OPTIO SOFTWARE INC, DEF 14A, 2000-05-26

OPTIO SOFTWARE INC
DEF 14A, 2000-05-26
COMPUTERS & PERIPHERAL EQUIPMENT & SOFTWARE

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SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

Filed by the Registrant |X|
Filed by a Party other than the Registrant | |

OPTIO SOFTWARE, INC.
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(Name of Registrant as specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

|X| No fee required.

| | Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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| | Fee paid previously with preliminary materials.

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| | Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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[LOGO]
OPTIO SOFTWARE, INC.
3015 Windward Plaza
Windward Fairways II
Alpharetta, Georgia 30005

May 26, 2000

Dear Shareholder:

On behalf of the Board of Directors and management of Optio Software,
Inc., we cordially invite you to attend the Annual Meeting of Shareholders to be
held on Friday, June 23, 2000, at 10:00 a.m., local time, at the Atlanta
Marriott Alpharetta, 5750 Windward Parkway, Alpharetta, Georgia 30005.

At the Annual Meeting, the shareholders will be asked to:

1. elect two (2) directors for a three-year term;

2. approve the Optio Software, Inc. Directors' Stock Option Plan;

3. ratify the appointment of Ernst & Young LLP as Optio Software,
Inc.'s independent public accountants for the year ending
January 31, 2001; and

4. transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.

These matters are described in the accompanying Notice of Annual
Meeting and Proxy Statement.

We have included a copy of Optio Software, Inc.'s Annual Report to
Shareholders with the Proxy Statement. We encourage you to read the Annual
Report. It includes the audited financial statements for the year ended January
31, 2000 as well as information about the Company's operations, markets,
products and services.

It is important that your stock be represented at the meeting
regardless of the number of shares you hold. You are encouraged to specify your
voting preferences by so marking the enclosed proxy card. Please then sign and
date the proxy card and return it in the enclosed envelope whether or not you
plan to attend the meeting. If you do attend and wish to vote in person, you may
revoke your proxy at the meeting. If you plan to attend the meeting, please
check the proxy card in the space provided. This will assist us with meeting
preparations.

Your vote is very important and we appreciate your cooperation in
considering and acting on the matters presented.

Sincerely,

/s/ C. WAYNE CAPE
-------------------------------------
C. Wayne Cape
CHAIRMAN OF THE BOARD OF DIRECTORS,
CHIEF EXECUTIVE OFFICER AND PRESIDENT

<PAGE>

OPTIO SOFTWARE, INC.
3015 Windward Plaza
Windward Fairways II
Alpharetta, Georgia 30005
(770) 576-3500

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 23, 2000

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Optio
Software, Inc., 3015 Windward Plaza, Windward Fairways II, Alpharetta, Georgia
30005 (the "Company") will be held on Friday, June 23, 2000, at 10:00 a.m.,
local time, at the Atlanta Marriott Alpharetta, 5750 Windward Parkway,
Alpharetta, Georgia 30005 (the "Annual Meeting"), to consider and act upon:

1. the election of two (2) directors to the Company's Board of
Directors;

2. proposal to approve the Optio Software, Inc. Directors' Stock
Option Plan;

3. proposal to ratify the selection of Ernst & Young, LLP as
independent public accountants for the Company's current fiscal
year; and

4. such other business as may properly come before the Annual Meeting
or any adjournment thereof.

The Board of Directors has fixed the close of business on May 3, 2000,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the meeting.

By Order of the Board of Directors,

/s/ C. WAYNE CAPE
-------------------------------------
C. Wayne Cape
CHAIRMAN OF THE BOARD OF DIRECTORS,
CHIEF EXECUTIVE OFFICER AND PRESIDENT

May 26, 2000
Atlanta, Georgia

IMPORTANT

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING, PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE
ENVELOPE WHICH HAS BEEN PROVIDED. NO POSTAGE IS REQUIRED FOR MAILING IN THE
UNITED STATES. IN THE EVENT YOU ARE ABLE TO ATTEND THE MEETING, YOU MAY REVOKE
YOUR PROXY AND VOTE YOUR SHARES IN PERSON.

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OPTIO SOFTWARE, INC.
3015 Windward Plaza
Windward Fairways II
Alpharetta, Georgia 30005
(770) 576-3500

PROXY STATEMENT
FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD
JUNE 23, 2000

INFORMATION CONCERNING SOLICITATION AND VOTING

SHAREHOLDERS MEETING

This Proxy Statement and the enclosed proxy ("Proxy") are furnished on
behalf of the Board of Directors of Optio Software, Inc., a Georgia corporation
(the "Company"), for use at the Annual Meeting of Shareholders to be held on
Friday, June 23, 2000 at 10:00 o'clock a.m., local time (the "Annual Meeting"),
or at any adjournment or postponement thereof, for the purposes set forth herein
and in the accompanying Notice of Annual Meeting. The Annual Meeting will be
held at the Atlanta Marriott Alpharetta, 5750 Windward Parkway, Alpharetta,
Georgia 30005. The Company intends to mail this Proxy Statement and the
accompanying Proxy card on or about May 26, 2000 to all shareholders entitled to
vote at the Annual Meeting.

SHAREHOLDERS ENTITLED TO VOTE

Only holders of record of common stock of the Company, no par value per
share (the "Common Stock"), at the close of business on May 3, 2000 will be
entitled to notice of and to vote at the Annual Meeting. At the close of
business on May 3, 2000, the Company had outstanding and entitled to vote
17,258,640 shares of Common Stock. Each holder of record of Common Stock on such
date will be entitled to one vote for each share held on all matters to be voted
upon at the Annual Meeting. Any shareholder who signs and returns a Proxy has
the power to revoke it at any time before it is exercised by providing written
notice of revocation to the Secretary of the Company or by filing with the
Secretary of the Company a Proxy bearing a later date. The holders of a majority
of the total shares of Common Stock outstanding on the record date, whether
present at the Annual Meeting in person or represented by Proxy, will constitute
a quorum for the transaction of business at the Annual Meeting. The shares held
by each shareholder who signs and returns the enclosed form of Proxy will be
counted for the purposes of determining the presence of a quorum at the meeting,
whether or not the shareholder abstains on all or any matter to be acted on at
the meeting. Abstentions and broker non-votes both will be counted toward
fulfillment of quorum requirements. A broker non-vote occurs when a nominee
holding shares for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary voting power with respect to
that proposal and has not received instructions from the beneficial owner.

COUNTING OF VOTES

The purpose of the Annual Meeting is to consider and act upon the
matters which are listed in the accompanying Notice of Annual Meeting and set
forth in this Proxy Statement. The enclosed form of Proxy provides a means for a
shareholder to vote for all of the matters listed in the accompanying Notice of
Annual Meeting and described in the Proxy Statement. The enclosed form of Proxy
also provides a means for a shareholder to vote for all of the nominees for
Director listed thereon or to withhold authority to vote for one or more of such
nominees. The Company's Bylaws provide that Directors are elected by a plurality
of the votes cast. Plurality means that more votes must be cast in favor of the
election of a Director than those cast against election of such

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Director. Accordingly, the withholding of authority by a shareholder (including
broker non-votes) will not be counted in computing a plurality and thus will
have no effect on the results of the election of such nominees.

The accompanying form of Proxy also provides a means for a shareholder
to vote for, against or abstain from voting on each of the other matters to be
acted upon at the Annual Meeting. Each Proxy will be voted in accordance with
the shareholder's directions. The affirmative vote of a majority of the shares
of Common Stock present in person or represented by a Proxy and entitled to vote
on Proposals Two and Three set forth in the accompanying Notice of Annual
Meeting is required for the approval of such proposal. Approval of any other
matters as may properly come before the meeting also will require the
affirmative vote of a majority of the shares of Common Stock present in person
or represented by a Proxy and entitled to vote at the meeting. Abstentions with
respect to Proposals Two and Three will have the same effect as a vote against
these proposals. With respect to broker non-votes, the shares will not be
considered present at the meeting for the proposal to which authority was
withheld. Consequently, broker non-votes will not be counted with regard to the
proposal, but they will have the effect of reducing the number of affirmative
votes required to approve the proposal, because they reduce the number of shares
present or represented from which a majority is calculated.

PROXIES

When the enclosed Proxy is properly signed and returned, the shares
which it represents will be voted at the Annual Meeting in accordance with the
instructions noted thereon. In the absence of such instructions, the shares
represented by a signed Proxy will be voted in favor of the nominees for
election to the Board of Directors, and in favor of the approval of Proposals
Two and Three.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the amount and percent of shares of
Common Stock which, as of May 3, 2000, are deemed under the rules of the
Securities and Exchange Commission (the "Commission") to be "beneficially owned"
by each member of the Board of Directors of the Company, by each nominee to
become a member of the Board of Directors, by each Executive Officer of the
Company, by all Directors, Nominees and Executive Officers of the Company as a
group, and by any person or "group" (as that term is used in the Securities Act
of 1934, as amended) known to the Company as of that date to be a "beneficial
owner" of more than 5% of the outstanding shares of Common Stock of the Company.

NUMBER OF PERCENT
SHARES OF
BENEFICIALLY CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED OWNED(2)
- ------------------------------------- ----- --------
<S> <C> <C>
C. Wayne Cape(3).................................................... 9,510,650 48.1%
G. Robert Beck(4)................................................... 1,010,000 5.5%
F. Barron Hughes(5)................................................. 700,000 3.9%
Charles Carey(6).................................................... 2,318,770 13.4%
David Dunn-Rankin(7)................................................ 510,000 2.9%
James J. Felcyn(8).................................................. 11,000 *
Daryl G. Hatton(9).................................................. 491,600 2.8%
John L. Kopcke(10).................................................. 75,000 *
Steven E. Kaye(11).................................................. 62,500 *
Mitchel J. Laskey(12)............................................... 20,000 *
All directors and executive officers as a Group (9 persons)(13) .... 12,390,750 55.2%

</TABLE>

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* Less than 1% of the outstanding Common Stock.
(1) The business address of Messrs. Cape, Beck, Hughes, Hatton, Kopcke, and
Kaye is c/o Optio Software, Inc., 3015 Windward Plaza, Windward Fairways
II, Alpharetta, Georgia 30005. Mr. Carey's business address is c/o
Enterprise Resolutions, 4250 River Green Parkway, Duluth, Georgia 30096.
Mr. Laskey's business address is 615 Crescent Executive Court, Fifth Floor,
Lake Mary, Florida 32746. Mr. Dunn-Rankin's business address is 1770 The
Exchange, Suite 240, Atlanta, Georgia 30339. Mr. Felcyn's business address
is c/o Citrix Systems, Inc., 6400 N.W. 6th Way, Fort Lauderdale, Florida
33309.
(2) For purposes of computing the percentage of outstanding shares of Common
Stock held by each person or group of persons named above, any security
that such person or persons have or have the right to acquire within 60
days following May 3, 2000, is deemed to be outstanding but is not deemed
to be outstanding for the purpose of computing the percentage ownership of
any other person.
(3) This number includes 2,500,000 shares subject to options exercisable within
60 days held by Mr. Cape and 69,130 shares held by Mr. Cape's wife, with
respect to which Mr. Cape disclaims beneficial ownership.
(4) This number includes 1,000,000 shares subject to options exercisable within
60 days held by Mr. Beck and 10,000 shares held by Mr. Beck's wife, with
respect to which Mr. Beck disclaims beneficial ownership.
(5) This number includes 700,000 shares subject to options exercisable within
60 days held by Mr. Hughes.
(6) This number includes 150,000 shares held by Mr. Carey's immediate family,
with respect to which Mr. Carey disclaims beneficial ownership.
(7) This number includes 510,000 shares subject to options exercisable within
60 days held by Mr. Dunn-Rankin.
(8) This number includes 10,000 shares subject to options exercisable within 60
days held by Mr. Felcyn.
(9) This number includes 337,500 shares subject to options exercisable within
60 days and 3,100 shares held by Mr. Hatton's immediate family, with
respect to which Mr. Hatton disclaims beneficial ownership..
(10) This number includes 75,000 shares subject to options exercisable within 60
days held by Mr. Kopcke.
(11) This number includes 62,500 shares subject to options exercisable within 60
days held by Mr. Kaye.
(12) This number includes 10,000 shares subject to options exercisable within 60
days held by Mr. Laskey.
(13) Includes 5,205,000 shares subject to options exercisable within 60 days.

PROPOSAL 1

ELECTION OF DIRECTORS

INTRODUCTION

At the Annual Meeting, two directors are to be elected for the term
described below. The Board of Directors is divided into three classes, each of
whose members serve for staggered three-year terms. The Board is currently
comprised of Messrs. Cape, Dunn-Rankin, Felcyn and Laskey. At each annual
meeting of shareholders, a

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class of directors will be elected for a three-year term to succeed the
directors of the same class whose terms are then expiring. The terms of the
initial Class II director and Class III director will expire upon the election
and qualification of successor directors at the 2001 and 2002 annual meeting of
shareholders, respectively. The term of the new Class I directors will expire
upon the election and qualification of successor directors at the 2003 annual
meeting of shareholders.

Shares represented by executed proxies will be voted, if authority to
do so is not withheld, for the election of the nominees named below. In the
event that a nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as the Board of Directors may select. The persons nominated
for election have agreed to serve if elected, and management has no reason to
believe that the nominees will be unable to serve.

The Board of Directors recommends a vote FOR each named nominee.

NOMINEES, INCUMBENT DIRECTORS AND EXECUTIVE OFFICERS

The following sets forth certain information regarding the nominees for
director and the two incumbent directors whose terms will continue following the
Annual Meeting.

NOMINEES TO SERVE AS CLASS I DIRECTORS (TERM EXPIRES IN 2003)

C. WAYNE CAPE, 45, the founder of the Company, has served as Chief
Executive Officer and President of the Company since its inception in 1981. Mr.
Cape became Chairman of the Board of Directors in September 1999. Prior to
launching the Company, Mr. Cape was an employee at Digital Communication
Associates from 1974 to 1981 where he served in a variety of technical, sales
and regional sales management positions.

JAMES J. FELCYN, JR., 58, has served as a Director of the Company since
December 1999 and has served on the Compensation and Audit Committees since
February 2000. Mr. Felcyn was Vice President, Finance and Administration, Chief
Financial Officer and Treasurer of Citrix Systems, Inc., a leading provider of
thin client/server system software, from July 1994 to December 1999. Mr. Felcyn
also serves as a director of seven other companies, including Smith Gardner &
Associates, Inc., a provider of application solutions for e-commerce and mail
order transactions, and Equinox Systems, Inc., a provider of connectivity
solutions for remote access and multi-user applications, ChildU, Inc.,
LifeFiles.Com, Inc., SilverBack Technologies, Inc., MoreDirect, Inc. and
Emergin, Inc.

INCUMBENT CLASS II DIRECTOR (TERM EXPIRES IN 2001)

DAVID DUNN-RANKIN, 41, has served as a Director and a member of the
Compensation and Audit Committees of the Company since October 1999. Mr.
Dunn-Rankin currently serves as the President of ecIndX. Prior to accepting this
position, he served as Chief Executive Officer for The UniLink Group, LLC from
October 1997 until 2000. From June 1995 to September 1997, he served as a
partner at Bridges & Dunn-Rankin, a certified public accounting and consulting
firm. Mr. Dunn-Rankin also serves on the board of directors for Sun Coast Media
Group, Folio Z, Classic Real Estate Systems and ecIndX.

INCUMBENT CLASS III DIRECTOR (TERM EXPIRES IN 2002)

MITCHEL J. LASKEY, 50, has served as a Director and a member of the
Compensation and Audit Committees of the Company since October 1999. He has
served as President and Chief Executive Officer of Dynamic Healthcare
Technologies, Inc. since May 1996. From August 1994 to May 1996, Mr. Laskey
served as President and Chief Operating Officer of Dynamic Healthcare
Technologies, Inc. From 1992 to 1994, Mr. Laskey served as Chairman and Chief
Executive Officer of Dynamic Technical Resources, Inc., a healthcare information
services and consulting firm. Mr. Laskey also serves as a director of Dynamic
Healthcare Technologies, Inc. and CNL Bankshares, Inc.

BOARD OF DIRECTORS MEETINGS AND COMMITTEES

During the fiscal year ended January 31, 2000, the Board of Directors
held no formal meetings, but took action by unanimous written consent ten times.
All of the incumbent directors attended at least 75% of the aggregate total
number of meetings of the Board of Directors and meetings of committees of the
Board of Directors on which they served. The Board of Directors has established
a Compensation Committee and an Audit Committee

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to which it has assigned certain responsibilities in connection with the
governance and management of the Company. The Company has no standing nominating
or other committee performing similar functions. The Board of Directors as a
whole acts as a nominating committee to select nominees for election as
directors of the Company. The Board of Directors will consider nominees
recommended by shareholders if submitted to the Board in accordance with the
procedures specified in the Company's Bylaws. The Bylaws provide that a
shareholder seeking to nominate a candidate for election as a director at a
meeting of the shareholders must provide notice of such nomination not less than
60 days prior to the meeting, and such notice must provide the Company certain
information regarding the nominee.

COMPENSATION COMMITTEE. The Compensation Committee is comprised of
Messrs. Dunn-Rankin, Felcyn and Laskey. The Compensation Committee, consisting
of a majority of independent directors, reviews and evaluates the compensation
and benefits of all the officers, reviews general policy matters relating to
compensation and benefits of employees of the Company and makes recommendations
concerning these matters to the Board of Directors. The Compensation Committee
also administers the Optio Software, Inc. Directors' Stock Option Plan. The
Compensation Committee was first organized during fiscal 2000, but it has held
no formal meetings or taken any action by written consent.

AUDIT COMMITTEE. The Audit Committee is comprised of Messrs.
Dunn-Rankin, Felcyn and Laskey. The Audit Committee reviews the scope and timing
of the Company's audit services and any other services the independent auditors
are asked to perform, the auditor's report on the financial statements following
completion of their audit and their policies and procedures with respect to
internal accounting and financial control. In addition, the Audit Committee
makes annual recommendations to the Board of Directors for the appointment of
independent auditors for the following year. The Audit Committee was first
organized during fiscal 2000, but it has held no formal meetings or taken any
action by written consent.

DIRECTORS' COMPENSATION

The Company reimburses all directors for their travel and other
expenses incurred in connection with attending board or committee meetings. In
addition, the non-employee members of the board are entitled to receive options
pursuant to the Optio Software, Inc. Directors' Stock Option Plan, which was
adopted by the board in October 1999 (the "Directors' Plan"). Under the terms of
the Directors' Plan, upon initially becoming an eligible director, a director is
entitled to receive an option to purchase 10,000 shares of the Common Stock. At
the end of each completed year of service as an eligible director following
adoption of the Directors' Plan, a director shall be granted an option to
purchase 5,000 shares of Common Stock. All options granted under the Directors'
Plan are fully vested as of the date of grant and have an exercise price equal
to the fair market value of the underlying shares on the date of grant. Pursuant
to the plan, 300,000 shares of Common Stock are reserved for issuance.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE.

The following table sets forth, for the year ended January 31, 2000,
the total compensation paid to or accrued by the Company's Chief Executive
Officer and the four other executive officers with the next highest total annual
salary and bonus which exceeded $100,000 (collectively, the "Named Executive
Officers").

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SUMMARY COMPENSATION TABLE

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------- ----------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) ($) (1)
--------------------------- ---- ------ ----- ---------------- --------------
<S> <C> <C> <C> <C> <C>
C. Wayne Cape 2000 $210,000 $ -- -- $150,009
Chairman, Chief Executive Officer and 1999 210,000 36,750 -- 64,154
President 1998 210,000 31,500 2,000,000 --

G. Robert Beck 2000 $175,000 $30,625 -- $150,009
Senior Vice-President, Sales 1999 156,250 -- -- 104,677
1998 130,167 15,625 500,000 95,330

F. Barron Hughes 2000 $128,750 $19,250 -- --
Chief Financial Officer, Secretary and 1999 105,312 750 -- --
Treasurer 1998 97,500 14,625 400,000 --

John L. Kopcke(2) 2000 $143,692 -- 300,000 --
Senior Vice-President, Product Development 1999 -- -- -- --
and Client Services 1998 -- -- -- --

Daryl G. Hatton 2000 $100,000 $17,500 -- --
Chief Technology Officer 1999 91,875 -- -- --
1998 82,292 3,600 500,000 --

</TABLE>

- ----------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted because such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of the total annual
salary and bonus for the Named Executive Officer for such year.
(2) Mr. Kopcke joined the Company in March 1999.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth all individual grants of stock options
during the fiscal year ended January 31, 2000, to each of the Named Executive
Officers:

INDIVIDUAL GRANTS
-----------------------------
NUMBER OF PERCENT OF POTENTIAL REALIZABLE
SECURITIES TOTAL OPTIONS VALUE AT ASSUMED
UNDERLYING GRANTED TO EXERCISE OR ANNUAL RATES OF STOCK
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRICE APPRECIATION
NAME GRANTED FISCAL YEAR PER SHARE(1) DATE FOR OPTION TERM (2)
---- ---------- ------------- ------------ ---------- ---------------------
5% 10%
---------- ---------
<S> <C> <C> <C> <C> <C> <C>
John L. Kopcke(3) 300,000 21.9% $1.50 3/8/2009 $283,003 $717,184

</TABLE>

- ----------
(1) The exercise price of the options granted was equal to fair market value
of the underlying stock on the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on the fair market value per share on the date of grant and
assumed rates of stock price appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. These assumptions are mandated by the rules of the
Securities and Exchange Commission and are not intended to forecast future
appreciation of our stock price. The potential realizable value
computation is net of the applicable exercise price, but does not take
into account federal or state income tax consequences and other expenses
of option exercises or sales of appreciated stock. Actual gains, if any,
are dependent upon the timing of such exercise and the future performance
of our common stock. There can be no assurance that the rates of
appreciation in this table can be achieved. This table does not take into
account any appreciation in the price of our common stock to date.
(3) Grants become exercisable in equal installments beginning on the first
anniversary of the date of grant continuing for four years thereafter
until fully vested.

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<PAGE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES

The following table sets forth information concerning unexercised
options, including the aggregate dollar value of in-the-money options, held by
the Named Executive Officers as of January 31, 2000. No options were exercised
by the Named Executive Officers during the fiscal year ended January 31, 2000.

NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END(1)(2)
------------------------------- ---------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
C. Wayne Cape..................... 2,250,000 750,000 $36,235,625 $11,821,875
G. Robert Beck.................... 687,500 562,500 10,949,219 8,903,906
F. Barron Hughes.................. 600,000 300,000 9,757,500 4,728,750
John L. Kopcke.................... -- 300,000 -- 4,518,750
Daryl G. Hatton................... 212,500 375,000 3,363,351 5,910,938

</TABLE>

- ----------
(1) Amounts disclosed in this column do not reflect amounts actually received
by the Named Executive Officers but are calculated based on the difference
between the fair market value on the date of exercise of the options and
the exercise price of the options. The Named Executive Officers will
receive cash only if and when they sell the Common Stock issued upon
exercise of the options, and the amount of cash received by such
individuals is dependent on the price of the Common Stock at the time of
such sale.
(2) Based on the fair market value of the Common Stock as of January 31, 2000
of $16.5625 per share as reported on the Nasdaq National Market, less the
exercise price payable upon exercise of such options.

EMPLOYMENT AGREEMENTS

All of our principal employees, including executive officers, are
required to sign an agreement with us restricting the ability of the employee to
compete with us or to solicit our customers or employees during his or her
employment and for a period of one year thereafter. The agreement also provides
for our ownership of the work product of the employee, an assignment to us of
intellectual property, and a prohibition from the disclosure of our trade
secrets and confidential information.

BENEFIT PLANS

STOCK INCENTIVE PLAN. The Optio Software, Inc. Stock Incentive Plan
(the "Stock Incentive Plan") was adopted by the Board of Directors on January 1,
1997 and approved by the shareholders on December 23, 1997. The aggregate number
of shares of Common Stock reserved for issuance under the Stock Incentive Plan
was increased effective November 17, 1997 and is currently 12,500,000. The
purpose of the Stock Incentive Plan is to provide incentives for key employees,
officers, consultants and directors to promote the Company's success and to
enhance its ability to attract and retain the services of such persons. Options
granted under the Stock Incentive Plan may be either options intended to qualify
as "incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") or nonqualified stock options. The Stock Incentive
Plan also provides for the grant of stock appreciation rights and restricted
stock awards.

The Stock Incentive Plan is administered by the Board of Directors,
which has the authority to interpret the Stock Incentive Plan and take other
action as it deems equitable. The Board of Directors has absolute discretion
under the Stock Incentive Plan to determine to which employees and key persons
stock incentives shall be granted, when these grants shall be made, and the
number of shares of Common Stock subject to these grants.

The Board of Directors determines, at the time of the grant, when
options issued under the plan can be exercised and the exercise price for such
options. Options issued under the plan expire ten years after the date of grant,
unless the Board of Directors sets an earlier date.

Exercise prices for incentive stock options may not be less than the
fair market value per share of Common Stock on the date of grant, or 110% of the
fair market value in the case of incentive stock options granted to any person
possessing 10% or more of the total voting power of all of our capital stock.
Exercise prices for non-qualified stock options may be less than the fair market
value per share, but must be at least $0.01 per share.

In the event of change of control, the Board of Directors has absolute
discretion to accelerate the vesting of all options that have not vested as of
the date of change in control or to arrange for the successor entity to assume
all

-7-
<PAGE>

of the rights and obligations under the plan. If an option holder's employment
is terminated for cause following the exercise of his options, the Company has
the right to repurchase the shares at the exercise price for ninety days
following such termination.

As of May 3, 2000, options to purchase 6,164,908 shares of Common Stock
were outstanding under the Stock Incentive Plan at a weighted average exercise
price of $2.79 per share. No shares of Common Stock have been issued upon
exercise of options granted under the Stock Incentive Plan.

DIRECTORS' STOCK OPTION PLAN. The Board of Directors adopted the
Directors' Plan on October 15, 1999, and approved an amendment to the plan
effective as of May 25, 2000. Pursuant to the plan, 300,000 shares of Common
Stock are reserved for issuance. Only members of the Board of Directors who are
not employees of the Company are eligible to receive option grants under the
Directors' Plan. The Directors' Plan only provides for the grant of options
which do not qualify under Section 422 of the Code.

The Directors' Plan is administered by the Board of Directors, which
has the authority to interpret the Directors' Plan and to take such other
actions in the administration and operation of the Directors' Plan as it deems
equitable. The Board of Directors may delegate its authority under the
Directors' Plan to a committee appointed by the board consisting of not less
than two directors.

Upon initially becoming an eligible director, a director is entitled to
receive an option to purchase 10,000 shares of the Common Stock. As of the end
of each completed year of service as an eligible director following adoption of
the Directors' Plan, a director shall be granted an option to purchase 5,000
shares of Common Stock. Each person who qualified as an eligible director as of
the effective date of the Directors' Plan received an option to purchase 10,000
shares of the Common Stock as of the effective date of the Directors' Plan.

All options granted under the Directors' Plan are fully vested as of
the date of grant and have an exercise price equal to the fair market value of
the underlying shares. Options granted under the Directors' Plan may not have
terms exceeding ten years from the date of grant. Options granted under the
Directors' Plan are not transferable or assignable except by will or by the laws
of descent and distribution and are exercisable, during the optionee's lifetime,
only by the optionee.

As of May 3, 2000, options to purchase 30,000 shares of Common Stock
were outstanding under the Directors' Plan at an exercise price of $10.00 per
share, and no shares of Common Stock have been issued upon exercise of options
granted under the Directors' Plan.

NON-PLAN OPTIONS. In addition to options granted under the Stock
Incentive Plan and the Directors' Plan, as of May 3, 2000, options to purchase
an aggregate of 3,917,500 shares of Common Stock at a weighted average exercise
price of $0.32 were outstanding.

401(K) PROFIT SHARING PLAN. The Company maintains a 401(k) profit
sharing plan which is intended to be a tax-qualified contribution plan under
Section 401(k) of the Code. Pursuant to the 401(k) plan, participants may
contribute, subject to certain Code limitations, up to 15% of eligible
compensation, as defined, to the 401(k) plan. Employees are eligible for this
arrangement upon completion of first three calendar months of employment. The
Company will match contributions made by employees pursuant to the 401(k) plan
at a rate of 75% of the participant's contributions, up to 5% of the eligible
compensation being contributed, subject to certain Code limitations. The Company
may make an additional contribution to participants' 401(k) plan each year at
the discretion of the Board of Directors. The portion of a participant's account
attributable to his or her own contributions is 100% vested. The portion of the
account attributable to Company contributions vests over 6 years of service.
Distributions from the 401(k) plan may be made in the form of a lump-sum cash
payment or in installment payments.

CASH BONUS PLAN. The Company has established a discretionary cash bonus
plan for those employees whose compensation is not already supplemented by
commissions and quota bonuses. The Company's Chief Executive Officer determines
the total amount of the bonuses and the amount to be paid to each individual
eligible to participate under the plan based upon the operating income target
for the current fiscal year, with the exception of Senior Executive Management,
for which the Compensation Committee determines participation in the plan. For
fiscal 2000, a total of approximately $400,000 was paid to individuals eligible
to participate under the plan. The estimated total bonus amount to be paid for
fiscal 2001 is $700,000.

-8-
<PAGE>

LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Company's articles of incorporation provide that the liability of
the directors for monetary damages shall be eliminated to the fullest extent
permissible under Georgia law and that the Company may indemnify its officers,
employees and agents to the fullest extent permitted under Georgia law.

The Company's bylaws provide that it must indemnify its directors
against all liabilities to the fullest extent permitted under Georgia law and
that the Company must advance all reasonable expenses incurred in a proceeding
where the director was either a party or a witness because he or she was a
director.

The Company has entered into agreements that require it to indemnify
its directors and officers to the full extent permitted under Georgia law. In
addition, the Company has agreed to defend, hold harmless and indemnify its
directors and officers against any obligation to pay a judgment, penalty, fine,
expenses and settlement amounts in connection with any action, suit or
proceeding brought by reason of the fact that he or she is a director or
officer, as the case may be, of the Company or is serving, at the request of the
Company, as a director, officer, employee, agent or consultant of another
entity. No indemnification will be provided for any misappropriation of any
business opportunity, any act or omission involving intentional misconduct or a
knowing violation of law, any transaction from which an improper personal
benefit was received and other types of liability under Georgia law. Further,
the Company will pay expenses incurred by directors and officers in defending
any covered action, suit or proceeding in advance of the final disposition of
such action, suit or proceeding. The Company believes that these agreements, as
well as the provisions contained in its articles and bylaws described above, are
necessary to attract and retain qualified persons as directors and officers.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors of the Company pursuant to the provisions of
the charter documents, Georgia law or the agreements described above, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, this indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to the formation of the Compensation Committee in October 1999,
C. Wayne Cape, the founder, Chief Executive Officer and President, discharged
the duties customarily performed by a compensation committee. In setting his
compensation during fiscal year 2000, Mr. Cape considered the Company's
achievement of its revenue growth goals for the prior fiscal year.

The Company loaned $48,800 to C. Wayne Cape on a non-interest basis in
ten advances from October 15, 1986 to May 9, 1995. This loan is due and payable
upon demand and is unsecured. Mr. Cape has made no payments on this loan.

On December 31, 1988, the Company loaned $30,000 to C. Wayne Cape
pursuant to a promissory note. This note bears interest at 10% per annum and it
is unsecured. The principal and interest under the note were due and payable on
December 30, 1990; however, the Company has not requested payment. To date, Mr.
Cape has made no payments pursuant to the note and the outstanding balance of
principal plus interest as of January 31, 2000 was $63,250.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act 1934 requires the
Company's directors and executive officers and persons who own beneficially more
than 10% of the Company's Common Stock to file reports of ownership and changes
in ownership of such stock with the Securities and Exchange Commission. To the
Company's knowledge, based solely on review of copies of such reports furnished
to the Company and written representations that no other reports were required,
during the fiscal year ended January 31, 2000, all Section 16(a) filing
requirements applicable to the directors, executive officers and greater than
10% beneficial owners were complied with by such persons, except one late filing
by James J. Felcyn, Jr. of the Form 3 to report his beneficial ownership after
becoming a director of the Company.

-9-
<PAGE>

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

GENERAL

The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee consists of David Dunn-Rankin, James J. Felcyn, Jr. and Mitchel J.
Laskey. The Committee also administers the Directors' Plan.

The Company's executive compensation policy, as implemented by the
Committee, is designed to provide a competitive compensation program that will
enable the Company to attract, motivate, reward and retain executives who have
skills, experience and talents required to promote the short-term and long-term
financial performance and growth of the Company. The compensation policy is
designed to link compensation to the value and level of the performance of the
executive as well as to the performance of the Company. In so doing, the policy
strives to align the financial rewards to the Company's executive officers with
the financial interests of the Company's shareholders.

The Compensation Committee seeks to achieve these objectives by
implementing, as the principal components of compensation, a program of base
salary, incentive bonus compensation and equity-based incentives. The
compensation decisions of the Committee relative to the Company's executive
officers and key employees are described below as to each of the foregoing
components.

COMPENSATION OF EXECUTIVE OFFICERS GENERALLY

BASE SALARY. Base Salary levels for each of the Company's executive
officers, including the Chief Executive Officer, are generally set within a
range of base salaries that the Committee believes are paid to similar executive
officers at companies deemed comparable based on the similarity in revenue
level, industry segment and competitive employment market to Company. In
addition, the Committee generally takes into account the Company's past
financial performance and future expectations, as well as the performance of the
executives and changes in the executives' responsibilities. The base salaries of
the executive officers for fiscal 2000 were not linked to specific Company
performance criteria.

INCENTIVE CASH BONUSES. The Company's executive officers, as well as
other management employees, are eligible to receive cash bonus awards. The
Committee determines eligible participants, performance goals, measurement
criteria, performance ratings and amount and timing of payments. The judgment of
the Committee, and of the Chief Executive Officer in the case of other executive
officers, as to the impact of the individual on the financial performance of the
Company are also considered. All awards are paid in full, in cash, following the
year of performance. Bonus awards are granted to executive officers under the
plan at the sole discretion of the Compensation Committee.

EQUITY INCENTIVES. The Committee believes that long-term incentive
compensation in the form of stock options is the most direct way of making
executive compensation dependent upon increases in shareholder value. The Stock
Incentive Plan provides the means through which executive officers can build an
investment in Common Stock which will align such officers' economic interests
with the interests of the Company's shareholders. Under the Stock Incentive
Plan, the Company may award incentive stock options, non-qualified stock
options, restricted stock awards and stock appreciation rights. To date, the
Company has issued only stock options under the plan.

For the Company's fiscal year ended January 31, 2000, the Company
granted options to purchase 300,000 shares to John Kopcke. For the Company's
current fiscal year, the Committee intends to recommend to the Board of
Directors that options be granted to all employees based upon the Company's
achievement of the plan objectives and the Committee's assessment of the
individual's contribution to the Company's performance.

OTHER BENEFITS. Executive officers also participate, on a voluntary
basis, in the Company's regular employee benefit programs, including group
medical and dental coverage, group life insurance and group long-term disability
insurance. In addition, executive officers receive, along with and on the same
terms as other employees, certain benefits pursuant to the Company's 401(k)
plan, including Company matching contributions.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

The Committee annually reviews the performance and compensation of the
Chief Executive Officer based on the assessment of his past performance and its
expectation of his future contributions to the Company's

-10-
<PAGE>

performance. C. Wayne Cape has served as the Company's Chief Executive Officer
since inception. For the fiscal year ended January 31, 2000, Mr. Cape's
compensation plan included a base salary of $210,000. Mr. Cape received
additional compensation of $150,009 for the 2000 fiscal year for commissions
based on the Company's revenue performance. The Committee believes that Mr.
Cape's total fiscal year 2000 compensation was below the average total cash
compensation paid to chief executive officers by comparable companies. Mr.
Cape's base salary for the current fiscal year is $210,000. Mr. Cape did not
receive any options or other equity-based incentives during the 2000 fiscal
year. Mr. Cape will be entitled to receive options during the current fiscal
year, depending upon the Committee's assessment of his performance and the
Company's achievement of the specified objectives for performance criteria.

POLICY WITH RESPECT TO QUALIFYING COMPENSATION FOR DEDUCTIBILITY

Section 162(m) of the Internal Revenue Code of 1986, as amended, limits
the deduction allowable to the Company for compensation paid to the Chief
Executive Officer and each of the four other most highly compensated executive
officers to $1.0 million. Qualified performance-based compensation is excluded
from this limitation if certain requirements are met. The Company's policy is
generally to preserve the federal income tax deductibility of compensation paid,
to the extent feasible. The Committee believes that awards under the Company's
award of options made under stock option plans for employees will qualify as
performance-based compensation and thereby be excluded from the $1.0 million
limitation. Notwithstanding the Company's policy to preserve the federal income
tax deductibility of compensation payments, under certain circumstances, the
Committee, in its discretion, may authorize payment, such as salary, bonuses or
otherwise, that may cause an executive officer's income to exceed the deductible
limits.

Compensation Committee of the Board of Directors

David Dunn-Rankin
Mitchel J. Laskey
James J. Felcyn, Jr.

-11-
<PAGE>

STOCK PERFORMANCE GRAPH

The following line-graph provides a comparison of the cumulative total
shareholder return on the Company's Common Stock for the period from December
15, 1999, the date of the Company's initial public offering through January 31,
2000, against the cumulative shareholder return during such period achieved by
the Nasdaq Stock Market (U.S. Companies) Index and the Standard & Poor's
Computers (Software & Services) Index. The graph assumes that $100 was invested
on November 30, 1999 in each of the comparison indices, and December 15, 1999 in
our common stock. All amounts have been calculated as if all dividends were
reinvested.

[GRAPH]

11/30/99 12/31/99 01/31/00
- ------------------------------------------------------------------------- ------------ ------------- -------------
<S> <C> <C> <C>
Nasdaq Stock Market (U.S. Companies) Index 100.00 121.93 117.42
Standard & Poor's Computers (Software & Services) Index 100.00 126.68 104.46
Optio Software, Inc. 100.00 144.06 101.54
- ------------------------------------------------------------------------- ------------ ------------- -------------

</TABLE>

Neither the preceding Stock Performance Graph nor the Compensation
Committee Report shall be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended (collectively, the "Acts"), except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.

-12-
<PAGE>

CERTAIN TRANSACTIONS

RELATED PARTY TRANSACTIONS

In the past, the Company has loaned a total of $78,800 to C. Wayne
Cape. See "Compensation Committee Interlocks and Insider Participation."

The Company loaned $600,000 to David Dunn-Rankin, a director of the
Company, in six advances from August 6, 1998 to February 19, 1999. This loan
bears interest at 9% per annum. Mr. Dunn-Rankin is required to make annual
interest payments on October 13 of each year, and the principal is due and
payable in full on October 13, 2001. This loan is secured by Mr. Dunn-Rankin's
options to acquire 500,000 shares of Common Stock at an exercise price of $0.60
per share. This loan was originally convertible into equity of The Unilink
Group, LLC, a technology company controlled by Mr. Dunn-Rankin; however, the
Company did not elect to convert in the time frame agreed to with Mr.
Dunn-Rankin.

The outstanding balance of principal plus interest on other interest
bearing notes receivable from shareholders as of January 31, 2000 was $120,000.

On December 23, 1998, the Company repurchased 1,646,590 shares of
Common Stock that were previously owned by Gordon Terris, Bonnie Malstrom and
Clarence Rydberg. These shareholders exercised dissenters' rights in connection
with an amendment to our Articles of Incorporation. At the time of the
settlement, Mr. Terris, Ms. Malstrom and Mr. Rydberg held approximately 6.1%,
5.6% and 3.6%, respectively, of the outstanding capital stock. The Company
agreed to pay Mr. Terris $1,318,393, evidenced by a promissory note for the full
amount, which was secured by 603,360 shares of Common Stock. The Company agreed
to pay Ms. Malstrom $1,221,884, evidenced by cash payment of $60,000 and a
promissory note for $1,161,884, which was secured by 543,230 shares of Common
Stock. The Company agreed to pay Mr. Rydberg $802,500, evidenced by a promissory
note for the full amount, which was secured by 500,000 shares of Common Stock.
All of these promissory notes bore interest at 7% per annum and required equal
quarterly principal payments. All the Common Stock held as security for these
promissory notes was held in escrow and was to be released as payments were
made. The notes were paid in full from the proceeds of the Company's initial
public offering and all Common Stock held in escrow was released for
cancellation.

The Company has agreed to provide indemnification to its executive
officers and directors which may require the Company to indemnify officers and
directors against liabilities that may rise by reason of their status or service
as officers or directors, other than liabilities arising from willful misconduct
of a culpable nature, and to advance expenses incurred as a result of any
proceeding against them as to which they could be indemnified.

All future transactions, including loans, if any, between the Company
and its officers, directors and principal shareholders and their affiliates and
any transactions between the Company and any entity with which its officers,
directors or principal shareholders are affiliated will be subject to the
approval of a majority of the Board of Directors, including the majority of the
independent and disinterested outside directors of the Board of Directors and
must be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.

PROPOSAL 2

APPROVAL OF OPTIO SOFTWARE, INC. DIRECTORS' STOCK OPTION PLAN

Effective October 15, 1999, the Board of Directors adopted the Optio
Software, Inc. Directors' Stock Option Plan. The Board of Directors approved an
amendment to the plan effective as of May 25, 2000, to clarify the terms of the
plan pertaining to the grant of options thereunder. Pursuant to the plan,
300,000 shares of Common Stock are reserved for issuance. A copy of the plan, as
amended, is attached as EXHIBIT A to this Proxy Statement. Only members of the
Board of Directors who are not employees of the Company are eligible to receive
option

-13-
<PAGE>

grants under the Directors' Plan. The Directors' Plan only provides for the
grant of options which do not qualify under Section 422 of the Code. The closing
price of the Common Stock underlying the options on May 24, 2000 on Nasdaq was
$6.50 per share.

Upon initially becoming an eligible director, a director is entitled to
receive an option to purchase 10,000 shares of the Common Stock. At the end of
each completed year of service as an eligible director following adoption of the
Directors' Plan, a director shall be granted an option to purchase 5,000 shares
of Common Stock. Each person who qualified as an eligible director as of the
effective date of the Directors' Plan received an option to purchase 10,000
shares of the Common Stock as of the effective date of the Directors' Plan. All
options granted under the Directors' Plan are fully vested as of the date of
grant and have an exercise price equal to the fair market value of the
underlying shares. Options granted under the Directors' Plan may not have terms
exceeding ten years from the date of grant. Options granted under the Directors'
Plan are not transferable or assignable except by will or by the laws of descent
and distribution and are exercisable, during the optionee's lifetime, only by
the optionee.

The options granted under the Directors' Plan are non-qualified
options. A director does not recognize income for federal income tax purposes
upon the date of grant of the non-qualified option. However, the holder of a
non-qualified option must recognize ordinary income upon exercise in the amount
equal to the difference between the exercise price and the fair market value of
the underlying shares of Common Stock (the "Shares") on the date of exercise
(referred to as the "Spread"). Upon the sale of Shares acquired pursuant to the
exercise of non-qualified options, the director will recognize capital gain (or
loss) to the extent that the amount realized from the sale exceeds (or in the
case of a loss, is less than) the fair market value of the Shares on the date of
exercise. This gain will be long-term capital gain (or loss, as the case may be)
if the Shares have been held for more than one year after exercise. Under
current law, the maximum federal capital gain rate is 20% for gains from capital
assets held more than one year. The state income tax consequences of option
exercises depend on the individual laws of the state in question.

The following table sets forth information concerning options granted
to eligible directors under the Directors' Plan, including the aggregate dollar
value of the options as of January 31, 2000. The closing price of the Common
Stock underlying the options on January 31, 2000 (the last trading day of the
fiscal year) on Nasdaq was $16.5625 per share.

OPTIO SOFTWARE, INC. DIRECTORS' STOCK OPTION PLAN

------------------------ ------------------------
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF SHARES
------------------------ ------------------------
<S> <C> <C>
Non-Executive Director Group(1).................. $196,875 30,000

</TABLE>

- ----------
(1) Each of Messrs. Dunn-Rankin, Felcyn and Laskey have been granted options
to purchase 10,000 shares of Common Stock; and pursuant to the terms of
the plan, each will be granted additional options to purchase 5,000 shares
of Common Stock as of the date of the Annual Meeting.

The shareholders are being requested to approve the Optio Software,
Inc. Directors' Stock Option Plan as approved by the Board of Directors. The
Board of Directors believes that the ability to grant participation in the
Directors' Plan will be important to our future success.

The Board of Directors recommends a vote FOR ratification and approval
of the Optio Software, Inc. Directors' Stock Option Plan.

PROPOSAL 3

RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

In January 2000, the Board of Directors appointed the accounting firm
of Ernst & Young LLP to serve as its independent auditor. The appointment of
this firm was recommended to the Board of Directors by its Audit Committee. A
proposal to ratify that appointment will be presented at the Annual Meeting.
Representatives of

-14-
<PAGE>

Ernst & Young LLP are expected to be present at the meeting. They will have an
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions from shareholders.

The Board of Directors recommends that the shareholders vote FOR
ratification of selection of independent auditors.

SHAREHOLDER PROPOSALS

Rules of the Securities and Exchange Commission require that any
proposal by a shareholder of the Company for consideration at the 2001 Annual
Meeting of Shareholders must be received by the Company no later than January
15, 2001 if any such proposal is to be eligible for inclusion in the Company's
proxy materials for its 2001 Annual Meeting. Under such rules, the Company is
not required to include shareholder proposals in its proxy materials unless
certain other conditions specified in such rules are met.

In order for a shareholder to bring any business or nominations before
the 2001 Annual Meeting of Shareholders, certain conditions set forth in Section
2.13 of the Company's Bylaws must be complied with, including, but not limited
to, delivery of notice to the Company not less than 60 days prior to the meeting
as originally scheduled; provided, however, that in the event that less than 60
days notice or public disclosure of the date of the meeting is given or made to
the shareholders, notice by the shareholders to be timely must be received not
later than the close of business on the 10th day following the date on which
such notice of the date of meeting was mailed or such public disclosure was
made.

OTHER MATTERS

Management of the Company is not aware of any other matter to be
presented for action at the Annual Meeting other than those mentioned in the
Notice of Annual Meeting of Shareholders and referred to in this Proxy
Statement. However, should any other matter requiring a vote of the shareholders
arise, the representatives named on the accompanying Proxy will vote in
accordance with their best judgment as to the interests of the Company and the
shareholders.

BY ORDER OF THE BOARD OF DIRECTORS,

/s/ C. WAYNE CAPE
-------------------------------------
C. Wayne Cape
CHAIRMAN OF THE BOARD OF DIRECTORS,
CHIEF EXECUTIVE OFFICER AND PRESIDENT

-15-
<PAGE>

EXHIBIT A

OPTIO SOFTWARE, INC.
DIRECTORS' STOCK OPTION PLAN

SECTION 1.
PURPOSE

The purpose of this Plan is to promote the interests of the Company by
providing the opportunity to purchase Shares to Directors who are not Employee
in order to attract and retain such Directors by providing an incentive to work
to increase the value of Shares and a stake in the future of the Company which
corresponds to the stake of each of the Company's shareholders. The Plan
provides for the grant of Non-Qualified Stock Options to aid the Company in
obtaining these goals.

SECTION 2.
DEFINITIONS

Each term set forth in this Section shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular, and reference to one gender shall include the other gender.

2.1 BOARD means the Board of Directors of the Company.

2.2 CODE means the Internal Revenue Code of 1986, as amended.

2.3 COMMITTEE means the Compensation Committee of the Board.

2.4 COMMON STOCK means the common stock, no par value per share, of
the Company.

2.5 COMPANY means Optio Software, Inc., a Georgia corporation, and any
successor to such organization.

2.6 DIRECTOR means a member of the Board.

2.7 ELIGIBLE DIRECTOR means a Director who is not an Employee.

2.8 EMPLOYEE means an employee of the Company, a Subsidiary or a
Parent.

2.9 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.

2.10 EXERCISE PRICE means the price which shall be paid to purchase one
(1) Share upon the exercise of an Option granted under this Plan.

2.11 FAIR MARKET VALUE of each Share on any date means the price
determined below on the last business day immediately preceding the date of
valuation:

(a) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value per share shall be the
closing sale price for the Common Stock (or the mean of the closing bid and
asked prices, if no sales were reported), as quoted on such exchange or system
on the date of such determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable; or

<PAGE>

(b) If the Common Stock is not listed on any established stock
exchange or a national market system, its Fair Market Value per share shall be
the average of the closing dealer "bid" and "ask" prices of a share of the
Common Stock as reflected on the NASDAQ intermeddler quotation system of the
National Association of Securities Dealers, Inc. on the date of such
determination; or

(c) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.

2.12 INSIDER means an individual who is, on the relevant date, an
officer, Director or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.

2.13 NQSO means an option granted under this Plan to purchase Shares.

2.14 OPTION means a NQSO.

2.15 PARENT means any corporation which is a parent of the Company
(within the meaning of Code Section424).

2.16 PARTICIPANT means an individual who receives a NQSO hereunder.

2.17 PLAN means this Optio Software, Inc. Directors' Stock Option Plan,
as amended from time to time.

2.18 SHARE means a share of the Common Stock of the Company.

2.19 STOCK OPTION AGREEMENT means an agreement between the Company and
a Participant evidencing an award of a NQSO.

2.20 SUBSIDIARY means any corporation which is a subsidiary of the
Company (within the meaning of Code Section424(f)).

SECTION 3.
SHARES SUBJECT TO STOCK OPTIONS

The total number of Shares that may be issued pursuant to Stock Options
under this Plan shall not exceed 300,000, as adjusted pursuant to Section 10.
Such Shares shall be reserved, to the extent that the Company deems appropriate,
from authorized but unissued Shares, and from Shares which have been reacquired
by the Company. Furthermore, any Shares subject to a Stock Option which remain
after the cancellation, expiration or exchange of such Stock Option thereafter
shall again become available for use under this Plan.

SECTION 4.
EFFECTIVE DATE

The effective date of this Plan, as amended and restated herein, shall
be the date it is adopted by the Board.

Optio Software, Inc.
Directors' Stock Option Plan
Page 2 of 7
<PAGE>

SECTION 5.
ADMINISTRATION

5.1 GENERAL ADMINISTRATION. This Plan shall be administered by the
Board. The Board, acting in its absolute discretion, shall exercise such powers
and take such action as expressly called for under this Plan. The Board shall
have the power to interpret this Plan and, subject to Section 12 to take such
other action in the administration and operation of the Plan as it deems
equitable under the circumstances. The Board's actions shall be binding on the
Company, on each affected Director, and on each other person directly or
indirectly affected by such actions.

5.2 DELEGATION OF AUTHORITY. The Board may delegate its authority under
the Plan, in whole or in part, to a Committee appointed by the Board consisting
of not less than two (2) Directors. The members of the Committee shall serve at
the discretion of the Board. The Committee (if appointed) shall act according to
the policies and procedures set forth in the Plan and to those policies and
procedures established by the Board, and the Committee shall have such powers
and responsibilities as are set forth by the Board. Reference to the Board in
this Plan shall specifically include reference to the Committee where the Board
has delegated it authority to the Committee, and any action by the Committee
pursuant to a delegation of authority by the Board shall be deemed an action by
the Board under the Plan. Notwithstanding the above, the Board may assume the
powers and responsibilities granted to the Committee at any time, in whole or in
part.

5.3 DECISIONS BINDING. All determinations and decisions made by the
Board (or its delegate) pursuant to the provisions of this Plan and all related
orders and resolutions of the Board shall be final, conclusive and binding on
all persons, including the Company, its stockholders, Directors, Participants,
and their estates and beneficiaries.

SECTION 6.
ELIGIBILITY AND GRANTS OF OPTIONS

6.1 INDIVIDUALS ELIGIBLE FOR GRANTS OF OPTIONS. Only Eligible Directors
shall be eligible for the grant of Stock Options under this Plan. Eligible
Directors shall receive Options hereunder in accordance with the provisions of
Section 6.2 below.

6.2 GRANT OF OPTIONS. Options shall be granted to Eligible Directors in
accordance with the following formulas:

(a) OPTIONS UPON INITIALLY BECOMING A DIRECTOR. Upon initially
becoming an Eligible Director after the effective date, an individual shall be
granted an Option to purchase 10,000 Shares, with such Option subject to the
provisions of Section 7 below, and with such grant occurring on the date on
which the individual becomes an Eligible Director. Options granted under this
subsection (a) shall not be granted to a Director who has previously served as a
Director and who is again becoming a Director, but shall only be granted upon an
individual's initially becoming an eligible Director.

(b) OPTIONS AFTER EACH YEAR OF SERVICE. As of the end of each
completed year of service as an Eligible Director after the effective date, an
individual shall be granted an Option to purchase 5,000 Shares, with such Option
subject to the provisions of Section 7 below.

(c) TRANSITIONAL RULE. Except as provided in this subsection
(c), no individual who is serving as an Eligible Director as of the effective
date of this Plan shall be entitled to any Options under subsections (a) or (b)
above of this Plan as a result of service prior to the effective date of the
Plan. Each Eligible Director as of the effective date shall be granted Options
under the terms and provisions of subsection (a) above as of the effective date
as if such Director had initially become an Eligible Director on the effective

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date. Each Eligible Director serving on the effective date (or elected within
ninety (90) days following the effective date) shall be granted Options under
the terms and provisions of subsection (b) at the first annual meeting of the
shareholders held after the effective date, as if such Director had completed a
single year of service as of the date of such annual meeting.

(d) YEARS OF SERVICE. A year of service as a director shall be
measured from the date of an annual meeting of shareholders of the Company to
the date of the next succeeding annual meeting. The Committee shall have
complete power to interpret the provisions of this Section 6.2, including the
power to determine whether an individual has completed a year of service.

SECTION 7
TERMS OF STOCK OPTIONS

7.1 TERMS AND CONDITIONS OF ALL STOCK OPTIONS

(a) Each Stock Option shall be evidenced by a Stock Option
Agreement executed by the Company and the Participant, which shall be in such
form and contain such terms and conditions as the Committee in its discretion
may, subject to the provisions of the Plan, from time to time determine.

(b) Options issued under this Plan shall be immediately vested
upon grant.

7.2 TERMS AND CONDITIONS OF OPTIONS.

(a) EXERCISE PRICE. Subject to adjustment in accordance with
Section 10 and the other provisions of this Section, the Exercise Price shall be
set forth in the applicable Stock Option Agreement, and shall be equal to the
Fair Market Value of a Share determined as of the date of grant of the Option.

(b) OPTION TERM. Each Option granted under this Plan shall be
exercisable in whole or in part as of the date of grant, but no Stock Option
Agreement shall (i) make an Option exercisable before the date such Option is
granted; or (ii) make an Option exercisable after the earlier of (A) the date
such Option is exercised in full, or (B) the date which is the tenth (10th)
anniversary of the date such Option is granted.

(c) PAYMENT. Options shall be exercised by the delivery of a
written notice of exercise to the Company, setting forth the number of Shares
with respect to which the Option is to be exercised accompanied by full payment
for the Shares. Payment for all shares of Stock purchased pursuant to exercise
of an Option shall be made in cash or, if the Stock Option Agreement provides,
by delivery to the Company of a number of Shares which have been owned by the
holder for at least six (6) months prior to the date of exercise having an
aggregate Fair Market Value equal to the amount to be tendered, or a combination
thereof. In addition, if the Stock Option Agreement so provides, the Option may
be exercised through a brokerage transaction following registration of the
Company's equity securities under Section 12 of the Securities Exchange Act of
1934 as permitted under the provisions of Regulation T applicable to cashless
exercises promulgated by the Federal Reserve Board. However, notwithstanding the
foregoing, with respect to any Option recipient who is an Insider, a tender of
shares or a cashless exercise must (1) have met the requirements of an exemption
under Rule 16b-3 promulgated under the Exchange Act, or (2) be a subsequent
transaction the terms of which were provided for in a transaction initially
meeting the requirements of an exemption under Rule 16b-3 promulgated under the
Exchange Act. Payment shall be made at the time that the Option or any part
thereof is exercised, and no Shares shall be issued or delivered upon exercise
of an Option until full payment has been made by the Participant. The holder of
an Option, as such, shall have none of the rights of a stockholder.
Notwithstanding the preceding, and in the sole discretion of the Committee, an
Option may be exercised as to a portion or all (as determined by the Committee)
of the number of Shares specified in the Stock

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Option Agreement by delivery to the Company of a promissory note, such
promissory note to be executed by the Participant and which shall include, with
such other terms and conditions as the Committee shall determine, provisions in
a form approved by the Committee under which: (i) the balance of the aggregate
purchase price shall be payable in equal installments over such period and shall
bear interest at such rate (which shall not be less than the prime bank loan
rate as determined by the Committee) as the Committee shall approve, and (ii)
the Participant shall be personally liable for payment of the unpaid principal
balance and all accrued but unpaid interest.

(d) CONDITIONS ON SHARES PURCHASED WITH OPTION. The Board may
impose such restrictions on any Shares acquired pursuant to the exercise of an
Option as it may deem advisable, including, without limitation, restrictions
under applicable federal securities laws, under the requirements of any stock
exchange or market upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to such Shares.

(e) NONTRANSFERABILITY OF OPTIONS. An Option shall not be
transferable or assignable except by will or by the laws of descent and
distribution and shall be exercisable, during the Participant's lifetime, only
by the Participant; provided, however, that in the event the Participant is
incapacitated and unable to exercise his or her Option, such Option may be
exercised by such Participant's legal guardian, legal representative, or other
representative whom the Committee deems appropriate based on applicable facts
and circumstances. The determination of incapacity of a Participant and the
determination of the appropriate representative of the Participant who shall be
able to exercise the Option if the Participant is incapacitated shall be
determine by the Committee in its sole and absolute discretion.

SECTION 8.
SECURITIES REGULATION

Each Stock Option Agreement may provide that, upon the receipt of
Shares as a result of the surrender or exercise of a Stock Option, the
Participant shall, if so requested by the Company, hold such Shares for
investment and not with a view of resale or distribution to the public and, if
so requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Stock Option Agreement may also
provide that, if so requested by the Company, the Participant shall make a
written representation to the Company that he or she will not sell or offer to
sell any of such Shares unless a registration statement shall be in effect with
respect to such Shares under the Securities Act of 1933, as amended ("1933
Act"), and any applicable state securities law or, unless he or she shall have
furnished to the Company an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required. Certificates representing the Shares transferred upon the exercise
or surrender of a Stock Option granted under this Plan may at the discretion of
the Company bear a legend to the effect that such Shares have not been
registered under the 1933 Act or any applicable state securities law and that
such Shares may not be sold or offered for sale in the absence of an effective
registration statement as to such Shares under the 1933 Act and any applicable
state securities law or an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required.

SECTION 9.
LIFE OF PLAN

No Stock Option shall be granted under this Plan on or after the
earlier of:

(a) the tenth (10th) anniversary of the effective date of this Plan (as
determined under Section 4 of this Plan), in which event this Plan otherwise
thereafter shall continue in effect until all outstanding Stock Options have
been surrendered or exercised in full or no longer are exercisable, or

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(b) the date on which all of the Shares reserved under Section 3 of
this Plan have (as a result of the exercise of Stock Options granted under this
Plan) been issued or no longer are available for use under this Plan.

SECTION 10.
ADJUSTMENT

The number of Shares reserved under Section 3 of this Plan, and the
number of Shares subject to Stock Options granted under this Plan, and the
Exercise Price of any Options, shall be adjusted by the Committee in an
equitable manner to reflect any change in the capitalization of the Company,
including, but not limited to, such changes as stock dividends or stock splits.
Furthermore, the Committee shall have the right to adjust (in a manner which
satisfies the requirements of Code Section424(a)) the number of Shares reserved
under Section 3, the number of Shares and Exercise Price of Options to be
granted under Section 6, and the number of Shares subject to Stock Options
granted under this Plan, and the Exercise Price of any Options in the event of
any corporate transaction described in Code Section 424(a) which provides for
the substitution or assumption of such Stock Options. If any adjustment under
this Section creates a fractional Share or a right to acquire a fractional
Share, such fractional Share shall be disregarded, and the number of Shares
reserved under this Plan and the number subject to any Stock Options granted
under this Plan shall be the next lower number of Shares, rounding all fractions
downward. An adjustment made under this Section by the Committee shall be
conclusive and binding on all affected persons and, further, shall not
constitute an increase in the number of Shares reserved under Section 3.

SECTION 11.
SALE OR MERGER OF THE COMPANY

If the Company agrees to sell substantially all of its assets for cash
or property, or for a combination of cash and property, or agrees to any merger,
consolidation, reorganization, division or other transaction in which Shares are
converted into another security or into the right to receive securities or
property, and such agreement does not provide for the assumption or substitution
of the Stock Options granted under this Plan, each Stock at the direction and
discretion of the Committee or the Board, or as is otherwise provided in the
Stock Option Agreements (i) may be deemed to be fully vested and/or exercisable,
or (ii) may be canceled unilaterally by the Company in exchange for (a) whole
Shares and, at the Committee's direction and discretion, cash in lieu of any
fractional Share which each Participant would otherwise receive if he or she had
the right to exercise his or her outstanding Stock Option in full and he or she
exercised that right exclusively for Shares on a date fixed by the Committee
which comes before such sale or other corporate transaction, or (b) cash or
other property equivalent in value, as determined by the Board in its sole
discretion, to the Shares described in (a). Any such Stock Option which is not
assumed or substituted as provided above and which the Company does not elect to
cancel prior to a sale or other corporate transaction as described in this
Section shall become fully vested and immediately exercisable just prior to the
closing of such transaction.

SECTION 12.
AMENDMENT OR TERMINATION

This Plan may be amended by the Board from time to time to the extent
that the Board deems necessary or appropriate. The Board also may suspend the
granting of Stock Options under this Plan at any time and may terminate this
Plan at any time; provided, however, the Company shall not have the right to
modify, amend or cancel any Stock Option granted before such suspension or
termination unless (a) the Participant consents in writing to such modification,
amendment or cancellation, or (b) there is a dissolution or liquidation of the
Company or a transaction described in Section 10 or Section 11.

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SECTION 13.
MISCELLANEOUS

13.1 SHAREHOLDER RIGHTS. No Participant shall have any rights as a
shareholder of the Company as a result of the grant of a Stock Option to him or
to her under this Plan or his or her exercise or surrender of such Stock Option
pending the actual delivery of Shares subject to such Stock Option to such
Participant.

13.2 NO GUARANTEE OF CONTINUED RELATIONSHIP. The grant of a Stock
Option to a Participant under this Plan shall not constitute a contract for
services and shall not confer on a Participant any rights upon his or her
termination of service or relationship with the Company in addition to those
rights, if any, expressly set forth in the Stock Option Agreement which
evidences his or her Stock Option.

13.3 CONSTRUCTION. This Plan shall be construed under the laws of the
State of Georgia.

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<PAGE>

[FRONT OF PROXY CARD]

Optio Software, Inc.
3015 Windward Plaza
Windward Fairways II
Alpharetta, Georgia 30005

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints C. Wayne Cape and F. Barron Hughes, and
each of them, with full power of substitution, as Proxy, to represent and vote
all the shares of common stock of Optio Software, Inc. held of record by the
undersigned on May 3, 2000, at the annual meeting of stockholders to be held on
June 23, 2000 or any adjournment thereof, as designated on the reverse side
hereof and in their discretion as to other matters.

Please sign exactly as name appears on the reverse side. When shares
are held by joint tenants, both should sign. When signing as attorney, as
executor, administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.

The shares represented by this proxy will be voted as directed by the
Stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR" all nominees in Proposal 1 and "FOR" Proposals 2
and 3.

I PLAN TO ATTEND MEETING [ ]

The Board of Directors Recommends a vote "FOR all nominees" in Proposal 1 and
"For" Proposals 2 and 3.

(Please date and sign on reverse)
(Continued on reverse side)

[BACK OF PROXY CARD]

Proposal 1- Election of the following Nominees as Directors:

NOMINEES: C. Wayne Cape

[ ] FOR all Nominees listed [ ] WITHHOLD James J. Felcyn, Jr.
at right (except as marked for all Nominees
to the contrary) listed at right

(To withhold authority to vote for any individual nominee, strike a line through
the nominee's name.)

Proposal 2- Approval of the Directors' Stock Option Plan:
For [ ] Against [ ] Abstain [ ]

Proposal 3- Approval of the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending January 31, 2001:

For [ ] Against [ ] Abstain [ ]

Date_______________________________________

Signature__________________________________

Signature if held jointly__________________
Please mark, date and sign as your name
appears above and return in the enclosed
envelope

PLEASE MARK YOUR CHOICE LIKE THIS X IN BLUE OR BLACK INK.