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© Overview

The next generation of applications will be built on

distributed computing platforms, including LANs,

client-server databases, and peer-to-peer networks.

An increasing number of these applications will be

constructed using object-oriented software devel

opment tools and techniques.

Patricia Seybold's 1992 Technology Forum will

discuss how end users can overcome the manage

ment and technical barriers that prevent them from

applying distributed and object-oriented technolo

gies to solve mainstream business problems. The

conference will address these issues by drawing on

the experiences and expertise of leading end-user companies.

Who Should Attend

Product Marketing Managers and Product Planners

Strategic Planners

MIS and DP Professionals

Application Developers

Information Systems Technology Planners

The Format

User Forum Sessions will focus on applications of

distributed/object technology and the obstacles that users

must overcome to create them. Though most presenters in

these sessions will be representatives from user companies,

vendors may be invited to explain a particular issue or

application opportunity.

Solutions Forum Sessions will illustrate the latest in dis

tributed/object technology and tools through interactive

demonstrations by vendor and user companies. These ses

sions will be presented in two simultaneous tracks titled

Building Solutions and Management and Planning.

Evening Showcase Exhibits will offer attendees a first

hand look at the latest technology and tools.

Comments from Past Attendees

Probably the best prepared and managed

conference of any I've attended in 20 years.

This conference had the most impressive array of

speakers I've ever seen. Brilliant minds!

Excellent format—very interesting with good

interaction.

bar exceeded my expectations!

Registration Form

Patricia Seybold's Technology Forum • Please register me for the 1992 Technology

Forum—$895

Order Information

©

NAME

TITLE/DEPT.

COMPANY _

ADDRESS

CD

CITY, STATE, ZIP.

TELEPHONE

FAX NUMBER

Payment of Fees • Check enclosed.

• Bill me. P.O. #

• Charge to my

_ MasterCard _ VISA _ AMEX

CARD NUMBER

EXPIRATION DATE

SIGNATURE

Mail: Patricia Seybold's Office Computing Group, 148 State St. 7th Floor, Boston, MA 02109

Fax: (617)742-1028

Call: (617) 742-5200 or (800) 826-2424

Open for Conference Schedule Printed on recycled paper. T92-3-X

PATRICIA SEYBOLD'S 1992 TECHNOLOGY FORUM CONFERENCE SCHEDULE

Track 1 Afternoon Solutions Forum Sessions Track 2 Day 1 Morning User Forum Sessions Day 1

Conference Overview & Stage Setting The Goal of this Session is to discuss how distributed and object-oriented computing technologies can help meet current business issues and user requirements. • John R. Rymer, Vice President,

Patricia Seybold's Office Computing Group

Business Justification and Investment Models for Distributed and Object-Based Computing

The Goal of this Session is to give attendees effective new approaches to cost-benefit and investment analyses that they can take back to their organizations and put to use. • David M. Sherr, First Vice President, Equity Systems,

Lehman Brothers • Jim Stikeleather, Director of Development, Kashn' Karry • King Walling, Manager, O.O. Center of Expertise EDS/

Mfg. Consulting Division, Electronic Data Systems

Factoring New Technology into Enterprise Architectures The Goal of this Session is to give attendees prescriptive information that allows them to begin formulating architectures that effectively combine new distributed and object-oriented technologies with older technologies to achieve business benefits.

• Omar A. Effendi, Director, Technologies, The American Express Company

• Robert Marcus, Senior Researcher, Boeing Advanced Technology Center

• Rao V. Mikkilineni, Director, Advanced Software Technologies, US WEST Advanced Technologies

• Larry Poleshuck, Vice President, Citibank, N.A.

Building Solutions

Systems Integrations with Distributed Object Management Technology

The Goal of this Session is to introduce software development managers to distributed object management technology and to illustrate to them how distributed object management technol-ogy might be used in real situations.

• William S. Andreas, Chief Architect, HyperDesk Corporation

• Stephen J. Baron, Software Engineering Manager, Digital Equipment Corporation

Object-Oriented Front Ends To Data Sources The Goal of this Session is to lay out the basics of the major approaches to using object-oriented and distributed technologies to make data access easy for a broad base of end users.

• Michael DeSanti, Director of Integration Systems, Versant Object Technology

Group Applications Using Objectbases The Goal of this Session is to introduce software development managers to objectbase technology as the basis for workflow and group coordination applications and to illustrate to them how objectbases are used to build such applications. • Timothy A. Andrews, Chief Technical Officer,

Ontos, Incorporated

• Jack Orenstein, Ph.D., Member of the Technical Staff, Object Design, Incorporated

Management and Planning The Goal of this Track is to give users a clear understanding of how leading vendors plan to use distributed and object-oriented technologies to create new value, and how these companies plan to support users in adopting these new technologies.

IBM and Digital Strategies for Distributed and Object-Oriented Technologies

• Elizabeth Freburger, Object-Oriented Program Manager, Digital Equipment Corporation

• Larry Loucks, IBM Fellow & Director, Software Architecture, IBM Corporation

Hewlett-Packard and AT&T/NCR Strategies for Distributed and Object-Oriented Technologies

• Gail Hamilton, Marketing Manager, Network Systems Group

• Dr. Philip M. Neches, Chief Scientist & Senior Vice President, NCR Corporation

Microsoft, Novell, and SunSoft Strategies for Distributed and Object-Oriented Technologies

• Jim Allchin, Vice President of Advanced Windows, Microsoft Corporation

• Steve Martino, Director, Product Marketing/Application & Environment Marketing, SunSoft, Incorporated

• Darrell Miller, Executive Vice President, Novell, Incorporated

Day 1 and 2

Day 2 Morning User Forum Sessions

Evening Showcase Exhibits

will offer attendees a first-hand

look at the latest technology

and tools.

Day 3 Looking Ahead

Standards in Distributed and Object-Based Computing. The Goal of this Session is to provide a distributed/object-oriented computing frame of reference for ongoing standards efforts. Attendees will leave with a solid understanding of how standards will and won't help them achieve their business goals in the near and long term.

Reusable Class Libraries as a Means of Software Construction.

The Goal of this Session is to provide attendees with an understanding of what they themselves must do to achieve the benefits of object reuse. In addition, the session will outline key developments in the industry for users to watch for.

• Howard Baetjer Jr., Executive Director, Agorics Project, Center for the Study of Market Processes, George Mason University

• Wayne Stevens, Consulting Systems Designer, Applications Development Consulting Practice, IBM Corporation

End-User Software Construction Using Distributed, Object-Oriented Technologies.

The Goal of this Session is to stimulate and challenge attendees by helping them understand the state of the art in end-user software creation and the future directions in the field.

• Bob Kantor, Information Technology Coach, C1BA-GEIGY Corporation

• Harold Kirkpatrick, Radio Free Europe

Planning to Secure Distributed, Object-Oriented Environments The Goal of this Session is to equip attendees so they can begin constructing an effective enterprise security policy for distributed, object-oriented computing environments. • Daniel E. White, Senior Manager, Ernst & Young • Larry K. Miller, Manager of Systems Management Technologies, Boeing Computer Services

Application Development in the Distributed, Object-Oriented Environment The Goal of this Session is to give attendees a picture of how new distributed computing and object-oriented development tools can be effectively deployed within the confines of existing development organizations. It will specifically address how to migrate from current practice to the new technologies, including where the pitfalls lie. • Charles Durette, Manufacturing Consulting Division, Electronic Data Systems

Planning for the Management of the Distributed, Object-Oriented Environment The Goal of this Session is to equip attendees so they can begin constructing an effective enterprise system and network management policy for distributed, object-oriented computing environments. • John Payne, Communications Architect, DHL Airways, Incorporated

Day 2 Track 1 Afternoon Solutions Forum Sessions Track 2

Building Solutions Design Methodologies and Notations

The Goal of this Session is to help users understand the relevance of methodologies and notations to their development work with objects. In addition, this session seeks to equip users with a framework with which to judge current and future methodologies.

Building Mail-Enabled Applications The Goal of this Session is to equip attendees with the knowledge they '11 need to begin a serious approach to mail-enabled applications. The session will answer questions about technology selection and planning, as well as personnel skills development. • Michael D. Zisman, President & Chief Executive Officer,

Soft'Switch, Incorporated

Distributed and Object-Oriented Technologies in CASE and Repositories

The Goal of this Session is to clarify the choices users have among tools supporting development of advanced applications by teams of programmers. Attendees should leave the session equipped to formulate a strategy for adopting framework and repository technology.

Management and Planning

Managing Object-Oriented Software Projects The Goal of this Session is to give attendees a frame of reference for successfully managing large object-oriented software construction projects.

• Adele Goldberg, President and Chief Executive Officer, ParcPlace Systems

Object-Oriented Systems and Network Management The Goal of this Session is to explain this new approach to systems and network management, and equip users with what they need to know to put it to use. It should also help users understand the steps they must take to migrate from today's approaches to the object-oriented approach.

• Todd A. Smith, Chief Scientist & Vice President of Technology, Tivoli Systems, Incorporated

Managing Security The Goal of this Session is to provide a frame of reference with which to judge new security products for distributed and object-oriented environments. • Nelson Hazeltine, Director, Architecture and Systems

Management, NCR Corporation

This is a partial speaker list. Agenda and speaker schedule are subject to change.

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FastCab . . . /t Works The Way You Do

Introduc ing . . .

Electronic Filing for Windows FastCab is today's most economical electronic document

image filing software for text and/or graphics. Itis designed to streamline your paper-based filing through the accuracy and responsiveness of Windows and your PC.

You'll leam to use FastCab quickly because it uses the familiar concept of filing cabinets, drawers and file folders. It lets you organize your scanned documents in electronic folders and file them in Fast "Cabinets" on your computer. When you need a document, in a matter of seconds you can browse through your folders, select the document you need and view its contents. It's simple!

Need another copy of your original document? FastCab and your laser printer deliver duplicates at the touch of a button.

FastCab Facts: It Saves Money

FastCab will save your company money and increase your productivity. FastCab.,.

• Immediately reduces paper flow (copying, filing, etc.) and lowers its cost.

• Distributes information fast and free. Use LAN and print only when necessary.

• Eliminates lost documents. Originals are never removed.

• Provides quick access to information by displaying documents instantly.

• Keeps frequently-used files up-to-date because it requires only minimal effort.

Steps for Electronic Filing Made Easy

J

1. Scan 2. Create 3. Label electronic 4. File folder(s) 5. View 6. Print document electronic folder(s) for in electronic document document,

cabinet document cabinet if needed

Using FastCab A FastCab cabinet is an organized group of documents. A document can be text and artwork from scanners, fax machines, or drawing programs. Documents may be virtually anything: engineers' drawings, clip art, letters, purchase orders, etc.To file, create and name a cabinet, label a folder for the document and file it in the appropriate drawer. Quickly accessing the information you need with FastCab's friendly menus or mouse is a snap! To retrieve, look in any of FastCab's drawers, click the folder name, and view. Printing documents is simple.

FastCab Features

Essentials • On-line help • Illustrated user's guides • Pull-down menus with mouse or keyboard access

• Easy View software for fast self-training

Creating Cabinets • Virtually unlimited number of cabinets • Virtually unlimited number of documents per

drawer (file a maximum of 4 million copies)

Vlanaging Documents • Single or multiple page documents . Document names (up to 32 characters)

. Cross-filing

. Revise documents (rearrange, add, delete)

. Preview screen for creating or revising documents

• Document summaries

Viewing • Viewing options: rotate, invert, pan, zoom • GoTo Page, Next Page, Previous Page • Next Document and Previous Document

Printing Printer support for printers available in Windows 3.0

Exporting Printer, file, Clipboard

Direct Scanning With HP ScanJet and ScanJet Plus

File Conversion From PCX to TIFF

DDE Support

Network Compatible * Storage capacity is limited by available disk space. Cabinets anc images may be stored on hard disk or removable media. (An average image requires approximately 50K storage space.)

EasyView . . . Software That Works Like An Office

When you purchase FastCab you also receive EasyView, a special program that works with FastCab to help you quickly leamthe basics of electronic filing. The EasyView program looks like an actual office. It contains your FastCabinets, a computer monitor, In/Out baskets, and a printer just like you use in your real office. Simply pull your folder from a drawer in your FastCabinet, then move the document to the computer monitor to display it. Move the document to the printer when you need to print a paper copy.

System Requirements

• Personal computer with 80286 processor or higher (80386 recommended)

• MS-DOS 3.1 or higher • 2 megabytes RAM or more • Microsoft Windows 3.0 or higher • Monitors supported by Windows (EasyView

requires a VGA monitor)

• Mouse supported by Windows

Optional • Printer supported by Windows • HP ScanJet/ScanJet Plus for direct scanning or a

Windows-supported scanner that creates TIFF or PCX images

FastCab Image File Format

FastCab supports TIFF encapsulated CCITT Group 3 and Group 4 compressed images and TIFF encapsulated uncompressed images. A document is one or more pages. Each page is a single bi-tonal (black/white) raster graphic. Pages may be a variety of sizes up to E size drawings (34" x44").

PCX or TIFF images from any scanner, FAX machine, or drawing application may be converted in FastCab to one of the valid FastCab formats. (If you have special file conversion needs, call TMS, Inc. about additional image conversion software. We also offer on-line support.)

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Sterling Software, Inc. 8080 N. Central Expressway Suite 1100 Dallas, Texas 75206

Attn: Mr. Phil Moore

B U R T O N G R A D A S S O C I A T E S , I N C .

235 MARTLING AVENUE TARRYTOWN. NEW YORK 10591 (914) 631-1 129 (914) 631-1 164 FAX

Invoice # 2528

May 29, 1992

Project # 133-44

INVOICE

Strategic Planning

Consulting Services:

January-February 1992

1 day @ $1800/day

Expenses Incurred:

Telephone and Fax

Express Delivery

TOTAL FEES

TOTAL EXPENSES

TOTAL INVOICE

$1,800.00

$1,800.00

86.80

15.50

102.30

$1,902.30

INVOICES ARE PAYABLE WITHIN 15 DAYS OF RECEIPT

CONSULTANTS ON SOFTWARE 1

Notes on TDI Text Document Image Systems

The TDI applications and market involve consideration of application, industry (niche) and system environment. All of these applications have heavy dependency on both structured and unstructured data bases. They all require the ability to rapidly retrieve and analyze information which is not necessarily pre-patterned. Intelligent searching probably augmented by appropriate decision support capabilities will enable these application systems to provide insight and understanding beyond the simple massaging of available structured data.

While much of the financial data processing involves analyses and reports which have been defined through many years of practice and experience, the value of the information in these operational systems will be the ability to see new relationships. This is not going to be an automated process, but the automation is in the tools, capabilities, functionality and performance that are available to the human beings who are responsible for managing and using these systems.

As descried elsewhere, the size of the requirement will be significant in selecting the appropriate platforms to function as servers. Size will have a number of dimensions, including the number of users, the size and complexity of the data bases, the size and complexity of the indexes that are needed to these data bases, the volume and complexity of the transactions being applied, and the need for support of multiple levels of the documents. Therefore, the most complex problems to be dealt with will be to provide simultaneous access to a document by a number of people and yet manage the process by which they may choose to modify or extend the document. This is well characterized by working with contracts or legal documents where both sides in a negotiation will want to try to modify the document and many people on each side may need to review and modify the document. New concepts of document control during modification will have to be evolved. An extended concept of a data base administrator may be essential to enable a person to be responsible for each document and to be responsible for the decision as to which of the pieces that are changed should be inserted into the document. We might call this roll the editor, and the editor's decisions are the final decisions at each stage of the process.

The very nature of these applications integrates the concepts and tools of e-mail, relational data base management, text management and retrieval, image management, document management, work group cooperation, etc.

To my knowledge, no current offerings have been produced which put together these pieces in a businesslike fashion. Maybe some of the

8128 3/18/92

work done for the intelligence community or the FBI has some of these characteristics, and maybe some of these tools can be moved to the commercial world.

A significant marketing problem (and a profit making problem) will be whether companies are capable of designing and producing, extending and maintaining applications which vary significantly from industry to industry, by size of company and by application. One cannot expect to have a significant volume of shrink wrapped applications delivered in these environments. Rather, the concept will be one of delivering core product, probably by industry and application, and then implementing this product for a particular client/server structure (to highly automated compiling techniques) and using the same tools and facilities to construct the necessary individualization needed for the program to tune it for that particular user's needs.

This will raise serious issues in terms of what constitutes a package software company versus a custom software operation, will lead to issues of pricing and to technical difficulties in maintenance. These problems will be compounded by the fact that many of the application systems will be delivered on equipment platforms which historically have had relatively low-priced software delivered (AS/400, RISC/UNIX, etc.).

8128 3/18/92

How to Build an Organization to Produce and Market TDI Products and Services

There are a number of elements which will need to be brought together to create a first class TDI company.

The core of the system will be the tools necessary to construct text, document and image applications in an efficient manner. In all likelihood, these tools will have to be object oriented; they will need to be platform independent both in terms of the environment used to write the applications and the platform used to execute the applications.

They will need to be compiled in a way that is totally scalable from desktop clients and servers through to mainframe servers.

Scalability implies more than just the ability to perform; it is the ability to perform efficiently and effectively both from a response time and utilization of resources point of view.

The system will need to interface with a range of relational data base management systems, a variety of communications interfaces, possibly with applications written in different application languages.

Key to this whole concept will be very clean, very well defined interfaces.

While one imagines a hierarchical structure, one can't have so many layers as to reduce or destroy the efficiency of the operation.

High capability, entry, search, retrieval and display mechanisms will be needed.

The ability to do analysis and interpretation of images will certainly be a requirement.

8128 3/18/92

Create a company (division) focused on providing a full function document management facility:

text acquisition, indexing, storage, search and retrieval, structure and display

document creation, document assembly, document maintenance, document distribution

multi-person preparation and analysis of document elements (text, graphic s, image)

scanning, storage, display of images (reproduction, ocr, form/content analysis)

These functions would be available on a wide range of platforms:

mainframe, midrange, workstation, desktop

client/server

. LAN

The principal markets would cover;

U.S., Europe, Japan

Government agencies

Service companies

Commercial and industrial companies

The deliveries would be focused on industry/functional applications using in-company, public or proprietary data bases.

Rather than create all elements of the system, open interfaces would be constructed to work with: various data base management systems and text entry systems (word processors); desktop, workstation and LAN operating systems and tools.

The principal features of the company would be to combine:

mainframe text management installed customer base

client/server application construction facilities

8013 -1-

solid marketing, sales and distribution capabilities

consulting services activities

customer service and support organization

Specifics on Potential Players;

INFODATA — $12M revenue, publicly held, market capitalization under $4M, 100-200 Fortune 500 and government accounts, substantial consulting services

ODESTA — $6M revenue, privately held (eager to sell), strong client/server system to build document management applications, strong DEC relations, new Canon relation, substantial Mail experience

DOCUMENT SYSTEMS, INC. — $1.5M revenue, held by Vanguard and D&B, available for sale, application focus in insurance market

IDAC (Distribution company) — Stu Miller concept, document management on UNIX platforms, acquire companies, Warburg, Pincus and Oak Partners are interests

CTI — closed down, but has groupware technology available on OS/2

Financials

Revenues $20M

Profits Nil

Cost of acquisition $10M

Future investment $ 3M

8013 -2-

TDI Business Concept (Text, Document. Image)

Create a company (division) focused on providing a full function document management facility:

text acquisition, indexing, storage, search and retrieval, structure and display

document creation, document assembly, document maintenance, document distribution

srhared^preparation and analysis of document elements (text, graphic s, image)

scanning, storage, analysis and display of_images (reproduction, ocr, form/content examinat-j^n)

<?7 These functions would be available in a wide range of platforms:

mainframe, midrange, workstation, desktop

client/server LA-^S

The principal markets would cover;

U.S., Europe, Japan

Government agencies

Service companies

Commercial and industrial companies

The deliveries would be focused on industry/gfcfjpl functional applications using in-company, public or proprietary data bases.

Rather than create all elements of the system, open interfaces would be constructed to work with: various data base management systems^-**^-— text entry systems (word processors); desktop, workstation and LAN^S various eerver-sj -^te-r— s "fm+fs -

The principal features of the company would be to combine:

mainframe text management installed customer base

client/server application construction facilities

solid marketing^ sales and distribution capabilities

8013 -1-

consulting services activities

customer service and support organization

Specif ics,er*-

INFODATA — $12M revenue, publicly held, market capitalization under $4M, 100-200 Fortune 500 and government accounts, consulting services

ODESTA — $6M revenue, privately held (eager to sell), strong client/server system to build document management applications, strong DEC relation^ new Canon relation, substantial Mail experience

K/ek. Oi - - i> DOCUMENT SYSTEMS, INC.-- ^/.X"K u . » i T

IDAC — (Distribution company) co«.t<(X ; ^ CLO^YVC^-

CTI cLoWV*^ bv-f"

Financials

Revenues

Profits

Cost of acguisition

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$20M

Nil

$ 10M

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Functions Required

Enter/Update data (auto create data structure)

Produce data reports

types: standard/ad hoc

breakdowns:

any time period any product/service/geographic/department/etc. consolidation/detail/summary

Prepare documents

enter new text modify document format document prepare graphics: create/modify incorporate graphics/data/voice?/etc. produce document

Document Management

information about document:

who/when entered/updated who is authorized to see/update/delete/route who has accessed who is on distribution list when last updated number of updates comparison/change control

routing of document

maintaining distribution list actual distribution

electronic print fax "tickler"

Communication

. EMAIL Voice Mai 1

Sterling Future Plans - 1 - January 17, 1992

User Requirements

Common way to access data: GUI/standard commands

location independent: user doesn't care where data is; no special commands, procedures to access

platform independent: operation is same whether is on standalone PC, LAN, mini, MF, etc.

source independent: irrelevant whether it was entered via keying, scanning, EMAIL, downloading from MF, etc.

format independent: user doesn't need to know what format data is in (spreadsheet, wp, data base, etc.); system either automatically starts required program or transforms it into desired format

application independent: data enterd in one application (such as marketing/sales) can later be included in accounts receivable/customer service/etc.)

updates are reflected wherever data is used (if underlying data changes, a chart using the data in a document is automatically changed)


What has made new approach possible:

powerful PCs (desktop, laptop, handheld, notebook)

- LANS/WANS

CIient/server applications

object oriented development tools

common user interface (GUI)

standard operating systems

dynamic data exchange (DDE)

object linking and embedding (OLE)


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Applications - industry function Executive System user

application program generation

Application building facilities (languages, tools, systems, usage)

Platforms - equipment - client, server Operating System DB Management System Communications (trans. p«^c_. ) system

Multi-user Multi-tasking

Can develop on many platforms

Can execute on many platforms

Can use existing languages, operating systems, DB system, com^^ -system for development

Can use existing languages, operating systems, DB systems, TaJE?" systems for executives

Package Solutions Q \ S-io-Jps Sets (prototypes, J Customizable solutions Part package ^fpaSt

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235 MARTLING AVENUE TARRYTOWN, NEW YORK 10591 (914) 631-1 129 (914) 631-1 164 FAX

Sterling Software, Inc. 8080 N. Central Expressway-Suite 1140, LB 53 Dallas, Texas 75206

Attn: Mr. Phil Moore

Invoice # 2504

January 7, 1992

Project # 133-44

INVOICE

Strategic Planning

Consulting Services: December, 1991

Burton Grad — 3 days @ $1800/day $5,400.00

TOTAL FEES $5,400.00

Expenses Incurred:

B. Grad: 12/15-17/91 — Tarrytown to Dallas and return

airfare 892.80 taxis 60.00 hotel 90.40 meals 26.31 local auto 63.00 food for meeting 127.57 flip chart, easel, fax & copies 73.90 phone calls from meeting 89.98 1,423.96

Note: Sterling apparently paid room charges for Kensington Suite. Other costs were charged to B. Grad per enclosed hotel bill.

Telephone & fax 35.23

TOTAL EXPENSES 1,459.19

TOTAL INVOICE $6,859.19

INVOICES ARE PAYABLE WITHIN 15 DAYS OF RECEIPT

CONSULTANTS ON SOFTWARE A

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Notes from Sterling/strategy meeting 12/20/91

Shirley Williams, Phil Moore, Ed Lott, Burt Grad

Return to business roots

Not focus particularly on current businesses, but rather look at new opportunities so can afford to be dynamic - what new group level businesses to be in, plus acquisition activities in current business as well as in new businesses.

Have created substantial multi-product/service companies -financially disciplined, growth oriented - solid management team

Could buy fairly substantial company (Goal, Pansophic, Boole & Babbage)

criteria: potential home run stable recurring revenue opportunities to liquidate pieces (no longer critical)

Dylakov & Answer Systems have merged; Canadian Labs active in client/server; out of retail and standard banking applications

Industry views are in terms of interchange of information between suppliers/company/distributors. Industry verticals -applications? databases? Intercommunication functions

opportunities

for current business systems software

- EDI Federal Systems

platforms markets functions US/Europe/Asia-Pacific

consider

X = wholly owned group Y = investment (re: minority) with opportunity to own 100%

1. Define areas for X+Y criteria markets products companies

2. Go after selected opportunities 1-2 x's 4-5 y's (in different businesses)

Horizontal Axis = server - communications - client

Information management applications

Information interchanges

System software business to: run computer better; application development; communications

Security -

Ideas -

Use EDI's capabilities/business as a resource to distribute software documentation

Use EDI's - like facilities

for computer industry use for Sterling customer use for structured communications (orders, invoices, etc.) for other applications for internal Sterling use - with customers: product-oriented distribution, maintenance

Check on Sammi - Unix man - machine interface

for Broadview to do - what companies are available?

P. Moore and B. Grad mull through possible opportunity areas -possible companies

customer service and support sales management other information management

other areas entirely: new related to system software

. EDI

BG:7093 December 20, 1991

/ v' // / Notes from Sterling/strategy meeting "" ' ' '

Shirley Williams, Phil Moore, Ed Lott, Burt Grad IrusQjjA**'*

Return to^roots

Not focus particularly on current businesses, but rather look at new opportunities so can afford to be dynamic - what new group level businesses to be in, plus acquisition activities in current business as well as in new businesses.

Have created substantial multi-product/service companies -financially disciplined, growth oriented - solid management team

Could buy fairly substantial company (Goal, Paqsophic, Boole & Babbage)

criteria: potential home run stable recurring revenue opportunities to liquidate pieces (no longer critical)

Dylakov & Ari^Ver Systems have Canadian .abs active in client/server-out of retail and standard banking applications

Industry views are in terms of interchange of information between ^tfPl'-^'Vcompany/distribution©-. Industry verticals - applications? databases? Intercommunication functions

opportunities

for current business systems software

- EDI Federal System S

platforms markets functions

X = ^wholly owned group Y = ^investment (yea ) with opportunity to own 100%

Define areas for X+Y criteria markets products companies

Go after selected opportunities 1-2 x's 4-5 y*s i in different businesses /

Horizontal Axis = server - communications - client

InformatLpn management applications (im0 rrnr ~" f* < '

System software business to;run computer better application developmentj communications

Security -

Ideas - .

Use -fief's capabilities/business as a resource to distribute software documentation

Use Ed-A-s - like facilities

for computer industry use for Sterling customer use for structured communications (orders, invoices, etc.) for other applications for internal Sterling use - with customers: product-oriented distribution, maintenance

Check on - Unix man^machine interfaceBroadview to do - what companies are" available? 4 —— —• :

P. Moore and B. Grad mull through possible opportunity areas -possible companies

-r- customer support — sales management ^arke-trintr'ahd~¥aleR support

other information management

other areas entirely^jiew/"related to system,, software )-05DI~~^

BG:7093 December 20, 1991

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CORPORATE STRATEGY RETREAT NOVEMBER 3-4,1991

Topics suggested for discussion:

1. Define our mission 2. Financial goals - long range ('92-'96) 3. Markets we want to be in...and not in

• Niches of those markets 4. Organization to address our markets 5. Distribution channels 6. Do we want to have an International Group? 7. Executive Back-up...esp. GP's (& DP's) (prep, for succession) 8. Acquisitions

• Direction/needs • Process/Policy/Procedures

9. Revenue Mix Goals & Objectives 10. External Perception

• Image • Relations • Perceptions • Positioning

11. Benefits - General 12. SERP III...and/or Executive 'Treatment/Incentive" 13. Training & Education

• Sales Training • Management Development

14. Recruiting & Promoting & "Rotating" 15. Financial Strategy-Management 16. list the 4-5 things we gotta do to achieve our objectives

• List 2-3 things we gotta do to achieve each of those 17. Development Strategy...& structure...& organization, etc. 18. Type of products/markets we want to AVOID...& PURSUE 19. Strategic Alliances & Joint Ventures strategy/guidelines 20. Core Business - high level strategy for each 21. Principles & Philosophies (Top 10, high level) 22. Operating Style/Strategy 23. Investor/Public Market Management Strategy 24. What new or other businesses do we want to be in? 25. What do we have to do to become a $1.0 billion company? 26. How do we become more unified while remaining decentralized? 27. How do we eliminate (bad) politics everywhere?

11/11/91 1

28. What new or different technology should we be exploiting...(UNIX) 29. Satellite Labs...pros & cons 30. Incenting technical people...external and internal 31. Data Center Strategy...company-wide vs. individual AND inter/intra-office

communications and automation 32. Common Product Nomenclature 33. Cross-Division Cooperation & Synergy esp. Sales & Marketing...how to

better exploit 34. How to upgrade Marketing (vs. sales) company-wide? 35. Financial—reduce paperwork & bureaucracy 36. Revenue Recognition Policy Change 37. How do we really do Strategic Planning...company-wide & within groups? 38. How do we build better Business Plans? 39. International Expansion/Focus...esp. Japan 40. Expand Capital Markets...geographically, e.g. Japan 41. Managing effects of (major) external factors.

11/11/91 2

Businesses We're In

1. Systems Software a. Application Development Software Products b. Information Management Software Products c. Storage Management Software Products d. Communications Software Products

2. EDI a. Translation Software Products b. Communications Software Products c. Network Services d. Database Services e. EDI Applications Software Product

• More EDI • More Industry-specific Applications

3. Federal a. Supercomputer Facilities Management b. Scientific Software Support & Services c. Secure Data Communications (esp. military) d. Contract Programming (for govt, agencies)

11/11/91 3

Systems Software Markets |

1. Markets We're In - Wanna Stay a. Storage Management - aggressively b. Communications - aggressively c. Information Management - actively (specific niches) d. Application Development — defensively

• We want to focus our AD/IM product/markets better —• development strategy

• We would sell into the 4GL market as a standalone product...that's alt. positioning of a standalone Information Management product

• e.g. ZIM —• DYL YYY as an Information Management engine and ZIM —• DYL ZZZ as a 4GL:

Distribution Channels VAR/OEM's

* Telemarketing (Dyl) sales force Development of DYL follow-up products driven by PC/LAN-oriented development (LYNX) Avoid direct sales force selling CAMI —• Developer, ZIM, et al ala ASD sales App.

2. Application Development/Information Management "Scenerio" • Keep selling Dylakor products as we are • Keep maintaining ASD customer as we have as long as we can • Move ASD & Dylakor together to sell

DYL XXX DYL etc. ZIM as DYL YYY (Information Management product a la DYL 280) ZIM as DYL ZZZ (4GL product) Answer DB (as we should...TBD)

• Revitalize VAR/OEM channels (old Zanthe distribution channels) to sell all the above...& build a U.S.-based version.

• Also sell all the above directly through telemarketing sales force (currently Dylakor)

• Combine planning & research & development for all CAMI DYL future products to be developed by current labs at Ottawa, Montreal, Woodland Hills & Chatsworth Milk (don't further) non-future products

• Acquire vs. build future products/technology wherever possible • Stop trying to sell "CAMI"

Stop trying to compete in the CASE market with Developer Systems Software Markets Continued:

11/11/91 4

Stop trying to compete in the Application Development (aka 4GL) market the way we have been with ZIM. Simplify product offerings to products & sel] them.

11/11/91 5

Communications Markets

1. Very aggressively pursue 2. Continue to specialize in the file transfer niche 3. Address more applications (than EDI)* 4. Get more PC/LAN expertise ASAP 5. Continue to address the corporate customer 6. Develop much better/broader distribution channels to address the changing

market

E E D E V t I F T c

COMM F/T

11/11/91 6

LAN

1. Big market developing...we must address it! 2. We must move all our (applicable) products to support the LAN

environment 3. We need product...

a. In our current markets b. In other systems software markets

4. We must obtain marketing (& sales/distribution) heavy expertise ASAP. 5. 3 &/or 4 could be acquired 6. We need (executable) LAN Plan (with strategies)

a. overall SSG b. for each of our current markets

Application development Information management Storage management Communications

11/11/91 7

Strategic Alliances & Joint Ventures

1. We need a briefly stated policy...what we'll do & not do & how to go about developing strategic alliances and joint ventures e.g. a. We will not be a minority partner (< 50%) on any joint venture unless

its an exit vehicle to get out of town. b. We must have first a business (strategic) plan of what we want to do

overall with an analysis of alternate ways to achieve...just like acquisitions. Includes: • Cost to us • Return to us

c. Etc. 2. JPM to draft ( < 2 pages)

11/11/91 8

EDI

1. Continue to pursue the translation market • Merge GENTRAN & TRANSLATOR into 1 product finally

2. Continue to pursue the EDI communications market with SSG. 3. Expand Network Services ASAP

• more verticals • acquisitions • aggressive sales

4. INTERNATIONAL: • Develop ASAP a more doable, aggressive strategic plan (esp. Europe

& Japan) 5. Determine ASAP how we're moving into Payments market for Banking & do

it 6. Hook up with Federal Systems Group to pursue government EDI market

11/11/91 9

EDI Database Services

1. We don't want to be in the "standalone" database service business...i.e., not associated with EDI network traffic.

2. We ought to consider trading with IMS to get out of DBS to get more (of their) EDI service business.

3. We don't want to buy database companies...if they're standalone (#1).

11/11/91 10

Federal Systems Group

1. Raise profit margins to 11% 2. Slow revenue growth if necessary to do #1. 3. Rename "Special Projects" to "Software Products Division" & rock 'n roll

(GHE) 4. Move aggressively into EDI for the government market

a. in conjunction with EDiG b. with Systems Integration (if possible) as spearhead

5. "Leverage" much mo~e FSG's tecnnology & expertise in SSG & EDIG • UNIX • LANS • Graphics • (Secure) Communications

6. Win (important) NASA & DoD recompetes. 7. We must identify a strategy to minimize the potential negative impact of

losing large revenue chunks in Federal such as NASA's CSS follow-on (e.g. restate the hardware portion of ACF).

11/11/91 11

Potential New Businesses

1. Office Automation —• "internal EDI" 2. Corporate Desktop (the next 1-2-3) 3. (Small) LAN software company 4. We should:

a. Identify the criteria for "new businesses" (a la 1981) b. Pursue low investment/risk opportunities proactively c. Target getting a small business with low risk & high potential...seed

for 4th or 5th group.

11/11/91 12

Operating Style

1. Operate the company on a decentralized basis...as much as absolutely possible.

2. Organize along market or business lines into groups of operating units (divisions).

3. Operate each division as a standalone business (addressing its specific market niche or functional responsibility).

4. Avoid bureaucracy...MORE. 5. Leverage synergy...MORE. 6. Push responsibility, authority & accountability for decision- making & P&L

performance to lowest levels possible. 7. More of the same...BETTER. 8. We must balance: adapting to change AND clinging to this philosophy...e.g.

better internal communications and management techniques (such as internal EDI and video conferencing)

11/11/91 13

Training & Development

1. We should regularly* provide Sterling Software sponsored formal training program...management training *e.g. annually—• investment

2. Ditto for sales training -+ investment • Sales reps • Technical & customer support reps • Sales management.

3. 1 & 2 should be supplemented actively at the group & division levels...as practical.

4. We should identify high potential management & send them to formal intensive management training programs outside, e.g. Harvard, Stanford (2 weeks - 3 months)

5. We want to actively rotate high potential people through temporary assignments to train & develop them a. Task force leaders...in the field (division) b. Ditto at corporate or group c. Temporary duty at corporate (or group)

11/11/91 14

Recruiting (& Promoting)

1. We want to look internally first and strive to fill jobs from within. 2. We must set up a formal procedure to flag key openings and a way to look

internally first. • Manual now • Automated later

3. We will only hire high quality people (8.0 or above) and we'll compensate/treat them as high quality people.

4. All recruiting/interview processes must be rigorous and selective • Include peers • 2 management levels up...3 levels up within discipline • Etc. • First the person must pass the hirer's standards test

11/11/91 15

Office Automation - Intra-company Communications

1. We must move aggressively toward providing intra-company (inter-office) communications — across as many applications as possible/practical — as fast as practical • company wide • group wide • division wide

2. Corporate will spearhead the initial effort (& ongoing oversight) with input (initially) & involvement (as we execute) from the field.

3. Examples: • E-mail • Bulletin board • Expanded MRS access/use • Sales management system • Customer support system • Acqmod • Acquisition prospect track/management • Customer/prospect information systems • Video conferencing

' }

11/11/91 16

International

1. We will - for the foreseeable future — keep International broken down by Group...main business.

2. In SSID, we need to get our act together: • Staff Germany's & France's C.M.'s • Staff Marketing FAST & GOOD • Together with the management team, Clive must meet and develop:

Operating management process Business plans * by country * by product area * total

11/11/91 17

Acquisitions

1. We will maintain an active acquisition/divestiture program 2. Divestitures ~ near term:

• none... • except CDS and/or assets

3. Acquisition Targets: a. Systems Software:

• Flagship Communications products/company • LAN-based automated operations products/company • Information Mangement products

b. EDI • Network Services business — Intl.

established business new vertical more customers

• Ditto U.S. • Funds Transfer for Banking —> Directions • Software ~ Intl

additional capabilities customers/market presence

• Ditto U.S. • Not database & not applications

c. Federal: • None

4. Guidelines: a. Size: $2-30M (but doesn't grow any division or group >50%) b. Price: S0-30M

• Cash: $0-5M • Stock (esp. if pooled): $0-30M • No more than 5% of SSW to a single party/small group

c. Acquisition candidate deal profile • Non-dilutive to SSW's EPS • Non-dilutive to group revenue growth rate and operating profit

margins (%) • Pays back in < 4 years

5. Other Acquisition Candidates a. New Businesses (not in 3 op. groups)

• Type: TBD (a la Grad's Grid)* not seed capital or during early development

b. Minority Interests • In target markets

EDI or SSG BUT NOT operationally related

11/11/91 18

Acquisitions Continued:

6.

or outside of current business groups • Initial investment* with unilateral option to own 100%

(* debt, or equity) • Therefore only candidates qualify if we would own 100% • Size:

Small: $0-3M * very high potential * more adventuresome Large: $0-30M * high potential * low risk * good investment (non-dilutive)

c. PURSUE AGGRESSIVELY Process • Document: process, responsibilities, duties, authorities by

level (company, group, division) Type of Acquisition

• TBD (JPM & EJL & GHE & PAM & SLW)

Responsibilities Duties

Corporate Group Divisions'

Large Company Acquisition

Small Company Acquisition

Company Invest.

Product Acquisition

11/11/91 19

Acquisitions Continued:

Responsibilities Duties Authority Large Company Acquisition e.g.

Pre-Deal Steps Corporate Groups Divisions

(Primary) (Second.) (Tnvolv.)

>

Post -deal

")

- )

11/11/91 20

Principals & Philosophies

1. Our people are our most important assets and will be treated that way. 2. Our customers are our most important relationships and will be treated that

way. 3. Our shareholders are our owners and we will protect their interests and grow

their investment. 4. Our goals and objectives will be taken seriously...and achieved. 5. We will be a quality company — a class act — and will strive to be perceived

that way. 6. We will maintain impeccable ethics in all our dealings...externally and

internally. 7. We will maintain honest and open communications...externally and

internally. 8. We will treat each other with trust and respect. 9. We will maintain an operating style that optimizes decision making,

maximizes efficiency and minimizes bureaucracy. 10. We will have fun.

11/11/91 21

SSG ORGANIZATION

cs

• Dylakor • ASD • AD Labs

a SSM • S/W Labs

CS

• Dylakor • ASD • AD Labs

SSG WLF

Ans.Lab Dyl.Mktg SSM S/WLabs SSID JG CM MS JJ CS

• Dyl.Labs • AD Labs

• Dyl.Mktg. • ASD

11/08/91

• SSID • OID

F Status Quo

1 1 / 0 8 / 9 1

VOTING

A A' B C D E F Ed 4 6 8 2 X X 5 George 5 7 9 7 X X 5 Jeannette 5 7 8 5 X X 5 Betty 7 5 8 1 X X 5 Phil 3 6 8 1 X X 5 Br enda 5 6 7 4 X X 5 Sterling 5 7 9 5 X X 5

)

11/11/91

s* STERUMB SOFTWARE MEMORANDUM

To: Group Presidents

Sterling L. Williams

November 12,1991

1991 Accomplishments

cc: Corporate Staff

From:

Date:

Subject:

Thanks for your input on your 1991 accomplishments. They've been extremely useful. Anne compiled them into a single document and I abbreviated them, so I get the blame if one of your proudest accomplishments didn't get the treatment it deserved. But I thought you'd like to have a copy.

Thanks again.

SLW:bhr Encl.

STERLING SOFTWARE, INC. ACCOMPLISHMENTS -1991

FINANCIAL

Increased EPS from Continuing Operations 17% from $.90 to $1.05.

Increased EPS 12% from $.94 to $1.05, before extraordinary gain.

Increased EPS 6% from $1.03 to $1.08, after extraordinary gain.

Increased Revenue 12% from $200.2M to $224.4M.

Increased Operating Profit 19% from $32.6M to $38.8M.

Increased Operating Profit Margin from 16% to 17%.

Increased Income Before Taxes 20% from $17.7M to $21.2M.

Increased Net Income 21% from $10.5M to $12.7M.

Increased Earnings to Common 8% from $8.9M to $9.7M.

Increased Cash Flow Per Share 12% from $3.61 to $4.05, before gain.

Increased Cash Flow Per Share 9% from $3.78 to $4.12, after gain.

Increased Cash and Equivalents 52% from $14.1M to $21.4M.

Improved Days Sales in Receivables 11% from 106 to 94.

Increased Working Capital 8% from $38.5M to $41.7M.

Increased Shareholders' Equity 12% from $83.0M to $92.9M.

Increased Tangible Net Worth 36% from $27.1M to $36.9M.

Reduced Debt-to-Equity Ratio 11% from .71 to .63.

Increased Working Capital Per Share 16% from $6.18 to $6.50.

Increased Book Value Per Share 10% from $9.90 to $10.93.

11/11/91 -1-

ACCOMPLISHMENTS -1991 OPERATIONAL

• Grew three principal businesses through good operating performance, significant new customers, product development, new Federal contracts and contract renewals, and three strategic acquisitions.

• Grew Systems Software through increases in revenue and operating profit of 24% and 32%, respectively; an increase in operating profit margin from 26% to 28% many significant new contracts including a $1.6M international contract with Peugeot; product development including several product releases and work on major projects in process in support of our strategic initiatives; and the Tefen Lab acquisition to further our CDCI development effort.

• Grew EDI through increases in revenue and operating profit of 39% and 57%, respectively; a higher operating profit margin of 29% up from 26%; a 68% increase in the number of EDI network customers through internal operations alone (126% including the 1,000 customers we added with the Redinet acquisition); a doubling our software customer base; new verticals through the Redinet acquisition and the integration of Directions into the group; and the release of several improved EDI mainframe, midrange and micro translation products and an improved network system.

• Strengthened Federal Systems through many significant new contract and critical contract renewal wins with a total estimated contract value of almost $70M; impressive award fee ratings; a new release of Sterling NQS; joint agreements with four hardware companies to further develop Sterling SSV; and new expertise in the DoD area and a presence at Rome Labs headquarters through the KSC acquisition.

11/11/91 -2-

ACCOMPLISHMENTS -1991 SYSTEMS SOFTWARE GROUP

GROUP • Increased revenue 24% from $74.4M to $91.9M.

• Increased operating profit 32% from $19.3M to $25.5M.

• Increased operating profit margin from 26% to 28%.

• Reorganized and focused development labs on major initiatives.

• Acquired a research & development lab in Tefen, Israel (Tefen Lab).

• Refined and expanded market awareness of initiatives through road shows, publications and User's Conferences.

• Hired Clive Smith as vice president of Sterling Software International.

• Established two new group officer positions which were filled with internal candidates: vice president of business development (Marshall Warwaruk) and vice president of research and development (Chris Turnbull).

• Conducted a major group advertising campaign.

• Held three Users Conferences in New Orleans, Cannes and Tokyo with record participation of over 1,000.

• Moved into major new office facilities in Woodland Hills.

ANSWER SYSTEMS • Improved operating profit from $.1M to $.2M.

• Closed $200K Delta Airlines and $ 100K American Airlines sales.

• Launched CAMI with a major road show.

• Advanced third party relationships with Informix and Tandem.

11/11/91 -3-

DYLAKOR • Increased revenue 20% from $13.6M to $16.4M.



• Closed $395K deal with ADP. t

• Had the #1 salesman in the company with $2.5M in sales.

• Acquired Quikjob product from Goal Systems.

• Completed detailed business plan for Odyssey.

• Established a director of business development position and hired Steve Harriman.

SYSTEMS SOFTWARE MARKETING • Increased revenue 17% from $20.6M to $24.2M.



• Developed and implemented strategy for CDCI initiative.

• Signed several large SuperTRACS accounts by promoting the use of communications products between major companies and their affiliates.

• Introduced SuperTRACS SPC developed by Software Labs and IMD and generated over $1.0M in fourth quarter sales alone.

STERLING SOFTWARE INTERNATIONAL • Increased revenue 46% from $26.1M to S38.0M.


• Signed $1.6M deal with Peugeot...largest SSG sale ever.

• Closed a $152K TestPro sale to the Bank of Nova Scotia and a $278K SHRINK sale to SIP in Italy.

11/11/91 -4-

• Reemphasized PCP marketing program which generated $2.8M of revenue in fourth quarter alone.

Hired Clive Smith as vice president of Sterling Software International.

Hired Bill Kooij as vice president of Asia Pacific.

Moved into major new office facilities in Stockley Park.

OFTWARE LABS Increased revenue 26% from $15.6M to $19.7M.

Increased operating profit 23% from $7.4M to $9.1M.

Generated an impressive 46% operating profit margin.

Acquired the Tefen Lab for LAN software development.

Progressed significantly with Eagle, the second phase of CSMI.

Implemented additional worldwide customer service improvement programs.

Established proactive pre-sales programs to assist with domestic and international sales closings.

Developed (in conjunction with Federal Systems IMD) SuperTRACS SPC.

AD LABS Increased revenue 25% from $5.4M to $6.7M.

Increased operating profit 24% from $1.3M to S1.6M.

New division consisting of Answer, Zanthe and Asyst development functions to concentrate on CAMI development.

Released several enhanced Answer products and a major new release of TestPro.

Produced new release of DEVELOPER with Windows 3.0 support capability.

Shipped ZIM Release 4.0.

• Began planning development of LYNX, the long-term CAMI project.

11/11/91 -5-

ACCOMPLISHMENTS -1991 EDI GROUP

GROUP • Increased revenue 39% from $32.8M to $45.6M.



• Acquired Redinet which added 1,100 customers, entry to a new market (discrete manufacturing and automotive), and elevated us to #1 in total EDI revenue in the world.

• Launched Product Family concept.

• Significantly improved data center operations and hardware.

• Established Quality Initiative and formation of a Quality Assurance organization.

• Moved Directions into EDI Group to penetrate EFT/EDI market.

• Successfully redeployed personnel from CDS to EDI Labs and Ordernet.

• Moved into a major new facility in Dublin, Ohio.

ORDERNET SERVICES • Increased revenue 52% from $23.3M to $35.4M.


• Doubled software customer base from 900 to 1,800 customers.

• Increased network customer base 126% from 1,900 to over 4,000 customers.

• Increased network services customer base by over 1,300 customers - a 68% increase, excluding Redinet customers.

• Grew maintenance revenue 153% from $1.3M to $3.3M.

• Signed 65 of the top 100 targeted Fortune 500 accounts.

• Added 26 VIPs under newly established Vendor Implementation Program (VIP).

11/11/91 -6-

• Moved into automotive, petrochemical, paper and packaging, and insurance vertical markets.

• Substantilly improved network hotline service.

ORDERNET INTERNATIONAL • Hired Jack Hall as president of the new Ordernet International Division and

established its headquarters in London.

• Sold seven accounts, including Marks & Spencer, a major U.K. retailer.

• Generated almost $1.0M in revenue in the first nine months of operations.

EDI LABS • Increased revenue 46% from $6.3M to $9.3M.



• Released mainframe EDE (Event Driven EDI) products.

• Released mainframe RTE (Real Time EDI) products.

• Released SuperTRACS 400, new communications product for the AS/400 marketed by Systems Software Group.

• Integrated mainframe translation software with SuperTRACS and produced TRANSLATOR Plus.

• Released version 5.0 of GENTRAN 400 with significant improvements in performance and communications capabilities.

• Integrated SuperTRACS with GENTRAN.

• Released new network services system which enhanced general, EDE and RTE options.

• Closed New York office (moved three employees to Cleveland and one to Columbus).

• Acquired SECURE*EDI, authentication/encription product, from ISI.

11/11/91 -7-

• Provided support for international standards (EDIFACT, ODETTE and TRADACOMS) across MVS, VSE, AS400 and DEC platforms.

DIRECTIONS • Increased revenue 11% from $8.6M to $9.6M.

• Increased operating profit 43% from $2.6M to S3.8M.


• Introduced Vector 9 Kite Research System.

• Introduced Vector Customer Service Software Product Line.

• Continued international expansion with over $1.0M of UK sales.

• Signed NSC letter of intent.

• Changed the strategic direction of the division to focus on EDI payments business.

11/11/91 -8-

ACCOMPLISHMENTS -1991 FEDERAL SYSTEMS GROUP

GROUP • Won new contracts and contract renewals with a total estimated contract value of

$75M.

• Reorganized to form a NASA Ames division and hired Wilson Cooper as president.

• Filled CFO position with an internal candidate, Don Annala.

NASA AMES • Achieved "Excellent" Award Fee Evaluation ratings on all three evaluation periods

through June 1991 under Computer Software Support (CSS) contract.

• Recognized for excellent performance following first year of CSS contract with 86 published technical papers, six Group Achievement Awards for work conducted by 41 staff members, and a Sterling staff member named as co-recipient of Ames Inventor of the Year Award.

• Won five-year Airborne Data Systems Support Services contract renewal with a value of up to $8M.

• Upgraded Cray YMP to 64mg under the existing ACF contract.

• Submitted proposal for seven-year ACF follow-on contract with a potential value of $170M.

SYSTEMS & SCIENTIFIC • Increased revenue 27% from $6.2M to $7.9M.

• Increased operating profit 36% from $.5M to $.7M.

• Won five-year NASA JPL/IPL contract renewal with a potential value of $ 18M.

• Received Excellent Award Fee Rating from NASA Lewis for first year of ADP support services contract.

• Received another outstanding review from MIT Lincoln Laboratory with near perfect award fee score on the TDWR project.

11/11/91 -9-

INTELLIGENCE & MILITARY Won 3-year Rome Labs CSP contract renewal with a potential value of $38 million.

Won new 3 1/2-year systems integration contract with a potential value of over $8M for the Defense Intelligence Agency, a new customer.

Won new 3-year $3.5 million Air Force Geographic Information-Handling System contract.

Signed deal to acquire KSC.

Moved into two new markets — counter-narcotics and counter-terrorism.

OFTWARE PRODUCTS Ported Sterling SSV to run on Silicon Graphics, HP, IBM and DEC hardware.

Established joint agreements with Silicon Graphics, HP, IBM and DEC to further develop SSV product on their advanced workstations.

Introduced NQS Exec, a significant upgrade to Sterling NQS.

Assisted in SuperTRACS SPC development for Systems Software Group.

11/11/91 -10-


November 25, 1991

235 MARTLING AVENUE

TARRYTOWN, NEW YORK 10591

(914) 631-1 129

(914) 631-1 164 FAX

Mr. Phil Moore Sterling Software, Inc. 8080 N. Central Expressway Suite 1140 LB 53 Dallas, Texas 75025

Dear Phil:

At your request, I have put together a proposal for Burton Grad Associates, Inc. (BGAI) to work with you, Ed Lott and others to help formulate an updated structure and an extended strategy for Sterling Software, Inc. (Sterling).

Goals

After ten successful years of exploiting a strategy of acquisition, extension and market focus, Sterling management wants to re-examine the foundations for their strategy and set up a framework for future growth with improving profit margins.

To help accomplish this, Sterling has set up an ad hoc team to formulate a proposed structure and plans similar to what was done in creating Sterling in the first place. The goals for this team are:

To provide Sterling with a blueprint for the future as did the initial strategy and structure.

To provide a basis for Sterling to prioritize acquisitions and internal investments in business growth.

A s s i g n m e n t

As part of the team, BGAI has been asked to help organize and participate in the following work assignments:

1. Briefly review original company concept and structure and examine principal events, accomplishments and revised directions over past ten years

2. Provide a new grid to structure products, platforms, markets, services and technology

A CONSULTANTS ON SOFTWARE

B U R T O N G R A D A S S O C I A T E S , 1 N C T

Mr. Phil Moore November 25, 1991 Page 2

3. Describe present business in terms of the new structure

4. Analyze opportunities for each grid intersection (cell)

5. Identify principal future interests within the scope of current groups as well as in potential new business areas

P a r t i c i p a n t s

The ad hoc team will be small, but input, suggestions and feedback will be obtained from the three principal groups, particularly irom their business development managers and from the group executives. In addition, input, suggestions and feedback will be obtained from the key corporate executives.

The proposed team structure is shown below:

Ad hoc team: Phil Moore Ed Lott Burt Grad Sterling Williams (ex officio)

Business Development Advisors: Paul Olson Marshall Warwaruk Don Annala

Executive Advisors: George Ellis Jeannette Meier Warner Blow Werner Frank Geno Tolari

Where necessary, other specialists within Sterling or third party consultants will be used to analyze particular technologies, platforms, industries, geographic opportunities or functional markets. These people will come from previous Sterling experience or recommendations from Grad, Broadview, etc.

B U R T O N G R A D A S S O C I A T E S , I N C ?


Schedule

The work will be structured in two phases, both to be carried out rapidly, but allowing sufficient time for analysis, synthesis and feedback in each phase. Consideration should be given to careful timing of team meetings to encourage participation by advisors.

The proposed schedule is shown below:

1. Initial material prepared for review by 12/11/91 from Grad, Lott and Moore using notes from the Corporate Strategy Retreat, Outline Report, 1991 Accomplishments Summary, etc.

2. Initial review and planning meeting 12/16 and 12/17 in Dallas.

3. Analyze and evaluate alternative structures and strategies.

4. Submit draft report incorporating suggested alternative directions by 1/15/92.

5. Obtain feedback and comments from all participants.

6. Assess structures and prioritize strategies.

7. produce final report with conclusions and recommendations by 2/29/92.

Costs and Payment

The exact size and scope of the work is difficult to formulate until completion of steps 1 and 2 of Phase I. However, the following is

Phase I

Phase II

a ballpark estimate: Effort Level (work-days)

Phase I Phase II

B. Grad P. Moore E. Lott S. Williams

10 4 4 2

5 4 4 2

Business Development Advisors (each) Executive Advisors (each) Outside consultants (total) Sterling specialists (total)

2 2 10 10

2 2 5 5

B U R T O N G R A D A S S O C I A T E S , I N C T


Burton Grad's work will be performed on a time and expense basis. His consulting fee will be $1,800 per day; other BGAI consultants will be at rates approved by Sterling in advance.

Sterling will also be billed for all authorized costs including travel, accommodations, meals, facsimile, phone, express delivery, etc.

Invoices will be sent monthly and are due to be paid within 15 days of receipt.

The current estimate of cost for BGAI activities is:

B. Grad — fees BGAI Associates — fees Total fees

B. Grad — expenses BGAI Associates — expenses Total expenses

Total Cost

Accepting this proposal by Ste for fees not to exceed $30,000

Phase I Phase II Total

$18,000 $ 9,000 $27,000 12.000 6.000 18.000 30,000 15,000 45,000

3,000 2,000 5,000 3.000 2.000 5.000 6,000 4,000 10,000

$36,000 $19,000 $55,000

authorizes the work in Phase I expenses not to exceed $6,000.

If the above proposal is satisfactory, please sign and return the original to BGAI.

Sincerely, Accepted for Sterling Software, Inc.

by. ' B u r t o n Grad s i g n a t u r e BG:7056

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OUTLINE REPORT

MISSION

- PROVIDE AN ATTRACTIVE RETURN TO OUR SHAREHOLDERS BOTH IN TERMS OF RETURN ON EQUITY AND MARKET VALUE OF THE STOCK

- PROVIDE THE BEST AVAILABLE PRODUCTS AND SERVICES TO OUR CUSTOMERS

- PROVIDE THE BEST AVAILABLE WORKING CONDITIONS AND CAREER OPPORTUNITIES TO OUR EMPLOYEES

- MAINTAIN LEADERSHIP POSITIONS IN EACH OF OUR PRIMARY MARKETS

GOALS

- GROW EPS AT AN AVERAGE RATE OF 20% OVER THE NEXT THREE YEARS

- GROW CFPS AT AN AVERAGE RATE OF 20% OVER THE NEXT THREE YEARS

- GROW REVENUE AT AN AVERAGE RATE OF 15% OVER THE NEXT THREE YEARS

- GROW ROE FROM 10% TO 15% BY FYE 1994 - ELIMINATE LONG TERM DEBT BY FYE 1993 - INCREASE THE STOCK PRICE TO $25.00 BY FYE 1992, $30.00 BY FYE 1993 AND $35.00 BY FYE 1994

OBJECTIVES: 1992

- ACHIEVE EPS OF $1.25 FOR THE YEAR... $.24 FOR THE FIRST QUARTER, $.30 FOR THE SECOND QUARTER, $.33 FOR THE THIRD QUARTER AND $.38 FOR THE FOURTH QUARTER

- ACHIEVE OPERATING PROFIT OF $44.2M... INCLUDING $13.7 FOR EDI, $26.7M FOR SYSTEMS SOFTWARE AND $6.1M FOR FEDERAL SYSTEMS

- ELIMINATE OUR $57.2M DEBT BY CONVERTING IT, EITHER DIRECTLY OR INDIRECTLY, TO EQUITY

+ OPERATIONALLY, MAKE SURE THAT... - IN EDI, WE ESTABLISH A FIRM PRESENCE IN EUROPE AND JAPAN

- IN SYSTEMS SOFTWARE, WE DEVELOP A SUBSTANTIAL LAN BUSINESS AND ESTABLISH FLAGSHIP PRODUCTS IN DATA COMMUNICATIONS AND INFORMATION MANAGEMENT

- IN FEDERAL SYSTEMS, WE WIN THE NASA ACF RECOMPETE AND BEGIN EXECUTION OF A SOLID PLAN TO WIN THE NASA CSS RECOMPETE

OUTLINE REPORT

- ACQUIRE AT LEAST TWO SIGNIFICANT EDI BUSINESSES AND ONE SIGNIFICANT SYSTEMS SOFTWARE BUSINESS

- ACHIEVE AND MAINTAIN A COMMON STOCK PE OF AT LEAST 20 BY ACHIEVING OUR OBJECTIVES AND DEALING EFFECTIVELY WITH THE INVESTMENT COMMUNITY

STRATEGY

- IDENTIFY HIGH POTENTIAL MARKETS BASED ON SIZE, GROWTH RATE, PROFITABILITY, CASH FLOW, COMPETITIVE CLIMATE AND BARRIERS TO ENTRY

- CREATE SEPARATE BUSINESSES TO PURSUE THEM AND OPERATE EACH BUSINESS INDEPENDENTLY...EACH WITH ITS OWN GOALS, OBJECTIVES AND STRATEGY

- FOCUS ON DOMINATING THE HIGHEST POTENTIAL NICHES IN EACH MARKET

- PUT GOOD PEOPLE IN CHARGE AND GIVE THEM THE RESPONSIBILITY AND AUTHORITY TO RUN THEIR BUSINESSES

- PROVIDE EACH BUSINESS THE HELP IT NEEDS TO SUCCEED

- MAINTAIN THE RIGHT BALANCE... OF DIRECTION, SUPPORT, CONTROL AND AUTONOMY AMONG CORPORATE, GROUP AND DIVISION

- MAINTAIN THE RIGHT BALANCE...OF SYNERGY AND INDEPENDENCE AMONG DIVISIONS

OPERATING STYLE

+ DECENTRALIZE - PUSH DECISION MAKING AND AUTHORITY TO THE LOWEST LEVEL POSSIBLE

- ELIMINATE UNNECESSARY BUREAUCRACY + ORGANIZE INTO GROUPS OF OPERATING DIVISIONS - EACH GROUP ADDRESSING A SPECIFIC TARGET MARKET

- EACH DIVISION ADDRESSING A SPECIFIC NICHE -- OR A SPECIFIC FUNCTION --WITHIN THE GROUP'S TARGET MARKET

+ REMAIN DECENTRALIZED - SUBDIVIDE AS THE BUSINESS GROWS RATHER THAN CONSOLIDATE

+ MAINTAIN A UNIFIED IMAGE - STERLING SOFTWARE UMBRELLA - COMMON NOMENCLATURE

+ MAINTAIN CLOSE CONTROLS AT ALL LEVELS

OUTLINE REPORT

- INTENSIVE ANNUAL STRATEGIC PLANNING SESSIONS

- COMPREHENSIVE QUARTERLY REVIEWS - DETAILED MONTHLY REPORTS - INFORMATIVE SEMI-MONTHLY UPDATES - WEEKLY UPDATES DURING THE THIRD MONTH OF EVERY QUARTER

- FREQUENT FACE TO FACE DIALOGUE IN ALL DIRECTIONS

RESPONSIBILITIES

+ CORPORATE - CORPORATE STRATEGY - OPERATIONAL ADVISE AND CONTROLS - FINANCIAL CONSOLIDATION, REPORTING AND CONTROLS

- ACQUISITIONS AND DIVESTITURES - INVESTOR RELATIONS

+ GROUP - GROUP AND DIVISION STRATEGY - OPERATIONAL ADVISE AND CONTROLS - FINANCIAL CONSOLIDATION AND CONTROLS - ACQUISITIONS AND DIVESTITURES - INDUSTRY RELATIONS

+ DIVISION - DIVISION STRATEGY - OPERATIONS - ACCOUNTING - INDUSTRY & CUSTOMER RELATIONS

POLICIES

+ BUSINESS PLANS - EACH DIVISION AND GROUP MUST PREPARE AN ANNUAL BUSINESS PLAN CONSISTING OF A P&L BUDGET, A BALANCE SHEET, A CASH FLOW BUDGET, A CAPITAL EXPENDITURE BUDGET AND A COMPREHENSIVE OPERATING PLAN. THE ANNUAL PLAN MUST BE REVIEWED BY CORPORATE AND HAVE THE CEO'S FINAL APPROVAL AND COMPLETED BY AUGUST 31 EACH YEAR.

+ ACHIEVING PROFIT PLAN - ON AN ONGOING BASIS WHILE PURSUING ITS ANNUAL OBJECTIVES, EACH DIVISION AND GROUP MUST MAINTAIN ITS EXPENSES BELOW THE LEVEL NECESSARY TO ACHIEVE ITS PROFIT PLAN

+ CAPITAL EXPENDITURES - COMMITMENTS TO UNBUDGETED CAPITAL EXPENDITURES ACCUMULATING TO MORE

* Page 4 OUTLINE REPORT

THAN $25,000 PER YEAR OR BUDGETED CAPITAL EXPENDITURES ACCUMULATING TO MORE THAN $50,000 PER YEAR MUST HAVE THE CEO'S APPROVAL.

+ PRICE LISTS - EACH DIVISION MUST MAINTAIN A WRITTEN PRICE LIST OF ITS PRODUCTS AND IT MUST BE REVIEWED AND APPROVED WITH EACH ANNUAL BUSINESS PLAN.

+ SALARY ADMINISTRATION - EACH DIVISION MUST HAVE A WRITTEN POLICY OUTLINING ITS APPROACH TO SALARY ADMINISTRATION AND IT MUST HAVE THE CEO'S PRIOR APPROVAL.

+ COMPENSATION PLANS - COMMISSION AND BONUS PLANS MUST BE IN WRITING AND HAVE THE CEO'S PRIOR APPROVAL. COMPENSATION FOR ALL EMPLOYEES, INCLUDING SALARY INCREASES, MUST HAVE TWO LEVELS OF APPROVAL.

+ EMPLOYEE BENEFITS PLANS - EACH DIVISION MUST HAVE A WRITTEN EMPLOYEE BENEFITS PLAN AND IT MUST HAVE THE CEO'S PRIOR APPROVAL.

+ RECRUITING AND PROMOTING - CANDIDATES MUST FIRST BE SOUGHT INTERNALLY IN AN EFFORT TO MAXIMIZE PROMOTION OPPORTUNITIES. WE WILL ONLY HIRE QUALITY CANDIDATES (8.0 OR ABOVE) WHETHER RECRUITED INTERNALLY OR EXTERNALLY. ALL CANDIDATES MUST BE INTERVIEWED AT THE PEER LEVEL AND TWO LEVELS UP.

+ EMPLOYEE AGREEMENTS - STANDARD EMPLOYMENT AGREEMENTS MUST BE REVIEWED BY THE CEO IN ADVANCE. NON-STANDARD EMPLOYMENT AGREEMENTS MUST BE REVIEWED AND APPROVED BY THE CEO PRIOR TO INITIAL DISCUSSIONS.

+ STOCK OPTION PLANS - WRITTEN POLICIES, PROCEDURES AND GUIDELINES FOR THE STOCK OPTION PLANS ARE IN PLACE AND ALL APPROPRIATE PARTIES MUST BE FAMILIAR WITH AND ADHERE TO THEM.

+ EXPENSE REPORTING - EACH DIVISION MUST HAVE A WRITTEN POLICY FOR BUSINESS EXPENSES REIMBURSEMENT AND IT MUST HAVE THE CEO'S PRIOR APPROVAL.

+ OFFICE FACILITIES - ALL DIVISIONS WITHIN A GIVEN GEOGRAPHIC AREA MUST CO-LOCATE IN A SINGLE STERLING SOFTWARE FACILITY. COMMITMENTS FOR ALL UNBUDGETED OFFICE FACILITIES AND BUDGETED

OUTLINE REPORT

OFFICE FACILITIES ACCUMULATING MORE THAN $25,000 PER YEAR MUST HAVE THE CEO'S PRIOR APPROVAL.

+ OUTSIDE ACCOUNTANTS AND AUDITORS - THE USE OF OUTSIDE ACCOUNTANTS OR AUDITORS MUST BE COORDINATED THROUGH CORPORATE AND MUST HAVE THE CFO'S PRIOR APPROVAL.

+ OUTSIDE ATTORNEYS - THE USE OF OUTSIDE ATTORNEYS MUST BE COORDINATED THROUGH CORPORATE AND MUST HAVE THE GENERAL COUNSEL'S PRIOR APPROVAL.

+ OUTSIDE RECRUITERS - COMMITMENTS TO EXECUTIVE SEARCH FIRMS ACCUMULATING TO MORE THAN $25,000 MUST HAVE THE CEO'S PRIOR APPROVAL.

+ ADVERTISING - CORPORATE ADVERTISING IS THE SOLE RESPONSIBILITY OF CORPORATE. ALL MAJOR DIVISION AND GROUP MEDIA ADVERTISING PROGRAMS COSTING MORE THAN $50,000 MUST BE REVIEWED IN ADVANCE BY THE VICE PRESIDENT OF INVESTOR RELATIONS.

+ PRESS RELEASES - PRESS RELEASES TO THE FINANCIAL COMMUNITY ARE THE SOLE RESPONSIBILITY OF CORPORATE. ALL MAJOR GROUP OR DIVISION PRESS RELEASES MUST BE REVIEWED IN ADVANCE BY THE VICE PRESIDENT OF INVESTOR RELATIONS.

+ COMPANY ACQUISITIONS - ACQUISITIONS OF COMPANIES ARE THE RESPONSIBILITY OF CORPORATE. AFTER IDENTIFYING CANDIDATES, ALL PHASES OF THE ACQUISITION PROCESS WILL BE UNDER THE DIRECTION OF THE VICE PRESIDENT OF MERGERS AND ACQUISITIONS WITH THE ACTIVE SUPPORT OF THE RELEVANT GROUP AND DIVISION. ALL COMPANY ACQUISITIONS MUST HAVE A FORMAL BUSINESS PLAN APPROVED BY THE CEO PRIOR TO EXTENDING AN OFFER. ALL OFFERS MUST BE APPROVED BY THE CEO.

+ PRODUCT ACQUISITIONS - ACQUISITIONS OF PRODUCTS ARE THE RESPONSIBILITY OF THE GROUPS. AFTER IDENTIFYING CANDIDATES, ALL PHASES OF THE ACQUISITION PROCESS WILL BE UNDER THE DIRECTION OF THE GROUP PRESIDENT WITH THE ACTIVE SUPPORT OF THE RELEVANT DIVISION. ALL PRODUCT ACQUISITIONS ACCUMULATING

OUTLINE REPORT

TO MORE THAN $500,000 MUST HAVE A FORMAL BUSINESS PLAN APPROVED BY THE CEO.

+ STRATEGIC ALLIANCES & JOINT VENTURE - STRATEGIC ALLIANCES AND JOINT VENTURES ARE THE RESPONSIBILITY OF THE GROUPS. BOTH HOWEVER REQUIRE FORMAL BUSINESS PLANS APPROVED BY THE CEO PRIOR TO INITIAL DISCUSSIONS. WE WILL NOT PARTICIPATE IN JOINT VENTURES AS A MINORITY PARTNER.

TARGET MARKETS

+ FOCUS ON OUR THREE PRIMARY BUSINESSES - SYSTEMS SOFTWARE - EDI - FEDERAL SYSTEMS

+ FOCUS ON DOMINATING NICHES WITHIN EACH OF THEM + SYSTEMS SOFTWARE

- INFORMATION MANAGEMENT SOFTWARE - STORAGE MANAGEMENT SOFTWARE - DATA COMMUNICATIONS SOFTWARE

+ EDI - TRANSLATION SOFTWARE - DATA COMMUNICATIONS SOFTWARE - NETWORK SERVICES

+ FEDERAL SYSTEMS - SECURE DATA COMMUNICATIONS SYSTEMS - SCIENTIFIC SUPPORT SERVICES - AUTOMATED MESSAGE HANDLING SYSTEMS - GRAPHICS SOFTWARE - NETWORK SYSTEMS

ORGANIZATION

+ STERLING SOFTWARE + SYSTEMS SOFTWARE

- ANSWER - AD LABS - DYLAKOR - SYSTEMS SOFTWARE MARKETING - SOFTWARE LABS - STERLING SOFTWARE INTERNATIONAL

+ EDI - ORDERNET - EDI LABS - ORDERNET INTERNATIONAL - DIRECTIONS

+ FEDERAL SYSTEMS - NASA AMES

OUTLINE REPORT - INTELLIGENCE & MILITARY - SYSTEMS & SCIENTIFIC

Page 7

SYSTEMS SOFTWARE STRATEGY

+ FOCUS ON OUR EXISTING TARGET MARKETS - STORAGE MANAGEMENT - DATA COMMUNICATIONS - INFORMATION MANAGEMENT - APPLICATIONS DEVELOPMENT

+ STORAGE MANAGEMENT - COMPLEMENT IBM AND EMBRACE SMS - BREAK EAGLE INTO A RELIABLE DELIVERY SCHEDULE WITH EARLY DELIVERABLES

- MAINTAIN OUR LEAD THROUGH AGGRESSIVE PRODUCT DEVELOPMENT AND MARKETING

- MOVE AGGRESSIVELY TO LANS + DATA COMMUNICATIONS

- FOCUS ON DOMINATING THE FILE TRANSFER NICHE

- TARGET MORE APPLICATIONS AREAS SUCH AS EDI, EFT AND VIDEO TEXT

- LEVERAGE THE SYNERGY WITH THE EDI GROUP

- SUPPORT THE MOST POPULAR COMMUNICATIONS PROTOCOLS

- MOVE AGGRESSIVELY TO LANS + INFORMATION MANAGEMENT

- SUPPORT AND EXPLOIT IBM'S INFORMATION WAREHOUSE

- CONSOLIDATE OUR RESOURCES TO FOCUS ON A COMMON INFORMATION MANAGEMENT STRATEGY

- COMBINE ANSWER SYSTEMS AND THE ANSWER LAB INTO DYLAKOR

- FOCUS AD LABS--CONSISTING OF THE ZANTHE LAB AND THE ASYST LAB--ON APPLICATIONS DEVELOPMENT

- COMBINE THE TECHNOLOGIES OF ANSWER AND DYLAKOR AND DEVELOP STATE-OF-THE-ART INFORMATION MANAGEMENT PRODUCTS

- SUPPORT THE MARK AND ANSWER MAINTENANCE BASES AS LONG AS TECHNICALLY FEASIBLE AND FINANCIALLY PRACTICAL

+ APPLICATIONS DEVELOPMENT - FOCUS AD LABS ON NICHES WITHIN THE APPLICATIONS DEVELOPMENT MARKET IN WHICH WE CAN MOST EFFECTIVELY COMPETE

- COMBINE THE TECHNOLOGIES OF ZIM, DEVELOPER AND LYNX TO PRODUCE STATE-

OUTLINE REPORT

OF-THE-ART APPLICATIONS DEVELOPMENT TOOLS

+ ATTACK THE INTERNATIONAL MARKET - EUROPE - JAPAN - CANADA

+ BUILD INDIRECT DISTRIBUTION CHANNELS. . . - VARS - OEMS

+ CONTINUE TO PROVIDE SOLUTIONS TO OUR CURRENT MAINFRAME CUSTOMERS - SUPPORT THEIR MAINFRAME PRODUCTS - OFFER MIGRATION PATHS TO OTHER PLATFORMS...ESPECIALLY LANS

+ AGGRESSIVELY PURSUE NEW MARKET OPPORTUNITIES - LANS - AUTOMATED OPERATIONS - OTHER

EDI STRATEGY

- COMMIT TO BEING THE DOMINANT EDI COMPANY WORLDWIDE

+ ATTACK EVERY MAJOR ASPECT OF THE MARKET - TRANSLATION SOFTWARE - COMMUNICATIONS SOFTWARE - NETWORK SERVICES - EDI-ORIENTED APPLICATIONS

+ ATTACK THE INTERNATIONAL MARKET - QUICKLY ESTABLISH A MAJOR PRESENCE IN BOTH EUROPE AND JAPAN

- AGGRESSIVELY PURSUE ACQUISITIONS - PURSUE STRATEGIC RELATIONSHIPS

+ ACQUIRE COMPLEMENTARY BUSINESSES - NETWORK SERVICES BUSINESSES IN EUROPE AND JAPAN

- NETWORK SERVICES BUSINESSES IN THE U.S.

- SOFTWARE COMPANIES IN EUROPE AND JAPAN THAT PROVIDE AN IMMEDIATE PRESENCE

+ EXPAND NETWORK SERVICES RAPIDLY - PENETRATE MORE VERTICAL MARKETS - PENETRATE MORE GEOGRAPHIC MARKETS: EUROPE AND APAC

- ACQUIRE CUSTOMER BASES AND VERTICAL MARKET PENETRATION

+ ACCELERATE PRODUCT DEVELOPMENT - DEVELOP A SINGLE TRANSLATION SOFTWARE PRODUCT FAMILY

- BUILD PRODUCT DIFFERENTIATION INTO OUR SOFTWARE AND SERVICES TO COMBAT

OUTLINE REPORT

COMMODITIZATION - SUPPORT ALL THE MAJOR PROTOCOLS AND STANDARDS WORLDWIDE

- LEVERAGE THE SYNERGY WITH THE SYSTEMS SOFTWARE GROUP

+ FOCUS OUR DATABASE BUSINESS - BUILD THE EDI-RELATED DATABASE BUSINESS

- DEEMPHASIZE THE STANDALONE, NON-EDI DATABASE BUSINESS

+ MOVE DIRECTIONS INTO EDI - PURSUE THE PAYMENTS MARKET - BUY RATHER THAN BUILD IF POSSIBLE - MAINTAIN OUR LEADERSHIP IN THE ITEM PROCESSING MARKET

+ PURSUE STRATEGIC RELATIONSHIPS - PHONE COMPANIES WORLDWIDE - COMPANIES IN EDI-RELATED MARKETS - NO JOINT VENTURES WHERE WE GIVE UP EQUITY

- NO STRATEGIC ALLIANCE OR SOFTWARE LICENSING RELINQUISHING POTENTIALLY ATTRACTIVE MARKETS

FEDERAL SYSTEMS STRATEGY

+ FOCUS ON OUR AREAS OF EXPERTISE - SCIENTIFIC SOFTWARE SUPPORT - SECURE DATA COMMUNICATIONS - AUTOMATED MESSAGE HANDLING - GRAPHICS - NETWORKING

- FOCUS ON IMPROVING OUR PROFIT MARGINS FROM 7% TO 12% BY 1995

+ FOCUS ON DEVELOPING EXISTING CLIENTS - ROME LABS AND NASA - WIN RECOMPETES...ESPECIALLY CSS, ACF AND CSP

- WIN NEW CONTRACTS + MANAGE TO CEILINGS

- NASA AMES CSS CONTRACT - NASA AMES AIRPLANES CONTRACT

+ SELECTIVELY PURSUE NEW MARKETS - LEVERAGE OUR EXPERTISE - UPGRADE MARKETING

+ FOCUS ON HIGH MARGIN BUSINESS - CONTRACTS REQUIRING UNIQUE EXPERTISE - EDI - SOFTWARE PRODUCTS

+ EXPLOIT THE FEDERAL EDI MARKET - AS A SYSTEMS INTEGRATOR - WITH THE EDI GROUP

+ ESTABLISH A FEDERAL SOFTWARE LAB - SEARCH FOR TECHNOLOGY WITHIN FSG ACTIVITIES THAT CAN BE PACKAGED FOR

OUTLINE REPORT

THE COMMERCIAL MARKET BECOME A DEVELOPMENT LAB FOR SYSTEMS SOFTWARE GROUP AND EDI GROUP

ACQUISITION STRATEGY

+ STRATEGY - ACQUIRE PRODUCTS AND COMPANIES IN THE EXECUTION OF EXISTING STRATEGIC PLANS

- BUY RATHER THAN BUILD WHEREVER POSSIBLE

- SELECTIVELY PURSUE OPPORTUNISTIC ACQUISITIONS

+ CURRENT TARGETS + SYSTEMS SOFTWARE

- FLAGSHIP COMMUNICATIONS PRODUCTS OR COMPANIES

- FLAGSHIP LAN PRODUCTS OR COMPANIES - INFORMATION MANAGEMENT PRODUCTS - AUTOMATED OPERATIONS PRODUCTS OR COMPANIES

+ EDI - NETWORK SERVICES BUSINESSES IN EUROPE AND JAPAN

- NETWORK SERVICES BUSINESSES IN THE U.S.

- SOFTWARE COMPANIES IN EUROPE AND JAPAN THAT PROVIDE AN IMMEDIATE PRESENCE

- FUNDS TRANSFER PRODUCTS OR COMPANIES

- NOT STANDALONE DATABASE + FEDERAL SYSTEMS

- NONE + OTHER

- EMERGING BUSINESSES OR TECHNOLOGIES OUTSIDE OF OUR THREE MAIN MARKETS...TBD

+ MINORITY INTERESTS - INITIAL INVESTMENT OF STOCK OR DEBT - VERY HIGH POTENTIAL BUSINESSES INSIDE OR OUTSIDE OUR THREE MAIN MARKETS

+ GUIDELINES + SIZE

- $2-3 OM - DOES NOT GROW THE ACQUIRING GROUP MORE THAN 50%

+ COST - CASH: $0-5M - STOCK: $0-30M - RESULTING IN NO MORE THAN 5% OF STERLING SOFTWARE GOING TO A SINGLE OUTSIDE PARTY OR GROUP

OUTLINE REPORT

+ RETURN - NON-DILUTIVE TO STERLING SOFTWARE'S EPS

- NON-DILUTIVE TO THE ACQUIRING GROUP'S REVENUE GROWTH RATE AND OPERATING PROFIT MARGIN

- PAYS BACK IN LESS THAN FOUR YEARS + CRITERIA

- PROVEN BUSINESSES WITH SUCCESSFUL TRACK RECORDS

- PROVEN PRODUCTS...DEVELOPED AND INSTALLED WITH SATISFIED CUSTOMERS

+ RESPONSIBILITIES + CORPORATE

- DEVELOP CORPORATE STRATEGIC PLAN - DEVELOP CORPORATE ACQUISITION PLAN - IDENTIFY OPPORTUNITIES - MANAGE COMPANY ACQUISITIONS - APPROVE PRODUCT ACQUISITIONS

+ GROUP - DEVELOP GROUP STRATEGIC PLAN - DEVELOP GROUP ACQUISITION PLAN - IDENTIFY OPPORTUNITIES + ASSIST CORPORATE IN ALL PHASES OF ACQUIRING COMPANIES - SCREENING AND EVALUATING - INTEGRATION PLANNING - DUE DILIGENCE - CLOSING AND EXECUTING

- MANAGE MAJOR PRODUCT ACQUISITIONS + DIVISION

- DEVELOP DIVISION STRATEGY - IDENTIFY ACQUISITION NEEDS - IDENTIFY OPPORTUNITIES - ASSIST GROUP AND CORPORATE IN ALL PHASES OF ACQUIRING RELEVANT COMPANIES

- ASSIST GROUP IN ALL PHASES OF PRODUCT ACQUISITIONS

- MANAGE MARKETING AGREEMENTS

DEVELOPMENT PHILOSOPHY

- CONDUCT DEVELOPMENT ACTIVITIES AT THE LOWEST LEVELS AND WITH THE SMALLEST TEAMS POSSIBLE

- DEVELOP PRODUCTS IN THE EXECUTION OF EXISTING STRATEGIC PLANS

- PERFORM OBJECTIVE BUILD VERSUS BUY ANALYSES...AND BUY WHEREVER POSSIBLE

+ MAINTAIN AND ENHANCE PRODUCT AS LONG AS IT IS TECHNICALLY FEASIBLE AND FINANCIALLY PRACTICAL - AGGRESSIVELY EXPLOIT PRODUCTS WITH POTENTIAL

OUTLINE REPORT

- MILK PRODUCTS THAT ARE DYING - KILL PRODUCTS THAT SHOULD BE DEAD

- MAINTAIN VISIONARIES AND STATE-OF-THE-ART EXPERTISE IN ALL OF OUR CRITICAL AREAS

- MAINTAIN STATE-OF-THE-ART TECHNOLOGY AND OPEN AND FLEXIBLE ARCHITECTURE IN ALL OF OUR CRITICAL AREAS

- MAINTAIN CLOSE RELATIONSHIPS WITH EXTERNAL EXPERTISE IN ALL OF OUR CRITICAL AREAS

FINANCIAL MANAGEMENT

- PUSH ALL ACCOUNTING FUNCTIONS DOWN TO THE LOWEST LEVEL POSSIBLE

- MAINTAIN STRONG FINANCIAL CONTROLS - MAINTAIN ACCOUNTING PRACTICES THAT ACCURATELY REFLECT OUR FINANCIAL RESULTS

- MAINTAIN AN AGGRESSIVE POSTURE ON TAX OPTIMIZATION

- MAINTAIN AN AWARENESS AND DISCIPLINE WHERE ALL LEVELS ARE DRIVEN BY CASH FLOW AND EPS PERFORMANCE

- STRIKE THE RIGHT BALANCE BETWEEN MAINTAINING CONSISTENCY IN OUR CAPITAL STRUCTURE AND TAKING ADVANTAGE OF OPPORTUNITIES IN THE CHANGING CAPITAL MARKETS

INVESTOR RELATIONS

+ OBJECTIVES - MAXIMIZE CONFIDENCE IN OUR PUBLIC SECURITIES: STOCK AND DEBT

- MAXIMIZE OUR STOCK PRICE AND VOLUME + STRATEGY

+ ACTIVELY CULTIVATE MAJOR INVESTORS AND INFLUENCERS - LARGE SHAREHOLDERS - LARGE BONDHOLDERS - PROSPECTIVE LARGE HOLDERS - SECURITIES ANALYSTS... BOTH BUY & SELL SIDE

- FINANCIAL AND TRADE PRESS + MAINTAIN REGULAR FACE-TO-FACE CONTACT - CONDUCT QUARTERLY INVESTOR UPDATES IN NEW YORK PLUS SELECTED MARKETS

- CONDUCT REGULAR ONE-ON-ONE MEETINGS WITH KEY SHAREHOLDERS AND ANALYSTS...BOTH NATIONAL AND

OUTLINE REPORT

REGIONAL - PARTICIPATE IN KEY FINANCIAL CONFERENCES

+ MAINTAIN STEADY FLOW OF INFORMATIVE WRITTEN MATERIAL - ANNUAL & QUARTERLY REPORTS - INVESTOR'S PERSPECTIVE - STERLING SOFTWARE TODAY - FACT SHEET - NEWS RELEASES - VARIOUS DIVISION LITERATURE

- BE OPEN & HONEST

PRINCIPLES

+ PEOPLE - OUR PEOPLE ARE OUR MOST IMPORTANT ASSETS...AND WILL BE TREATED THAT WAY

+ CUSTOMERS - OUR CUSTOMERS ARE OUR MOST IMPORTANT RELATIONSHIPS...AND WILL BE TREATED THAT WAY

+ SHAREHOLDERS - OUR SHAREHOLDERS ARE OUR OWNERS... AND WE WILL PROTECT THEIR INTERESTS AND GROW THEIR INVESTMENT

+ GOALS AND OBJECTIVES - OUR GOALS & OBJECTIVES WILL BE TAKEN SERIOUSLY...AND ACHIEVED

+ QUALITY - WE WILL BE A QUALITY COMPANY--A CLASS ACT--AND WILL STRIVE TO BE PERCEIVED THAT WAY

+ ETHICS - WE WILL MAINTAIN IMPECCABLE ETHICS IN ALL OUR DEALINGS...EXTERNALLY AND INTERNALLY

+ COMMUNICATIONS - WE WILL MAINTAIN HONEST & OPEN COMMUNICATIONS...EXTERNALLY & INTERNALLY

+ MUTUAL RESPECT - WE WILL TREAT EACH OTHER WITH TRUST & RESPECT

+ OPERATING STYLE - WE WILL MAINTAIN AN OPERATING STYLE THAT MAXIMIZES EFFICIENCY AND MINIMIZES BUREAUCRACY

+ FUN - WE WILL HAVE FUN

FUTURE DIRECTION OUTLINE REPORT

Page 14

- CONTINUE TO ADDRESS HIGH POTENTIAL MARKETS WITH SEPARATE BUSINESS GROUPS

- MAINTAIN A COMMITMENT TO EACH OF OUR THREE PRIMARY BUSINESSES AND EXECUTE THEIR INDIVIDUAL STRATEGIES

- PLANT SEEDS FOR A FOURTH BUSINESS THROUGH ACQUISITIONS AND INVESTMENTS

- MAINTAIN OUR CURRENT MANAGEMENT STYLE WHILE ADAPTING TO GROWTH

- CONTINUE STRENGTHENING OUR FINANCIAL CONDITION AND ENHANCING OUR FLEXIBILITY BY ELIMINATING OUR DEBT AND GROWING OUR EQUITY, OUR CASH RESERVES AND THE VALUE OF OUR STOCK PRICE

CAPITALIZATION PLANS

- REDEEM THE REST OF THE PREFERRED - GET OUR COMMON STOCK OVER $21.60 - CONVERT THE $57M DEBT TO COMMON - KEEP HITTING OUR NUMBERS AND WATCH OUR STOCK CLIMB

- ISSUE MORE COMMON STOCK--SAY 3.0M SHARES AT $25.00 GROSSING $75M CASH

- ACQUIRE MORE COMPANIES WITH STOCK OR CASH

- ROCK »N ROLL

THREATS

- TECHNICAL OBSOLESCENCE OF OUR PRODUCTS

- COMMODITIZATION OF EDI - COMPETITION FROM MAJOR HARDWARE VENDORS

- COMPETITION "BUYING" OUR LARGE FEDERAL CONTRACT RECOMPETES

- SEVERE ECONOMIC CONDITIONS

OPPORTUNITIES

- THE GLOBALIZATION AND EXPLOSIVE GROWTH OF EDI

- THE GROWING DEMAND IN FILE TRANSFER APPLICATIONS

- THE INCREASING DEMAND FOR INFORMATION MANAGEMENT TOOLS ...DRIVEN BY IBM'S

OUTLINE REPORT INFORMATION WAREHOUSE

- THE CRITICALITY AND RAPID GROWTH OF STORAGE MANAGEMENT

- THE RAPID MIGRATION TO LANS - THE EMERGING UNIX MARKET - TECHNOLOGY AND EXPERTISE COMING OUT OF FEDERAL...SUGGESTING A FEDERAL SOFTWARE LAB

- EMERGING TECHNOLOGIES OFFERING NEW MARKETS ... SUCH AS ENTERPRISE-WIDE OFFICE AUTOMATION

- EMERGING TECHNOLOGIES OFFERING MUCH BETTER METHODS OF COMMUNICATING, MANAGING, SELLING, DELIVERING, INSTALLING, TRAINING, SUPPORTING, DEVELOPING, MAINTAINING & ENHANCING...SUCH AS VIDEO CONFERENCING

- EUROPE AND JAPAN

CHALLENGES

- SELECTING & DEVELOPING PEOPLE - MAINTAINING OUR OPERATING STYLE - REMAINING FOCUSED - BECOMING MORE MARKETING ORIENTED - ADAPTING TO CHANGING TECHNOLOGIES - ADAPTING TO CHANGING MARKET NEEDS - ADAPTING TO CHANGING CAPITAL MARKETS

- THINKING YOUNGER & NEWER

ieick'k'k'k'k'k'k'k End of Report * * * * * * * * * *

"C><

ANCES ASSOCIATES, INC. ^ 5 Saint John Place Computer Software Consultants Westport, CT 06880 (203) 454-2104

INVOICE * 1788

February 3, 1992

Burton Grad Associates, Inc. 235 Martling Avenue Tarrytown, NY 10591

For services ail Sterling oject during January, 1992:

FEES

Review of ICP listings, preparation of product matrix; additional work on overall planning:

1.25 days @ $600 $ 750.00

EXPENSES

Local travel (72 miles @.25): jg tqq

TOTAL DUE: $ 768.00

IFF7

V fr

ML »'•*" n B U R T O N G R A D A S S O C I A T E S , I N C . 235 MARTLING AVENUE TARRYTOWN, NEW YORK 1 059 1 (914) 631 - t 129 (914) 631-1 164 FAX

January 2, 1992

Mr. Ed Lott Sterling Software 8080 North Central Expressway Suite 1140, LB 53 Dallas, TX 75206-1895

Dear Ed:

As we discussed briefly in the strategic planning session in Dallas, I have been consulting with the Odesta Corporation located in Northbrook, Illinois, a suburb of Chicago (near O'Hare airport).

Odesta has been active in a number of areas: MAC database management; mail support for various workstation platforms; document management systems and application development facilities (object oriented) for client/server systems.

For a small company (revenues around $6M in 1991), this wide range of activities and lack of focus have led to serious financial losses over an extended period of time.

The investors (a prominent Chicago family with their principal holdings in real estate) have reached their investment limit and wish to avoid any additional risk. Therefore, they have asked Broadview to try to find a buyer for the company as a whole or buyers for the individual businesses.

In the context of our recent discussions, I believe that the document management and client/server application development capabilities of this company might fit into Sterling's 1992 plans.

Obviously, I am in an unusual position since both Odesta and Sterling are active clients. Nevertheless, I feel that I can possibly be of value to both of my clients by factually describing the prospective values that I see to Sterling with approval from the Odesta investors and management.

CONSULTANTS ON SOFTWARE A


Mr. Ed Lott January 2, 1992 Page 2

One of the areas of possible future interest by Sterling is the area of office automation, involving the applications and communications functions needed to increase the productivity of professional office groups. Document management (work flow management, groupware) is key to this activity. It is my belief, based on customer comments, DEC support, industry consultants and technical and limited marketing review, that the Odesta Document Management System (ODMS) will (and, to a limited extent, already does) provide a suitable product on which to build a major effort in office automation.

The system is still in development although a product which DEC deems to be satisfactory to distribute under VAX/VMS/RDB will be delivered by 1/31/92. The balance of the initial product releases are targeted for completion by 6/30/92 (including RDB and Sybase coverage for Windows and MAC clients).

Sterling's emphasis on "buying not building" would be well served by considering ODMS. While I would prefer that the products were 6 months further along, they already represent: more than 2 years of development work by a team of 15 skilled people; significant customer interaction (large defense contractors, publishing firms, etc.); and major work with DEC technical and marketing personnel.

There are lots of caveats which would need to be examined and evaluated before making a decision to acquire product rights (or the company as a whole), but, in my opinion, there is enough of an opportunity to make it worthwhile for Sterling to take a careful look.

The reason I am writing directly, and not waiting for the Broadview process to produce its normal documentation, is that there is time urgency on the part of the investors and certain actions could be taken (to conserve cash) which would effect the customer/prospect base and hence the potential value to Sterling.

I recommend that you lead the charge (with agreement from Sterling and Phil), talk with Paul and Bernie and meet with the investors and management within the next two weeks (by 1/17).

If the opportunity looks promising from both market and technical points of view, then you could quickly lay out a financial proposal which could prevent any negative interim actions while Sterling could determine if this type of product fits into its plans. This would then give Sterling enough time to carry out suitable due diligence work.


Mr, Ed Lott Jartuary 2, 1992 Page 3

Ed, please call me to discuss this further. While I do not have any personal financial motivation in making this happen, I do feel it might be beneficial to two of my best clients.

Sincerely,

BG:8010

cc: Paul Deninger Phil Moore Sterling Williams

/

December 23, 1991

Mr. Phil Moore Sterling Software, Inc. 8080 North Central Expressway Suite 1140, LBS 3 Dallas, TX 75206-1895

Dear Phil:

Per our discussions on December 16 and 17, here is Mike Dubrall's address and phone number: Western Regional Director, Cooperative Marketing Division, NCR Corporation, 6870 Koll Center Parkway, Pleasanton, CA 94566, (415) 484-6294. Mike has been with NCR for about 10 years; he has a lot of general knowledge about Unix, Unix Vendors, Unix Systems, etc. from previous jobs and from his continuing work with various Unix committees.

Also, I have enclosed some reports I received from consultants regarding the future of Rise/Unix Systems in the commercial world and specifically referencing the need for OLTP systems.

I will work on the ICP directories when they arrive to see what can be done to better structure the opportunity areas and identify candidate products and companies.

I will also try to create a new grid to structure the areas of interest.

Sincerely,

Burton Grad BG:7095

enclosures

(>tH

Material on RISC/UNIX and OLTP

I believe that there is a new opportunity for OLTP systems software since the mainframe stranglehold (e.g., CICS on mainframe computers) on this application environment appears to be broken. In addition, the use of SQL data bases provides a common interface for transaction processing applications.

The ability to successfully perform a wide range of OLTP applications on various platforms opens the door to acquiring a multi-platform OLTP system and marketing it to the Fortune 1000 companies (on a company, division and department basis).

I have attached a few items to help you get better acquainted with the current status of RISC/UNIX and OLTP (as of summer 1991):

my summary of the market opportunity for OLTP's

a report from Aberdeen on commercial RISC/UNIX

The table of contents and introduction to an OLTP report from Patty Seybold

. AS/400 comparison to RISC/UNIX configurations for OLTP from ADM

I have quite a bit of additional material on the subject; the particularly good stuff is from Aberdeen, a Boston-based consulting firm.

Given Sterling's position with Super-Tracs and storage management, OLTP might be a bridge to carry you into client/server and midrange systems in addition to your strong mainframe positioning.

Burton Grad BG:8 0 0 0