPFcQ29B67CuoEXg== 0000950109-94-002224.txt : 19941202 0000950109-94-002224.hdr.sgml : 19941202 ACCESSION NUMBER: 0000950109-94-002224 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19941201 EFFECTIVENESS DATE: 19941220 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STERLING SOFTWARE INC CENTRAL INDEX KEY: 0000716714 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 751873956 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 033-56681 FILM NUMBER: 94562814 BUSINESS ADDRESS: STREET 1: 8080 N CENTRAL EXPWY STE 1100 CITY: DALLAS STATE: TX ZIP: 75206 BUSINESS PHONE: 2148918600 S-8 1 FORM S-8 As filed with the Securities and Exchange Commission on December 1, 1994. Registration No.33- ____________ - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- STERLING SOFTWARE, INC. (Exact name of registrant as specified in its charter) DELAWARE 75-1873956 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 8080 North Central Expressway Suite 1100 Dallas, Texas 75206 (Address of principal executive offices) (Zip Code) -------------------- KNOWLEDGEWARE, INC. INCENTIVE STOCK OPTION PLAN OF 1984 KNOWLEDGEWARE, INC. SECOND INCENTIVE STOCK OPTION PLAN OF 1984 KNOWLEDGEWARE, INC. 1988 STOCK INCENTIVE PLAN (Full title of the plans) JEANNETTE P. MEIER, ESQ. With a copy to: Executive Vice President, CHARLES D. MAGUIRE, JR., ESQ. Secretary and General Counsel Jackson & Walker, L.L.P. Sterling Software, Inc. 901 Main Street 8080 North Central Expressway Suite 6000 Suite 1100 Dallas, Texas 75202 Dallas, Texas 75206 (214) 953-5850 (214) 891-8685 (Name, address, including zip code, and telephone number, including area code, of agent for service) CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------- Title of Proposed Maximum Proposed Maximum Securities to be Amount to be Offering Price Per Aggregate Offering Amount of Registered Registered Share/(1)/ Price /(1)/ Registration Fee - -------------------------------------------------------------------------------------------------- Common Stock, 257,723 shares par value $29.50 $7,602,829 $2,622 $.10 per share - --------------------------------------------------------------------------------------------------
/(1)/ Estimated solely for the purpose of calculating the registration fee. Pursuant to Rules 457(c) and 457(h), the offering price and registration fee are computed on the basis of the average of the high and low prices of the Common Stock, as reported by the New York Stock Exchange, on November 23, 1994. PROSPECTUS 26,449 Shares STERLING SOFTWARE, INC. Common Stock This Prospectus has been prepared by Sterling Software, Inc., a Delaware corporation ("Sterling" or the "Company"), for use upon resale by a director of the Company (the "Selling Stockholder") of up to 26,449 shares (the "Shares") of Common Stock, par value $.10 per share ("Common Stock"), of the Company. In November 1994, a subsidiary of the Company ("Merger Sub") was merged (the "Merger") with and into KnowledgeWare, Inc., a Georgia corporation ("KnowledgeWare"), pursuant to which, among other things, (i) KnowledgeWare became a wholly owned subsidiary of the Company and (ii) all options then outstanding under KnowledgeWare's stock option plans were assumed by the Company and thereafter became exercisable to purchase .1653 of a share of Common Stock. The Selling Stockholder has acquired and/or may in the future acquire Shares from the Company pursuant to the exercise of outstanding options (the "Options") heretofore granted to the Selling Stockholder pursuant to the provisions of the KnowledgeWare, Inc. 1988 Stock Incentive Plan (the "Plan"). The Shares may be sold from time to time by the Selling Stockholder, or by pledgees, donees, transferees or other successors in interest. Such sales may be made on one or more exchanges, including the New York Stock Exchange (the "NYSE"), or in the over the counter market, or in negotiated transactions, in each case at prices and at terms then prevailing or at prices related to the then current market price or at negotiated prices and terms. Upon any sale of the Shares offered hereby, the Selling Stockholder or such successors in interest and participating agents, brokers or dealers may be deemed to be underwriters as that term is defined in the Securities Act of 1933, as amended (the "Securities Act"), and commissions or discounts or any profit realized on the resale of such securities may be deemed to be underwriting commissions or discounts under the Securities Act. See "Plan of Distribution." The Common Stock is listed for trading on the NYSE under the symbol "SSW." On November 29, 1994, the closing price of the Common Stock on the NYSE was $30.00. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is December 1, 1994. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60611, and at 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such materials can also be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Common Stock is listed on the NYSE. Reports, proxy statements and other information concerning the Company can also be inspected at the offices of the NYSE at 20 Broad Street, New York, New York 10005. The Company has filed with the Commission a Registration Statement on Form S-8 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act with respect to the Common Stock to be issued pursuant to the Plan and the following other plans of KnowledgeWare: the KnowledgeWare, Inc. Incentive Stock Option Plan of 1984 and the KnowledgeWare, Inc. Second Incentive Stock Option Plan of 1984. As permitted by the rules and regulations of the Commission, this Prospectus omits certain of the information contained in the Registration Statement. Copies of the Registration Statement are available from the Public Reference Section of the Commission at prescribed rates. Statements contained herein concerning the provisions of documents filed with the Registration Statement are necessarily summaries of such documents, and each such statement is qualified in its entirety by reference to the copy of the applicable document filed with the Commission. The Company's principal executive offices are located at 8080 North Central Expressway, Suite 1100, Dallas, Texas 75206, and the Company's telephone number at such address is (214) 891-8600. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, which have been filed with the Commission by the Company, are incorporated herein by reference and made a part hereof: (i) Annual Report on Form 10-K (File No. 1-8465) for the year ended September 30, 1993, as amended by Form 10-K/A Amendment No. 1, filed January 26, 1994; (ii) Quarterly Report on Form 10-Q (File No. 1-8465) for the quarter ended December 31, 1993; -2- (iii) Quarterly Report on Form 10-Q (File No. 1-8465) for the quarter ended March 31, 1994, as amended by Form 10-Q/A Amendment No. 1, filed May 16, 1994; (iv) Quarterly Report on Form 10-Q (File No. 1-8465) for the quarter ended June 30, 1994; (v) Current Report on Form 8-K (File No. 1-8465) dated November 15, 1993, filed November 16, 1993; (vi) Current Report on Form 8-K (File No. 1-8465) dated July 31, 1994, filed August 2, 1994; (vii) Current Report on Form 8-K (File No. 1-8465) dated August 1, 1994, filed August 2, 1994; (viii) Current Report on Form 8-K (File No. 1-8465) dated August 31, 1994, filed September 2, 1994; (ix) Current Report on Form 8-K (File No. 1-8465) dated November 3, 1994, filed November 3, 1994; (x) Current Report on Form 8-K (File No. 1-8465) dated November 14, 1994, filed November 14, 1994; (xi) Current Report on Form 8-K (File No. 1-8465) dated November 14, 1994, filed November 25, 1994; and (xii) the description of the Company's Common Stock contained in the Company's Registration Statement on Form 8-A (No. 0-108465), filed March 7, 1990. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of Common Stock to be made hereunder shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing thereof. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide, without charge, to each person to whom a copy of this Prospectus is delivered, upon the written or oral request of such person, a copy of any or all of -3- the documents incorporated herein by reference (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates). Written or telephone requests for copies should be directed to the Company's principal office: Sterling Software, Inc., 8080 N. Central Expressway, Suite 1100, Dallas, Texas 75206, Attention: Jeannette P. Meier, Executive Vice President, Secretary and General Counsel (telephone: (214) 891-8600). USE OF PROCEEDS The Company will not receive any proceeds from the sale of the Shares offered pursuant to this Prospectus. SELLING STOCKHOLDER The following Director of the Company is eligible to receive Shares upon exercise of Options granted under the Plan:
COMMON OWNERSHIP STOCK OFFERED OF COMMON FOR SELLING AMOUNT AND POSITION WITH STOCK PRIOR STOCKHOLDER'S PERCENTAGE OF THE TO ACCOUNT UPON CLASS AFTER NAME COMPANY OFFERING/(1)/ EXERCISE OFFERING/(1)//(2)/ - ---- ------- ------------- -------- ------------------ Francis A. Tarkenton/(3)/ Director 229,637/(4)/ 26,449 203,188/*/
- ------------------------ /*/ Less than 1% of class. /(1)/ Includes Shares to be acquired upon exercise of the Options. Includes 40,637 shares of Common Stock that were placed in escrow pursuant to the terms of an escrow agreement (the "Escrow Agreement") entered into in connection with the Merger. Such shares will be distributed to the Selling Stockholder only if and to the extent that such shares are not necessary to cover certain losses, claims, liabilities, judgments, costs and expenses that may be incurred by the Company, Merger Sub or KnowledgeWare in connection with any pending or threatened litigation, action, claims, proceeding, dispute or investigation (including amounts paid in settlement) to which Sterling, Merger Sub or KnowledgeWare is or may become a party and with respect to which Sterling is entitled to indemnification under the Merger Agreement. /(2)/ Assumes the exercise of all Options and the sale of the Shares acquired thereby. /(3)/ Former Chairman of the Board and Chief Executive Officer of KnowledgeWare. /(4)/ Includes 5,734 shares owned by Tarkenton Group, Inc. (including 1,146 shares placed in escrow pursuant to the Escrow Agreement), which is wholly owned by Mr. Tarkenton, and 26,449 Shares subject to Options. Does not include 10,926 shares (including 2,185 shares placed in escrow pursuant to the Escrow Agreement) held in irrevocable trusts for Mr. Tarkenton's children of which Mr. Tarkenton is not trustee. -4- PLAN OF DISTRIBUTION The Shares offered hereby may be sold from time to time by the Selling Stockholder, or by pledgees, donees, transferees or other successors in interest. The Shares may be disposed of from time to time in one or more transactions through any one or more of the following: (i) to purchasers directly, (ii) in ordinary brokerage transactions and transactions in which the broker solicits purchasers, (iii) through underwriters or dealers who may receive compensation in the form of underwriting discounts, concessions or commissions from the Selling Stockholder or such successors in interest and/or from the purchasers of the Shares for whom they may act as agent, (iv) the writing of options on the Shares, (v) the pledge of the Shares as security for any loan or obligation, including pledges to brokers or dealers who may, from time to time, themselves effect distributions of the Shares or interests therein, (vi) purchases by a broker or dealer as principal and resale by such broker or dealer for its own account pursuant to this Prospectus, (vii) a block trade in which the broker or dealer so engaged will attempt to sell the Shares as agent but may position and resell a portion of the block as principal to facilitate the transaction and (viii) an exchange distribution in accordance with the rules of such exchange, including the NYSE, or transactions in the over the counter market. Such sales may be made at prices and at terms then prevailing or at prices related to the then current market price or at negotiated prices and terms. In effecting sales, brokers or dealers may arrange for other brokers or dealers to participate. The Selling Stockholder or such successors in interest, and any underwriters, brokers, dealers or agents that participate in the distribution of the Shares, may be deemed to be "underwriters" within the meaning of the Securities Act, and any profit on the sale of the Shares by them and any discounts, commissions or concessions received by any such underwriters, brokers, dealers or agents may be deemed to be underwriting commissions or discounts under the Securities Act. The Company will pay all of the expenses incident to the offering and sale of the Shares to the public other than underwriting discounts or commissions, brokers' fees and the fees and expenses of any counsel to the Selling Stockholder related thereto. In the event of a material change in the plan of distribution disclosed in this Prospectus, the Selling Stockholder will not be able to effect transactions in the Shares pursuant to this Prospectus until such time as a post-effective amendment to the Registration Statement is filed with, and declared effective by, the Commission. LEGAL MATTERS Certain legal matters in connection with the validity of the Common Stock offered hereby have been passed upon by Jackson & Walker, L.L.P., Dallas, Texas. Michael C. French, a partner in Jackson & Walker, L.L.P., is a director of the Company. -5- EXPERTS The consolidated financial statements and financial statement schedules appearing in the Company's Annual Report on Form 10-K for the year ended September 30, 1993, as amended by Form 10-K/A Amendment No. 1, filed January 26, 1994, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated by reference herein, which as to the years 1992 and 1991, are based in part on the report of Arthur Andersen LLP, independent public accountants. Such consolidated financial statements and schedules are incorporated herein by reference in reliance upon such reports given upon the authority of such firms as experts in accounting and auditing. The consolidated financial statements of KnowledgeWare, Inc. and subsidiaries as of June 30, 1994 and 1993 and for each of the three years in the period ending June 30, 1994 incorporated by reference in this Prospectus have been incorporated herein on the report, which includes an explanatory paragraph about KnowledgeWare, Inc.'s ability to continue as a going concern, of Coopers & Lybrand L.L.P., independent certified public accountants, given upon authority of that firm as experts in accounting and auditing. INDEMNIFICATION Section 145 of the Delaware General Corporation Law empowers a corporation to indemnify its directors and officers or former directors or officers and to purchase insurance with respect to liability arising out of their capacity or status as directors and officers. Such law provides further that the indemnification permitted thereunder shall not be deemed exclusive of any other rights to which the directors and officers may be entitled under a corporation's Certificate of Incorporation, Bylaws, any agreement or otherwise. Article IX of the Company's Certificate of Incorporation, as amended, provides that, to the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended, a director of the Company shall not be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. Article IX of the Company's Restated Bylaws provides for indemnification of officers and directors. In addition, the Company has entered into Indemnity Agreements with each of its officers and directors pursuant to which such officers and directors may be indemnified against losses arising from certain claims, including claims under the Securities Act, which may be made by reason of their being officers or directors. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. -6- No person has been authorized in connection with the offering made hereby to give any information or to make any representation not contained in this Prospectus and, if given or made, such information or representation must not be 26,449 SHARES relied upon as having been authorized by the Company. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities to any person or by anyone in any jurisdiction where such offer or solicitation would be unlawful. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that STERLING SOFTWARE, the information contained herein is correct INC. as of any date subsequent to the date hereof. _________________________ TABLE OF CONTENTS COMMON STOCK
PAGE Available Information....................... 2 Incorporation of Certain Documents _______________ by Reference............................... 2 Use of Proceeds............................. 4 Selling Stockholder......................... 4 PROSPECTUS Plan of Distribution........................ 5 Legal Matters............................... 5 _______________ Experts..................................... 6 Indemnification............................. 6 December 1, 1994
PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 1. INCORPORATION OF DOCUMENTS BY REFERENCE. The following documents, which have been filed with the Commission by the Company, are incorporated herein by reference and made a part hereof: (i) Annual Report on Form 10-K (File No. 1-8465) for the year ended September 30, 1993, as amended by Form 10-K/A Amendment No. 1, filed January 26, 1994; (ii) Quarterly Report on Form 10-Q (File No. 1-8465) for the quarter ended December 31, 1993; (iii) Quarterly Report on Form 10-Q (File No. 1-8465) for the quarter ended March 31, 1994, as amended by Form 10-Q/A Amendment No. 1, filed May 16, 1994; (iv) Quarterly Report on Form 10-Q (File No. 1-8465) for the quarter ended June 30, 1994; (v) Current Report on Form 8-K (File No. 1-8465) dated November 15, 1993, filed November 16, 1993; (vi) Current Report on Form 8-K (File No. 1-8465) dated July 31, 1994, filed August 2, 1994; (vii) Current Report on Form 8-K (File No. 1-8465) dated August 1, 1994, filed August 2, 1994; (viii) Current Report on Form 8-K (File No. 1-8465) dated August 31, 1994, filed September 2, 1994; (ix) Current Report on Form 8-K (File No. 1-8465) dated November 3, 1994, filed November 3, 1994; (x) Current Report on Form 8-K (File No. 1-8465) dated November 14, 1994, filed November 14, 1994; (xi) Current Report on Form 8-K (File No. 1-8465) dated November 14, 1994, filed November 25, 1994; and II-1 (xii) the description of the Company's Common Stock contained in the Company's Registration Statement on Form 8-A (No. 0-108465), filed March 7, 1990. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this Registration Statement and prior to the filing of a post-effective amendment which indicates that all of the Common Stock offered hereunder has been sold or which deregisters all of such Common Stock then remaining unsold, shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. ITEM 2. DESCRIPTION OF SECURITIES. Not applicable. ITEM 3. INTERESTS OF NAMED EXPERTS AND COUNSEL. Certain legal matters in connection with the validity of the Common Stock to be offered hereby have been passed upon by Jackson & Walker, L.L.P., Dallas, Texas. Michael C. French, a partner in Jackson & Walker, L.L.P., is a director of the Company. ITEM 4. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law empowers a corporation to indemnify its directors and officers or former directors and officers and to purchase insurance with respect to liability arising out of their capacity or status as directors and officers. Such law provides further that the indemnification permitted thereunder shall not be deemed exclusive of any other rights to which the directors and officers may be entitled under a corporation's certificate of incorporation, bylaws, any agreement or otherwise. Article IX of the Company's Certificate of Incorporation, as amended, provides that, to the fullest extent permitted by the Delaware General Corporation Law, as the same exists or may hereafter be amended, a director of the Company shall not be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. Article IX of the Company's Restated Bylaws provides for indemnification of officers and directors. In addition, the Company has entered into Indemnity Agreements with each of its officers and directors pursuant to which such officers and directors may be indemnified against losses arising from certain claims, including claims under the Securities Act, which may be made by reason of their being officers or directors. II-2 Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. ITEM 5. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. ITEM 6. EXHIBITS. The following is a list of all exhibits filed as a part of this Registration Statement on Form S-8, including those incorporated herein by reference.
Exhibit No. Description of Exhibit - ----------- ---------------------- 4.1 Certificate of Incorporation of the Registrant./(1)/ 4.2 Certificate of Amendment of Certificate of Incorporation of the Registrant./(2)/ 4.3 Certificate of Amendment of Certificate of Incorporation of the Registrant./(3)/ 4.4 Restated Bylaws of the Registrant./(4)/ 4.5 Form of Common Stock Certificate./(5)/ 5 Opinion of Jackson & Walker, L.L.P./(6)/ 15 None. 23.1 Consent of Ernst & Young LLP./(6)/ 23.2 Consent of Arthur Andersen LLP./(6)/ 23.3 Consent of Coopers & Lybrand L.L.P./(6)/ 23.4 Consent of Jackson & Walker, L.L.P. (included in its opinion filed as Exhibit 5 to this Registration Statement)./(6)/ 25 Power of Attorney (appearing on page II-6 of this Registration Statement)./(6)/ 26 None.
II-3 27 None. 28 None. 99.1 KnowledgeWare, Inc. Incentive Stock Option Plan of 1984./(6)/ 99.2 KnowledgeWare, Inc. Second Incentive Stock Option Plan of 1984./(6)/ 99.3 KnowledgeWare, Inc. 1988 Stock Incentive Plan./(6)/
____________ /(1)/ Previously filed as an exhibit to the Registrant's Registration Statement No. 2-82506 on Form S-1 and incorporated herein by reference. /(2)/ Previously filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 and incorporated herein by reference. /(3)/ Previously filed as an exhibit to the Registrant's Registration Statement No. 33-69926 on Form S-8 and incorporated herein by reference. /(4)/ Previously filed as an exhibit to the Registrant's Registration Statement No. 33-47131 on Form S-8 and incorporated herein by reference. /(5)/ Previously filed as an exhibit to the Registrant's Registration Statement No. 2-86825 on Form S-1 and incorporated herein by reference. /(6)/ Filed herewith. ITEM 7. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; II-4 (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Company pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-5 POWER OF ATTORNEY Each person whose signature appears below authorizes Sterling L. Williams, George H. Ellis and Jeannette P. Meier, and each of them, each of whom may act without joinder of the others, to execute in the name of each such person who is then an officer or director of the Registrant and to file any amendments to this Registration Statement necessary or advisable to enable the Registrant to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in respect thereof, in connection with the registration of the securities which are the subject of this Registration Statement, which amendments may make such changes in the Registration Statement as such attorney may deem appropriate. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Dallas, State of Texas on the 30th day of November, 1994. STERLING SOFTWARE, INC. By: /s/ Jeannette P. Meier ------------------------------------- Name: Jeannette P. Meier ------------------------------ Title: Executive Vice President ----------------------------- II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment to Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signatures Title Date ---------- ----- ---- President, Chief /s/ Sterling L. Williams Executive Officer - -------------------------- and Director November 30, 1994 Sterling L. Williams (Principal Executive Officer) Executive Vice President and Chief /s/ George H. Ellis Financial Officer - -------------------------- (Principal Financial and November 30, 1994 George H. Ellis Accounting Officer) /s/ Sam Wyly Chairman of the - -------------------------- Board of Directors November 30, 1994 Sam Wyly /s/ Charles J. Wyly, Jr. Vice Chairman of the - -------------------------- Board of Directors November 30, 1994 Charles J. Wyly, Jr. /s/ Evan A. Wyly Director - -------------------------- November 30, 1994 Evan A. Wyly /s/ Michael C. French Director - -------------------------- November 30, 1994 Michael C. French /s/ Robert J. Donachie Chairman of the - -------------------------- Audit Committee November 30, 1994 Robert J. Donachie and Director /s/ Phillip A. Moore Executive Vice President, - -------------------------- Technology and November 30, 1994 Phillip A. Moore Director /s/ Robert E. Cook Director - -------------------------- November 30, 1994 Robert E. Cook /s/ Donald R. Miller Director - -------------------------- November 30, 1994 Donald R. Miller, Jr.
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit - ----------- ---------------------- 4.1 Certificate of Incorporation of the Registrant./(1)/ 4.2 Certificate of Amendment of Certificate of Incorporation of the Registrant./(2)/ 4.3 Certificate of Amendment of Certificate of Incorporation of the Registrant./(3)/ 4.4 Restated Bylaws of the Registrant./(4)/ 4.5 Form of Common Stock Certificate./(5)/ 5 Opinion of Jackson & Walker, L.L.P./(6)/ 15 None. 23.1 Consent of Ernst & Young LLP./(6)/ 23.2 Consent of Arthur Andersen LLP./(6)/ 23.3 Consent of Coopers & Lybrand L.L.P./(6)/ 23.4 Consent of Jackson & Walker, L.L.P. (included in its opinion filed as Exhibit 5 to this Registration Statement)./(6)/ 25 Power of Attorney (appearing on page II-6 of this Registration Statement)./(6)/ 26 None. 27 None. 28 None. 99.1 KnowledgeWare, Inc. Incentive Stock Option Plan of 1984./(6)/ 99.2 KnowledgeWare, Inc. Second Incentive Stock Option Plan of 1984./(6)/ 99.3 KnowledgeWare, Inc. 1988 Stock Incentive Plan./(6)/
- ------------ /(1)/ Previously filed as an exhibit to the Registrant's Registration Statement No. 2-82506 on Form S-1 and incorporated herein by reference. II-8 /(2)/ Previously filed as an exhibit to the Registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 and incorporated herein by reference. /(3)/ Previously filed as an exhibit to the Registrant's Registration Statement No. 33-69926 on Form S-8 and incorporated herein by reference. /(4)/ Previously filed as an exhibit to the Registrant's Registration Statement No. 33-47131 on Form S-8 and incorporated herein by reference. /(5)/ Previously filed as an exhibit to the Registrant's Registration Statement No. 2-86825 on Form S-1 and incorporated herein by reference. /(6)/ Filed herewith. II-9 EX-5 2 OPINION [JACKSON & WALKER, L.L.P. LETTERHEAD] EXHIBIT 5 November 30, 1994 Sterling Software, Inc. 8080 N. Central Expressway Suite 1100 Dallas, Texas 75206 Re: Registration Statement on Form S-8 of Sterling Software, Inc. Gentlemen: We are acting as counsel for Sterling Software, Inc., a Delaware corporation (the "Company"), in connection with the registration under the Securities Act of 1933, as amended, of the offering and sale of up to 257,723 shares of the Company's Common Stock, par value $0.10 per share (the "Shares"). The Company has authorized the issuance of such number of Shares as may from time to time be required to be issued upon the exercise of options outstanding as of November 30, 1994 under the (i) KnowledgeWare, Inc. Incentive Stock Option Plan of 1984, (ii) KnowledgeWare, Inc. Second Incentive Stock Option Plan of 1984 and (iii) KnowledgeWare, Inc. 1988 Stock Incentive Plan (collectively the "Plans"). A Registration Statement on Form S-8 covering the Shares (the "Registration Statement") is expected to be filed with the Securities and Exchange Commission (the "Commission") on or about the date hereof. In reaching the conclusions expressed in this opinion, we have examined and relied upon the originals or certified copies of all documents, certificates and instruments as we have deemed necessary to the opinions expressed herein, including the Certificate of Incorporation, as amended, and the Restated Bylaws of the Company and copies of the Plans. In making the foregoing examinations, we have assumed the genuineness of all signatures on original documents, the authenticity of all documents submitted to us as originals and the conformity to original documents of all copies submitted to us. Based solely upon the foregoing, subject to the comments hereinafter stated, and limited in all respects to the laws of the State of Texas, the General Corporation Law of the State of Delaware and the federal laws of the United States of America, it is our opinion that the Shares, when issued and sold in accordance with the terms of the Plans and any applicable option agreement, will be validly issued, fully paid and nonassessable. Sterling Software, Inc. November 30, 1994 Page 2 You should be aware that we are not admitted to the practice of law in the State of Delaware. Accordingly, any opinion herein as to the laws of the State of Delaware is based solely upon the latest generally available compilation of the statutes and case law of such state. We hereby consent to the use of this opinion as an Exhibit to the Registration Statement. In giving this consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission promulgated thereunder. Very truly yours, /s/ Jackson & Walker, L.L.P. EX-23.1 3 ERNST & YOUNG CONSENT Exhibit 23.1 Consent of Independent Auditors We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-8) pertaining to the registration of 257,723 shares of common stock of Sterling Software, Inc. and to the incorporation by reference therein of our report dated November 15, 1993, with respect to the consolidated financial statements and schedules of Sterling Software, Inc. included in its Annual Report on Form 10-K for the year ended September 30, 1993, as amended by Form 10-K/A Amendment No. 1 filed January 26, 1994, filed with the Securities and Exchange Commission. /s/Ernst & Young LLP Dallas, Texas November 30, 1994 EX-23.2 4 ARTHUR ANDERSEN CONSENT Exhibit 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated June 18, 1993 (except with respect to the matter discussed in Note 19 as to which the date is July 1, 1993), included in Sterling Software, Inc.'s Annual Report on form 10-K for the year ended September 30, 1993, and to all references to our Firm included in this registration statement. Washington, D.C. November 30, 1994 /s/ ARTHUR ANDERSEN LLP EX-23.3 5 COOPERS & LYBRAND CONSENT Exhibit 23.3 Consent of Independent Accountants We consent to the incorporation by reference in this registration statement on Form S-8 of our report, which includes an explanatory paragraph about KnowledgeWare, Inc.'s ability to continue as a going concern, dated August 31, 1994, on our audit of the financial statements of KnowledgeWare, Inc. and Subsidiaries. We also consent to the reference to our firm under the caption "Experts". Atlanta, Georgia November 30, 1994 /s/ Coopers & Lybrand L.L.P. EX-99.1 6 KNOWLEDGEWARE 1984 SOP EXHIBIT 99.1 KNOWLEDGEWARE INC. INCENTIVE STOCK OPTION PLAN (Approved by Shareholders May 2, 1984, and Amended and Restated February 24, 1989) ______________________________________ 1. Purpose. The purpose of the Plan will be to secure for the ------- Corporation and its stockholders the benefits which flow from providing corporate employees with the incentive inherent in common stock ownership by means of the grant of Incentive Stock Options (within the meaning of Section 422A of the Internal Revenue Code) and Nonstatutory Stock Options to such employees. 2. Amount of Stock. The total number of shares of the Corporation's --------------- Class A common stock to be subject to options granted pursuant to the Plan shall be 1,725,000 shares (adjusted for the 10 for one (1) stock split effective November 1. 1984). A maximum of 1,725,000 shares may be issued as Incentive Stock Options. The shares subject to the Plan shall consist of unissued shares or previously issued shares reacquired and held by the Corporation, and such amount of shares shall be and is hereby reserved for sale for such purpose. To the extent any options granted hereunder terminate, are cancelled or expire unexercised, in whole or in part, the shares with respect to which such options were not exercised shall again become available for options to be granted under this Plan. Any of such shares which remain unsold and which are not subject to outstanding options at the termination of the Plan shall cease to be reserved for the purpose of the Plan; but until termination of the Plan, the Corporation shall at all times reserve a sufficient number of shares to meet the requirements of the Plan. 3. Stock Option Committee. The Board of Directors shall, on a yearly ---------------------- basis, appoint a stock option committee (the "Committee") to serve under this Plan. Unless otherwise appointed, the Committee shall be the Board of Directors. The Committee shall have full power and authority to designate participants, to determine the terms and provisions of respective option agreements (which need not be identical) and to interpret the provisions and supervise the administration of the Plan. 4. Eligibility and Participation. Options may be granted pursuant to the ----------------------------- Plan to any employee. Provided, however, that if options granted hereunder are Incentive Stock Options, they shall be granted only to key employees. The Committee shall from time to time select the employees to whom options may be granted and shall determine the number of shares to be covered by each option so granted to each individual. 5. Duration of Plan. Options may be issued pursuant to the Plan for up ---------------- to ten (10) years from the earlier of the date of adoption of the Plan by the Board of Directors or approval of the Plan by the shareholders of the Corporation. 6. Duration of Options. ------------------- (a) The options under the Plan may have a duration as may be set by the Committee; provided, however, any Incentive Stock Option must be exercised only within 10 years of the date it is granted, except as otherwise provided in paragraph 13. (b) Notwithstanding any other provisions of the Plan, each option agreement may contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number and class of shares subject to such option and the option price in the event of changes in the outstanding Class A common stock by reason of any stock dividend, split-up, recapitalization, combination or exchange of shares, merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation and the like, and, in the event of any such change in the outstanding Class A common stock, the aggregate number and class of shares available under the Plan shall be appropriately adjusted by the Committee, whose determination shall be conclusive. 7. Option Price. The purchase price of Class A common stock purchasable ------------ under the options granted pursuant to the Plan shall be set by the Committee; provided, however, that the exercise price of an Incentive Stock Option shall not be less than one hundred percent (100%) of the fair market value of the stock at the time the options are granted. Such fair market value shall be determined by the Board of Directors or, if so authorized and directed by the Board of Directors, by the Committee. 8. Payment of Option Price. The purchase price of Class A common stock ----------------------- purchasable under option shall be paid with cash, with shares of the Corporation's Class A common stock previously acquired by the optionee or with a combination thereof in accordance with terms provided in the option agreement, which shall be determined by the Committee at the time of the grant of the option. 9. Option Agreements. ----------------- (a) Each option under the Plan shall be evidenced by a written option agreement. which shall be signed by the President of the Corporation or by a member of the Committee and by the employee and which shall contain such provisions as may be approved by the Committee. (b) The option agreements shall constitute binding contracts between the Corporation and the optionee and every optionee, upon acceptance of such option agreement, shall be bound by the terms and restrictions of the Plan and of the option agreement. - 2 - (c) In the discretion of the Committee, an option agreement entered into under the Plan may provide that all shares of stock issued pursuant to the exercise of an option shall be subject to a right of first refusal in favor of the Corporation in the event the owner of such shares desires to transfer them. (d) The terms of each option agreement shall be in accordance with the Plan, but may include additional provisions and restrictions (including, but not limited to, provisions for the vesting of the right to purchase shares under the option based upon duration of employment), provided that such additional provisions and restrictions are not inconsistent with the terms of the Plan, and in the case of Incentive Stock Options, are not inconsistent with Section 422A of the Internal Revenue Code. (e) In the discretion of the Committee, an option agreement may provide that for a period of sixty (60) days following termination of employment, the Corporation shall have the right to repurchase shares purchased by an employee pursuant to an exercised option under the terms set forth in the option agreement. (f) In the discretion of the Committee, an option agreement may grant the Corporation the right to repurchase shares purchased by an employee pursuant to an exercised option in the event the Corporation registers its common stock for sale to the public or in the event the principal shareholders of the Corporation contract for the sale of their stock in the Corporation. (g) Except as otherwise determined by the Committee, options granted under this Plan shall only be exercisable prior to termination of employment with the Corporation; provided, however, Incentive Stock Options may not be exercised more than three (3) months after termination of the optionee's employment with the Corporation. (h) If applicable, the option agreement shall provide that prior to the issuance of shares upon exercise of an option, the optionee shall pay or make adequate provision for any federal or state withholding obligations of the Corporation. 10. Assignability. No option granted under the Plan shall be transferable ------------- or assignable by the employee otherwise than by will or by the laws of descent and distribution and during the lifetime of the employee shall be exercisable only by him. 11. Sequential Exercise. Any Incentive Stock Option granted hereunder ------------------- before February 24, 1989, is not exercisable while there is outstanding any Incentive Stock Option which was granted to the optionee of such Incentive Stock Option at an earlier time. - 3 - 12. Maximum Value. ------------- (a) The aggregate fair market value (determined at the time the option is granted) of stock subject to incentive Stock Options which may be granted to any individual employee before February 24, 1989, may not exceed One Hundred Thousand Dollars ($100,000.00) in any calendar year plus any unused limit carry- over (determined in accordance with Section 422A(c)(4) of the Internal Revenue Code of 1954) available for such year. (b) In the case of Incentive Stock Options granted after February 24, 1989, the aggregate fair market value (determined at the time the option is granted) of the stock with respect to which Incentive Stock Options are exercisable for the first time by the optionee during any calendar year (under all plans of the Corporation or its subsidiaries) shall not exceed One Hundred Thousand Dollars ($100,000.00). 13. Existing Shareholders. In the event that any eligible participant is, --------------------- at the time that any Incentive Stock Options are granted to him under the Plan, the owner of stock of the Corporation possessing more than ten (10) percent of the total combined voting power of all classes of stock of the Corporation, then, (i) the purchase price of Class A common stock purchasable under the Incentive Stock Options granted to such individual shall not be less than one hundred ten (110) percent of the fair market value of the stock at the time the Incentive Stock Options are granted, determined in accordance with paragraph 7, above, and, (ii) the duration of such Incentive Stock Options shall not exceed five (5) years. 14. Investment Purpose. Each option under the Plan shall be granted on ------------------ the condition that the purchases of stock thereunder shall be for investment purposes, and not with a view to resale or distribute except that in the event the stock subject to such option is registered under the Securities Act of 1933, as amended, or in the event a resale of such stock without such registration would otherwise be permissible, said condition shall be inoperative if in the opinion of counsel for the Corporation such condition is not required under the Securities Act of 1933 or any other applicable law, regulation or rule of any governmental agency. 15. Indemnification of Committee. In addition so such other rights of ---------------------------- indemnification as they may have as directors or as members of the Committee, the members of the Committee shall be indemnified by the Corporation against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any option granted thereunder, and against all amounts paid by them in settlement - 4 - thereof (provided such settlement is approved by independent legal counsel selected by the Corporation) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member is liable for negligence or misconduct in the performance of his duties; provided that within sixty (60) days after institution of any such action, suit or proceeding a Committee member shall in writing offer the Corporation the opportunity, at its own expense, to handle and defend the same. 16. Amendment of the Plan. This Plan may be amended at any time by the --------------------- Board of Directors of the Corporation, provided that without the approval of the Stockholders of the Corporation, no such amendment shall become effective if it would (a) materially increase the benefits accruing to participants under the Plan, (b) materially increase the number of shares of Class A common stock which may be sold under the Plan, or (c) materially modify the requirements as to eligibility for participation in the Plan. Any amendment to the Plan shall not, without the written consent of the participant, affect such participant's rights under any option agreement entered into prior to such amendment. 17. Effective Date. The amendment and restatement of the Plan shall -------------- become effective upon approval by the Corporation's Stockholders. 18. Government Regulations. The Plan, and the granting and exercise of ---------------------- options thereunder, and the obligation of the Corporation to sell and deliver shares under such options, shall be subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required. Date Amended and Restated Plan Approved by Stockholders: February 24, 1989 - 5 - EX-99.2 7 KNOWLEDGEWARE 1984 SOP/2 EXHIBIT 99.2 KNOWLEDGEWARE, INC. SECOND INCENTIVE STOCK OPTION PLAN (Approved by Shareholders October 4, 1984, and Amended and Restated February 24, 1989) ____________________________________________________ 1. Purpose. The purpose of the Plan will be to secure for the ------- Corporation and its stockholders the benefits which flow from providing corporate employees with the incentive inherent in common stock ownership by means of the grant of Incentive Stock Options (within the meaning of Section 422A of the Internal Revenue Code) and Nonstatutory Stock Options to such employees. 2. Amount of Stock. The total number of shares of the Corporation's --------------- Class A common stock to be subject to options granted pursuant to the Plan shall be 600,000 shares (adjusted for the 10 for one (1) stock split effective November 1, 1984). A maximum of 600,000 shares may be issued as Incentive Stock Options. The shares subject to the Plan shall consist of unissued shares or previously issued shares reacquired and held by the Corporation, and such amount of shares shall be and is hereby reserved for sale for such purpose. To the extent any options granted hereunder terminate, are cancelled or expire unexercised, in whole or in part, the shares with respect to which such options were not exercised shall again become available for options to be granted under this Plan. Any of such shares which remain unsold and which are not subject to outstanding options at the termination of the Plan shall cease to be reserved for the purpose of the Plan; but until termination of the Plan, the Corporation shall at all times reserve a sufficient number of shares to meet the requirements of the Plan. 3. Stock Option Committee. The Board of Directors shall, on a yearly ---------------------- basis, appoint a stock option committee (the "Committee") to serve under this Plan. Unless otherwise appointed, the Committee shall be the Board of Directors. The Committee shall have full power and authority to designate participants, to determine the terms and provisions of respective option agreements (which need not be identical) and to interpret the provisions and supervise the administration of the Plan. 4. Eligibility and Participation. Options may be granted pursuant to the ----------------------------- Plan to any employee. Provided, however, that if options granted hereunder are Incentive Stock Options, they shall be granted only to key employees. The Committee shall from time to time select the employees to whom options may be granted and shall determine the number of shares to be covered by each option so granted to each individual. 5. Duration of Plan. Options may be issued pursuant to the Plan for up ---------------- to ten (10) years from the earlier of the date of adoption of the Plan by the Board of Directors or approval of the Plan by the shareholders of the Corporation. 6. Duration of Options. ------------------- (a) The options under the Plan may have a duration as may be set by the Committee; provided, however, any Incentive Stock Option must be exercised only within 10 years of the date it is granted, except as otherwise provided in paragraph 13. (b) Notwithstanding any other provisions of the Plan, each option agreement may contain such provisions as the Committee shall determine to be appropriate for the adjustment of the number and class of shares subject to such option and the option price in the event of changes in the outstanding Class A common stock by reason of any stock dividend, split-up, recapitalization, combination or exchange of shares, merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation and the like, and, in the event of any such change in the outstanding Class A common stock, the aggregate number and class of shares available under the Plan shall be appropriately adjusted by the Committee, whose determination shall be conclusive. 7. Option Price. The purchase price of Class A common stock purchasable ------------ under the options granted pursuant to the Plan shall be set by the Committee; provided, however, that the exercise price of an Incentive Stock Option shall not be less than one hundred percent (100%) of the fair market value of the stock at the time the options are granted. Such fair market value shall be determined by the Board of Directors or, if so authorized and directed by the Board of Directors, by the Committee. 8. Payment of Option Price. The purchase price of Class A common stock ----------------------- purchasable under option shall be paid with cash, with shares of the Corporation's Class A common stock previously acquired by the optionee or with a combination thereof in accordance with terms provided in the option agreement, which shall be determined by the Committee at the time of the grant of the option. 9. Option Agreements. ----------------- (a) Each option under the Plan shall be evidenced by a written option agreement, which shall be signed by the President of the Corporation or by a member of the Committee and by the employee and which shall contain such provisions as may be approved by the Committee. (b) The option agreements shall constitute binding contracts between the Corporation and the optionee and every optionee, upon acceptance of such option agreement, shall be bound by the terms and restrictions of the Plan and of the option agreement. (c) In the discretion of the Committee, an option agreement entered into under the Plan may provide that all shares of stock issued pursuant to the exercise of an option shall be - 2 - subject to a right of first refusal in favor of the Corporation in the event the owner of such shares desires to transfer them. (d) The terms of each option agreement shall be in accordance with the Plan, but may include additional provisions and restrictions (including, but not limited to, provisions for the vesting of the right to purchase shares under the option based upon duration of employment), provided that such additional provisions and restrictions are not inconsistent with the terms of the Plan, and in the case of Incentive Stock Options, are not inconsistent with Section 422A of the Internal Revenue Code. (e) In the discretion of the Committee, an option agreement may provide that for a period of sixty (60) days following termination of employment, the Corporation shall have the right to repurchase shares purchased by an employee pursuant to an exercised option under the terms set forth in the option agreement. (f) In the discretion of the Committee, an option agreement may grant the Corporation the right to repurchase shares purchased by an employee pursuant to an exercised option in the event the Corporation registers its common stock for sale to the public or in the event the principal shareholders of the Corporation contract for the sale of their stock in the Corporation. (g) Except as otherwise determined by the Committee, options granted under this Plan shall only be exercisable prior to termination of employment with the Corporation; provided, however, Incentive Stock Options may not be exercised more than three (3) months after termination of the optionee's employment with the Corporation. (h) If applicable, the option agreement shall provide that prior to the issuance of shares upon exercise of an option, the optionee shall pay or make adequate provision for any federal or state withholding obligations of the Corporation. 10. Assignability. No option granted under the Plan shall be transferable ------------- or assignable by the employee otherwise than by will or by the laws of descent and distribution and during the lifetime of the employee shall be exercisable only by him. 11. Sequential Exercise. Any Incentive Stock Option granted hereunder ------------------- before February 24, 1989, is not exercisable while there is outstanding any incentive Stock Option which was granted to the optionee of such Incentive Stock Option at an earlier time. 12. Maximum Value. ------------- (a) The aggregate fair market value (determined at the time the option is granted) of stock subject to Incentive Stock Options which may be granted to any individual employee before February 24, 1989, may not exceed One Hundred Thousand Dollars ($100,000.00), in any calendar year plus any unused limit carry- - 3 - over (determined in accordance with Section 422A(c)(4) of the Internal Revenue Code of 1954) available for such year. (b) In the case of Incentive Stock Options granted after February 24, 1989, the aggregate fair market value (determined at the time the option is granted) of the stock with respect to which Incentive Stock Options are exercisable for the first time by the optionee during any calendar year (under all plans of the Corporation or its subsidiaries) shall not exceed One Hundred Thousand Dollars ($100,000.00). 13. Existing Shareholders. In the event that any eligible participant is, --------------------- at the time that any Incentive Stock Options are granted to him under the Plan, the owner of stock of the Corporation possessing more than ten (10) percent of the total combined voting power of all classes of stock of the Corporation, then, (i) the purchase price of Class A common stock purchasable under the Incentive Stock Options granted to such individual shall not be less than one hundred ten (110) percent of the fair market value of the stock at the time the Incentive Stock Options are granted, determined in accordance with paragraph 7, above, and, (ii) the duration of such Incentive Stock Options shall not exceed five (5) years. 14. Investment Purpose. Each option under the Plan shall be granted on ------------------ the condition that the purchases of stock thereunder shall be for investment purposes, and not with a view to resale or distribute except that in the event the stock subject to such option is registered under the Securities Act of 1933, as amended, or in the event a resale of such stock without such registration would otherwise be permissible, said condition shall be inoperative if in the opinion of counsel for the Corporation such condition is not required under the Securities Act of 1933 or any other applicable law, regulation or rule of any governmental agency. 15. Indemnification of Committee. In addition to such other rights of ---------------------------- indemnification as they may have as directors or as members of the Committee, the members of the Committee shall be indemnified by the Corporation against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any option granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Corporation) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member is liable for negligence or misconduct in the performance of his duties; provided that within sixty (60) days after institution of any such action, suit or proceeding a Committee member shall in writing offer the Corporation the opportunity, at its own expense, to handle and defend the same. - 4 - 16. Amendment of the Plan. This Plan may be amended at any time by the --------------------- Board of Directors of the Corporation, provided that without the approval of the Stockholders of the Corporation, no such amendment shall become effective if it would (a) materially increase the benefits accruing to participants under the Plan, (b) materially increase the number of shares of Class A common stock which may be sold under the Plan, or (c) materially modify the requirements as to eligibility for participation in the Plan. Any amendment to the Plan shall not, without the written consent of the participant, affect such participant's rights under any option agreement entered into prior to such amendment. 17. Effective Date. The amendment and restatement of the Plan shall -------------- become effective upon approval by the Corporation's Stockholders. 18. Government Regulations. The Plan, and the granting and exercise of ---------------------- options thereunder, and the obligation of the Corporation to sell and deliver shares under such options, shall be subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required. Date Amended and Restated Plan Approved by Stockholders: February 24, 1989 - 5 - EX-99.3 8 KNOWLEDGEWARE 1988 SOP EXHIBIT 99.3 KNOWLEDGEWARE, INC. 1988 STOCK INCENTIVE PLAN (APPROVED BY THE SHAREHOLDERS DECEMBER 2, 1988, AND AMENDED AND RESTATED AUGUST 29, 1989, AUGUST 13, 1990, AUGUST 14, 1991 AND OCTOBER 7, 1993) The 1988 Stock Incentive Plan (the "Plan") is hereby adopted as follows: 1. PURPOSE OF PLAN. The purpose of the Plan is to provide corporate --------------- officers and key employees who remain in the employ KnowledgeWare, Inc. ("KnowledgeWare"), and its Subsidiaries (collectively the "Company"), as the Administrator hereinafter referred to shall designate, with a strong incentive for individual creativity and contribution to insure the future growth of the Company. The Plan is designed to reward those who are deeply committed to a career with the Company and whose ability and diligence permit such persons to make important contributions to the success of the Company by enabling such persons to acquire shares of KnowledgeWare Common Stock in the manner contemplated by the Plan. KnowledgeWare believes that the Plan will also aid the Company in attracting and retaining outstanding key employees and in stimulating the efforts of such employees to work for the success of the Company. This Plan covers the sale of shares which may or may not be subject to restrictions ("Restricted Stock"), the award of bonus shares which may be granted with or without restrictions ("Bonus Stock") and the grant of options [including nonstatutory stock options and options intended to qualify as incentive stock options under Section 422A of the Code ("Incentive Options")] to acquire shares which may or may not be subject to restrictions ("Option Stock"). 2. DEFINITIONS. For purposes of this Plan, the following terms where ----------- appearing with initial capitalization shall be applicable: (a) "Administrator" means either the Board of Directors or the Committee, whichever is so designated by the Board of Directors to administer the Plan. (b) "Board of Directors" means the Board of Directors of KnowledgeWare. (c) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (d) "Committee" means a committee appointed by the Board of Directors and which shall consist of not less than three persons, all of whom shall be "disinterested persons" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended from time to time, or any law, rule, regulation or other provision that may hereafter replace such Rule. If the Plan is administered by a Committee, the members of the Committee shall serve at the pleasure of the Board of Directors. Sixty percent of the Committee members shall constitute a quorum, and the action of a majority of the members of the Committee present at any meeting at which a quorum is present, or acts unanimously adopted in writing without holding a meeting, shall be the acts of the Committee. The Committee shall report all actions taken by it to the Board of Directors. (e) "Common Stock" means KnowledgeWare's Common Stock (formerly designated Class A common stock). (f) "Retirement" shall mean the discontinuance of employment of a participant after he has attained age 65. (g) "Subsidiary" means any corporation (other than Knowledgeware) in an unbroken chain of corporations beginning with KnowledgeWare if, at the time of the sale or award of any shares or the grant of any option under the Plan, each of the corporations other than the last in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. (h) "Total Disability" shall mean that a participant is determined to be, in the sole discretion of the Administrator, disabled, due to sickness or injury from a cause other than an excluded cause specified below, and such disability is likely to be continuous and permanent, such that the participant is, in the opinion of the Administrator, completely unable to perform any and every duty pertaining to his occupation with the Company and unable to engage in any reasonable occupation with the Company or any other employer, where "reasonable occupation" shall mean any occupation which other individuals who have an educational and employment background similar to that of the participant, and are in good health, are actually engaged in as their principal means of financial support. Any opinion of the Administrator rendered in accordance herewith shall be final and conclusive and shall not be subject to review by anyone. A participant will not be considered Totally Disabled if, in the opinion of the Administrator considering all of the circumstances, the disability is a result of: (1) excessive and habitual use by the participant of drugs, intoxicants or narcotics; (2) injury or disease sustained by the participant which was diagnosed or discovered subsequent to the date his employment was terminated; or (3) injury or sickness sustained by the participant as a result of reckless or wanton disregard of his own health or safety, or self- inflicted injuries. The Administrator may require proof in such form as it may decide, including, in all cases where practicable, the certificate of a duly licensed physician, satisfactory to the Administrator, that the participant has become disabled as provided herein. - 2 - (i) "Unvested Stock" shall mean all shares of Restricted Stock, Bonus Stock and Option Stock other than Vested Stock. (j) "Vested Stock" shall mean (i) all shares of Restricted Stock, Bonus Stock and Option Stock which at the time in question have been freed of the restrictions imposed pursuant to the Plan and any related Restricted Stock, Bonus Stock or Stock Option Agreement (other than those imposed by Section 11) and (ii) all shares of Restricted Stock, Bonus Stock and Option Stock which shall have been issued free of restriction (other than those imposed by Section 11). 3. ADMINISTRATION OF PLAN. This Plan shall be administered, construed ---------------------- and interpreted by the Administrator. The Administrator shall have full and final authority, in its discretion, (a) to determine those corporate officers and key employees who shall be eligible to participate in the Plan and the number of shares to be sold or awarded to each participant and the number of shares to be covered by any options granted and the time or times at which such options shall be granted to each participant (it being understood that more than one sale, award or option or any combination thereof may relate to the same participant), (b) to determine the terms and provisions of any Restricted Stock Agreement, Bonus Stock Agreement or Stock Option Agreement (the terms of which need not be identical), and (c) to make all other determinations and take all other actions deemed necessary and advisable for the proper administration of the Plan. The Administrator may adopt such rules and regulations for the administration of the Plan as it deems advisable. The Administrator may act by a meeting person or by telephone or by written determinations signed by all of the members of the Administrator. All actions, interpretations and determinations with respect to the administration of the Plan taken by the Administrator shall be conclusively binding for all purposes and upon all persons. 4. ELIGIBLE PARTICIPANTS. Key employees, including officers and --------------------- directors who are employees, of the Company as determined by the Administrator shall be eligible for participation under the Plan. However, with respect to Incentive Options, persons eligible to receive Incentive Options shall be limited to key employees (including officers and directors who are employees) of KnowledgeWare and its Subsidiaries. 5. SHARES SUBJECT TO PLAN. An aggregate of 4,000,000 shares of Common ---------------------- Stock shall be subject to this Plan either from authorized but unissued shares or from issued shares reacquired by KnowledgeWare, including shares purchased in the open market, and such number of shares subject to the Plan shall be appropriately adjusted, in the discretion of the Administrator in the event of - 3 - any one or more stock dividends, stock splits or any other forms of recapitalization. The Administrator in its sole discretion may provide in any Restricted Stock Agreement, Bonus Stock Agreement or Stock Option Agreement or otherwise for adjustments to be made with respect to shares sold or awarded hereunder. If prior to the termination of the Plan, shares or Restricted Stock or Bonus Stock issued pursuant hereto shall have been repurchased by or redelivered to KnowledgeWare in connection with the restrictions imposed on such shares pursuant to this Plan, such repurchase or redelivered shares shall again become available for sale, award or option under the Plan. To the extent any options granted hereunder terminate, are canceled or expire unexercised in whole or in part, the shares with respect to which such options were not exercised shall again become available for sale, award or option under the Plan. 6. PRICE. The Administrator in its absolute discretion shall determine ----- the price, if any, at which shares of Restricted Stock shall be sold to participants hereunder and may award shares of Bonus Stock to participants hereunder without cash consideration. The Administrator shall determine the price at which any options granted to purchase shares of Option Stock hereunder shall become exercisable, provided that such sale or exercise price with respect to Incentive Options is not less than the fair market value of a share of Common Stock at the time such option is granted, except as otherwise provided in Section 10(b)(vii). For the purposes hereof, fair market value shall be as determined by the Administrator and the Administrator may make such determination: (a) in case the Common Stock is publicly traded but shall not then be listed and traded upon a recognized securities exchange or shall not be quoted on a recognized national market system, upon the basis of the mean between the bid and asked quotations for such stock on the date of grant of such option as reported by the National Association of Securities Dealers Automated Quotation system (NASDAQ) or, in the event that there shall be no bid or asked quotations on the date of grant of such option, then upon the basis of the mean between the bid and asked quotations on the date nearest preceding such date of grant, and upon any other factors which the Administrator shall deem appropriate, or (b) in case the Common Stock is publicly traded and shall then be listed and traded upon a recognized securities exchange or shall be quoted on a recognized national market system, upon the basis of the mean between the highest and lowest selling prices at which shares of Common Stock were traded on such recognized securities exchange or national market system on such date of grant or, if the Common Stock was not traded on said date, upon the basis of the mean of such prices on the date nearest preceding such date of grant, and upon any other factors which the Administrator shall deem appropriate, or - 4 - (c) in case the Common Stock is not listed or traded as referred to in Sections 6(a) or (b) above, in good faith and taking into consideration factors which the Administrator determines are applicable in the determination of such fair market value. 7. PAYMENT. ------- (a) Payment for shares purchased under this Plan shall be payable in cash, by check, by promissory note (or in connection with any option granted pursuant to this Plan, in addition to the above, in shares of Common Stock as provided in (d) below) or in any combination thereof, as shall be determined by the Administrator and provided in the applicable Restricted Stock, Bonus Stock, or Stock Option Agreement. (b) If the payment is made in cash or by check, such payment shall be made at the time the shares are sold. (c) If the payment is made by promissory note, such note shall be delivered at the time the shares are sold and shall bear interest, if any, at such rate and shall be payable upon such terms as the Administrator shall determine. Certificates for the purchased shares shall be registered in the name of the participant and may be delivered to the purchaser or held by KnowledgeWare as security for payment of the promissory note as determined in the discretion of the Administrator. (d) In connection with any options granted pursuant to this Plan, the Administrator, in its discretion may accept as payment for all or any portion of the option price of any Option Stock, shares of Common Stock owned by the participant having a fair market value equal to the required payment. The participant shall deliver to KnowledgeWare a certificate or certificates representing such shares duly endorsed to KnowledgeWare or accompanied by a separate stock power so endorsed. 8. RESTRICTED STOCK. While not required to be subject to any ---------------- restrictions, shares of Restricted Stock sold pursuant to this Plan (including any shares received by the holders thereof as a result of stock dividends, stock splits or any other forms of recapitalization) may, in the discretion of the Administrator, be subject to any one or more of the following restrictions: (a) Shares of Unvested Stock may not be sold, assigned, transferred or otherwise alienated or hypothecated. (b) In the event of termination of employment with the Company by a participant within such period or periods after shares are sold to him hereunder as is established by the Administrator in the related Restricted Stock Agreement, if such termination is for any reason other than death, Total Disability, or Retirement, KnowledgeWare shall have the option for 30 days following written tender, within such period as is specified in the related Restricted Stock Agreement, of all shares of Unvested Stock by the participant to the Secretary of KnowledgeWare to buy for cash all - 5 - or any part of the shares of Unvested Stock sold to such participant at the cash price per share paid by him to KnowledgeWare, which purchase shall be as of the date of such termination of employment and participant shall be deemed to have ceased to own such shares as of such date. A participant's failure to make the above tender shall not limit in any manner the rights of KnowledgeWare to repurchase shares of Unvested Stock hereunder and in such event the Secretary of KnowledgeWare may give notice to such participant that his tender shall have been deemed to be made on the date of termination of employment. (c) In the event a participant who has purchased shares hereunder ceases to be employed by the Company as a result of death, Total Disability or Retirement, then (i) KnowledgeWare may repurchase such of the shares of Unvested Stock sold to such participant, at such price and on such terms and conditions, as the Administrator shall determine at such time in its sole discretion and (ii) the other restrictions imposed and still existing upon any or all of the shares of Unvested Stock sold to such participant shall lapse or shall be removed in accordance with a specified formula, all as shall be determined at such time in the sole discretion of the Administrator. (d) At the end of such period as shall be established by the Administrator in the related Restricted Stock Agreement, all shares of Unvested Stock shall be repurchased for cash by KnowledgeWare within 30 days after the expiration of such period at the cash price per share paid by such participant to KnowledgeWare. (e) At any time the Common Stock is not being publicly traded as described in Sections 6(a) or 6(b), in the event a participant shall desire to sell all or any part of his shares of Common Stock pursuant to a bona fide written offer for a monetary consideration, the participant shall give notice to the Secretary of KnowledgeWare of his desire to accept such offer in writing. The notice shall set forth the terms of the proposed sale including the identity of any person that the participant has reason to believe will have a beneficial interest in such shares. The notice shall also set forth the terms of any other agreement or understanding between the participant and other parties directly or indirectly connected with said offer. No sale may be made pursuant to the offer if KnowledgeWare determines in good faith that such other agreement or understanding has materially affected the terms of the offer and so notifies the participant within the option period. Any change in the terms of the proposed sale shall require a new notice. For a period of 60 days after receipt by KnowledgeWare of said notice, KnowledgeWare shall have the option, exercisable by written notice, to purchase said shares on the same terms and conditions as are specified in the notice except the time for closing shall be not less than 30 days after exercise of the option. Should KnowledgeWare not exercise its option, the remaining shareholders or KnowledgeWare shall be given the same notice of the proposed sale and said remaining shareholders shall have an additional period of 30 days to exercise an option to purchase said shares on such terms and conditions. If more than - 6 - one of the remaining shareholders shall exercise the option, the shares shall be purchased by them in proportion to their holdings before such exercise. If KnowledgeWare and the remaining shareholders fail to exercise the option, the participant shall be free to sell his shares pursuant to the terms of the notice for a period of 60 days following the expiration of KnowledgeWare's option period. Thereafter, the provisions of this Section relating to notice and options shall again apply. (f) The Administrator may provide in the related Restricted Stock Agreement for (i) any other restrictions on any shares of Restricted Stock sold pursuant to this Plan as it may deem advisable, including, without limitation, restrictions based on market appreciation of KnowledgeWare Common Stock, increases in the revenues, sales, net worth or net earnings of KnowledgeWare or any subsidiary, division or other component thereof, or the attainment of any other business or financial goal of the Company and (ii) such further restrictions as may be advisable to comply with the law, including the requirements of the Securities Act of 1933, as amended, any stock exchange upon which such share or shares of the same class are then listed, and under any state securities or other laws applicable to such shares. 9. BONUS STOCK. The Administrator shall have the sole discretion to ----------- determine in the related Bonus Stock Agreement whether shares or Bonus Stock awarded pursuant to the Plan (including any shares received by the holders thereof as a result of stock dividends, stock splits or any other forms of recapitalization) shall be free of any restrictions (other than those advisable to comply with the law) or shall be subject to restrictions similar to those referred to in Section 8 (including specifically Section 8(f)) with respect to shares of Restricted Stock. 10. OPTION STOCK. ------------ (a) All options granted pursuant to the Plan shall have such terms and conditions as the Administrator shall determine, including the period during which they may be exercised in whole or in part and the conditions under which they may be terminated or canceled and such other provisions as may be advisable to comply with the law or the rules of any such stock exchange, and each option shall have the following additional conditions: (i) The options shall not be transferable other than by will or the laws of descent and distribution and shall be exercisable during the participant's lifetime only by him and, except as otherwise determined by the Administrator, shall only be exercisable prior to termination of employment with the Company. (ii) KnowledgeWare shall not issue any fractional shares upon the exercise of options granted under the Plan. - 7 - (iii) No optionee will be deemed to be a holder of any shares of Common Stock or shall have any rights of a shareholder of KnowledgeWare until the issuance of certificates after the exercise thereof. No adjustment shall be made for any dividends or distributions or other rights for which the record date is prior to the date of such stock certificates so issued except as provided in (iv) below. (iv) The number of shares subject to an option and the price per share shall be appropriately adjusted by the Administrator to reflect any stock splits, stock dividends or other form of recapitalization. (v) The Administrator shall have sole discretion to determine in the Stock Option Agreement whether shares of Option Stock (including any shares received thereon as a result of stock dividends, stock splits and any other forms of recapitalization) shall be free of any restrictions (other than those advisable to comply with the law) or shall be subject to restrictions similar to those referred to in Section 8 (including specifically Section 8(f)) with respect to shares of Restricted Stock. (vi) The granting of an option shall impose no obligation upon the participant to exercise such option. (b) All Incentive Options granted hereunder, in addition to the conditions required by Section 10(a) and the other Sections of the Plan applicable to Incentive Options, must meet the following additional conditions where applicable: (i) The Plan must be approved by the shareholders of KnowledgeWare within 12 months after its adoption by the Board of Directors. (ii) Any Incentive Option must be granted within 10 years from the date the Plan is adopted by the Board of Directors. (iii) Any Incentive Option must be exercised only within 10 years of the date it is granted, except as otherwise provided in 10(b)(vii) below. (iv) A maximum of 2,750,000 shares of Common Stock may be issued under Incentive Options. (v) The aggregate fair market value (determined at the time the option is granted) of the stock with respect to which incentive stock options are exercisable for the first time by such individual during any calendar year (under all plans of KnowledgeWare and its Subsidiaries) shall not exceed $100,000. (vi) Any Incentive Option granted hereunder shall be consistent with the provisions of Sections 421, 422A and - 8 - 425 and related Sections of the Code and applicable Treasury Regulations. The Stock Option Agreements authorized under this Plan in connection with the grant of Incentive Options may contain other provisions, not inconsistent with the Plan and Section 422A of the Code, as the Administrator shall deem advisable. (vii) If the participant owns (subject to applicable ownership attribution rules of Section 425(d) of the Code and Treasury Regulations promulgated thereunder) stock possessing more than 10 percent of the total combined voting power of all classes of stock of KnowledgeWare or of stock of any parent or subsidiary of KnowledgeWAre at the time the Incentive Option is granted, the option price shall be not less than 110 percent of the fair market value of the stock subject to the Incentive Option and the Incentive Option by its terms shall not be exercisable after the expiration of five years from the date the Incentive Option is granted. 11. COMPETITION BY PARTICIPANT. -------------------------- (a) At the discretion of the Administrator, provisions may be included in a Restricted Stock Agreement, Bonus Stock Agreement or Stock Option Agreement that a participant within such period of time as shall be specified in the related Restricted Stock Agreement, Bonus Stock Agreement or Stock Option Agreement, shall not directly or indirectly, individually or as an employee, partner, officer, director or stockholder or in any other capacity whatsoever of any person, firm, partnership or corporation (i) recruit, hire, assist others in recruiting or hiring, discuss employment with, or refer to others, any persons who is, or within the preceding 12 months was, an employee of KnowledgeWare or any parent, subsidiary, or affiliated company, or of any present, prospective or former customer of KnowledgeWare or any parent, subsidiary or affiliated company, (ii) compete with KnowledgeWare or any parent, subsidiary or affiliated company in such segments of the business of the Company and within such territory as shall be specified in such related Agreement, (iii) use in competition with KnowledgeWare, or any parent, or subsidiary, or affiliated company, customer, prospective customer, or former customer, within such segments and specified territory, any of the methods, information, or systems developed by KnowledgeWare or any parent, or subsidiary, or affiliated company, customer, prospective customer, or former customer, where such customer, prospective customer, or former customer does business or (iv) call upon, solicit, accept employment with, sell or endeavor to sell within such segments and specified territory any customer, prospective customer, or former customer of KnowledgeWare, or any parent, subsidiary, or affiliated company. A Restricted Stock Agreement, Bonus Stock Agreement or Stock Option Agreement may contain such provisions regarding the forfeiture, resale or return to KnowledgeWare of shares received by the participant, or the termination or cancellation of options granted to the participant, under the Plan as the Administrator may deem appropriate upon the occurrence of an event prohibited under this Section. - 9 - (b) The provision of this Section shall not limit or restrict in any manner any rights or remedies which KnowledgeWare may have under any separate employment agreement with a participant or otherwise with respect to competition by a participant. 12. RELATED AGREEMENTS. In order to enforce the restrictions imposed upon ------------------ shares issued and options granted hereunder and to comply with federal and state securities laws and the Code, KnowledgeWare shall enter into a Restricted Stock Agreement, Bonus Stock Agreement or Stock Option Agreement with each participant containing such terms and conditions as the Administrator shall determine; and KnowledgeWare may require that the certificates representing shares of Unvested Stock or shares securing an installment payment for shares shall remain in the physical custody of KnowledgeWare or an escrow holder. 13. WITHHOLDING OF TAXES. Upon the award, sale or delivery of any shares, -------------------- or the grant or exercise of any option hereunder and should KnowledgeWare determine that the participant will be considered to have received income subject to withholding due to such event and the Company will be required to withhold amounts for federal and state income tax purposes, the distribution of any such shares to the participant may be deferred by KnowledgeWare until the participant makes satisfactory arrangements to provide KnowledgeWare with the funds to meet any such tax withholding obligation. If the participant fails to provide such funds to KnowledgeWare the time required to pay such withholding tax or should KnowledgeWare and the participant agree that such tax withholding obligation may be paid with shares to be distributed to the participant, KnowledgeWare may retain and sell a sufficient number of the participant's shares which are otherwise to be distributed to the participant as may be required to discharge, or reimburses KnowledgeWare for, the payment of such withholding obligation and any interest and penalty which may have accrued in connection therewith. KnowledgeWare shall have and retain a security interest in such shares of the participant for the purpose of securing the participant's obligation hereunder and the participant shall take such steps and execute such documents to perfect such security interest as KnowledgeWare shall reasonably request. 14. COMPLIANCE WITH SECURITIES LAW. ------------------------------ (a) KnowledgeWare shall not be obligated to sell or issue any shares pursuant to this Plan unless the shares to be distributed are at that time effectively registered or exempt from registration, in the opinion of KnowledgeWare, under the applicable federal and state securities laws. (b) Unless the shares covered by the Plan have been registered under the applicable federal and state securities laws, or KnowledgeWare has determined that such registration is unnecessary, each person receiving shares under the Plan may be required by KnowledgeWare to give a representation in writing that he is acquiring such shares for his own account for investment and - 10 - not with a view to, or for sale in connection with, the distribution of any part thereof. 15. INDEMNIFICATION. In addition to any other rights of indemnification --------------- that they may have as directors of KnowledgeWare or as members of the Committee, the directors of KnowledgeWare and members of the Committee shall be indemnified by KnowledgeWare against the reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any them may be a party by reason of action taken or failure to act under or in connection with the Plan, or any securities sold or issued hereunder, and against all amounts paid by them in settlement thereof (provided the settlement is approved by KnowledgeWare) or paid by them in satisfaction of a judgment in any action, suit or proceeding; provided that within 20 days after institution of any action, suit or proceeding, the director or the Committee member shall in writing offer KnowledgeWare the opportunity, at its own expense, to handle and defend the same. 16. EXPENSES OF PLAN. The expenses of administering the Plan shall be ---------------- borne by KnowledgeWare. 17. NO EFFECT ON EMPLOYMENT. Nothing herein contained, including the sale ----------------------- or award of any shares and the grant of any option, shall affect the right of the Company to terminate any participant's employment at any time for any reason. 18. EXEMPTION FROM PENSION COMPUTATION. By acceptance of shares sold or ---------------------------------- awarded or options granted under this Plan, each participant shall be deemed to agree that it is special incentive compensation and that it will not be taken into account as "wages" or "salary" in retirement or deferred profit sharing plans of the Company. In addition, each beneficiary of a deceased participant shall be deemed to agree that such sale, award or grant will not affect the amount of any life insurance coverage available to such beneficiary under any life insurance plan covering employees of the Company. 19. LEGEND. In order to enforce the restrictions imposed upon shares sold ------ or awarded hereunder the Administrator may cause a legend or legends to be placed on any certificates representing shares sold or awarded pursuant to this Plan, which legend or legends shall make appropriate reference to the restrictions imposed hereunder. 20. AMENDMENTS. This Plan may be amended at any time by the Board of ---------- Directors, provided that without the approval of the shareholders of KnowledgeWare, no such amendment shall become effective if it would (a) materially increase the benefits accruing to participants under the Plan, (b) materially increase the number of shares of Common Stock which may be sold under the Plan, or (c) materially modify the requirements as to eligibility for participation in the Plan. Any amendment to the Plan shall not, - 11 - without the written consent of the participant, affect such participant's rights under any Restricted Stock Agreement, Bonus Stock Agreement or Stock Option Agreement entered into prior to such amendment. 21. TERMINATION. This Plan shall terminate and no further shares shall be ----------- sold or issued hereunder after September 1, 1998, or such earlier date as may be determined by the Board of Directors. The termination of this Plan, however, shall not affect any restrictions previously imposed on shares issued pursuant to this Plan, or alter the rights of participants with respect to options granted or shares issued pursuant to this Plan. 22. RIGHTS OF PARTICIPANTS AS SHAREHOLDERS. Each participant acquiring -------------------------------------- shares of Restricted Stock, Bonus Stock or Option Stock hereunder shall, upon the issuance of certificates with respect to such shares, be the registered owner of such shares and, except as otherwise provided herein or in any related Restricted Stock Agreement, Bonus Stock Agreement or Stock Option Agreement, shall be entitled to full voting, dividend and distribution rights like any other holder of KnowledgeWare Common Stock as long as such participant remains the registered owner thereof. 23. GOVERNING LAW. This Plan shall be governed and construed in ------------- accordance with the laws of Georgia in all respects. 24. CONSTRUCTION. The masculine gender, where appearing in the Plan, ------------ shall be deemed to include the feminine and neuter genders, unless the context clearly indicates to the contrary; the singular includes the plural, and the plural shall include the singular. 25. VALIDITY AND LEGALITY. If any provision of this Plan for any reason --------------------- is declared invalid, illegal or unenforceable, in whole or in part, such declaration shall not affect the validity, legality or enforceability of any remaining provision or portion thereof, which remaining provisions or portion thereof shall remain in force and effect as if this Plan had been adopted with the invalid, illegal or unenforceable provision or portion thereof eliminated. 26. EFFECTIVE DATE. This Plan shall become effective upon its adoption by -------------- the Board of Directors and approval by the shareholders of KnowledgeWare. - 12 - -----END PRIVACY-ENHANCED MESSAGE-----