The Software AG Group runs share-option plans for Executive Board members, senior executives, and other employees which are not expensed in the consolidated financial statements.

First share-option plan: At September 30, 2004, Executive Board members held 145,846 subscription rights to shares in the Company, and senior executives 69,069 – unchanged over December 31, 2003. These rights cannot be exercised before September 30, 2004. Options have a term of seven years from the date on which they are granted, and may only be exercised, after an initial blocking period of 24 months as of the Software AG IPO, on four occasions during each fiscal year: after the publication of quarterly, biannual, and annual earnings figures.

The subscription price per share is the issue price less a 20 percent mark-down, but no less than €28.12. As Company stock was floated at €30, this minimum applied.

Holders of subscription rights must fulfill the following three conditions before they may exercise their conversion rights:

• Consolidated earnings from ordinary activities (according to HGB) must have increased by 30 percent between 1997 and 1999.
  
  This condition was fulfilled between 1997 and 1999.

• Consolidated earnings from ordinary activities must total at least 10 percent of revenues for the fiscal year prior to conversion.

• The share price must exceed the minimum conversion price.

Second share-option plan: At September 30, 2004, Executive Board members held 153,375 subscription rights to shares in the Company, and senior executives 568,275. These rights cannot be exercised before September 30, 2004. During the third quarter, 11,125 new options were issued to Executive Board members, and 133,525 to senior executives. No rights could be exercised during the period.

The subscription price is the average XETRA closing price over the previous five trading days on the Frankfurt Stock Exchange before the date of conversion.

Holders of subscription rights must fulfill the following two conditions before they may exercise their conversion rights:

• Consolidated revenues must have increased for the fiscal year prior to conversion by at least 10 percent in comparison to the previous year.

• Consolidated earnings from ordinary activities (according to HGB) must total at least 10 percent of revenues for the year prior to conversion.

The terms, blocking period, and conversion dates correspond to those of the first share-option plan.