mm• OPPORTUNITYFOR • INVESTMENT .m• PLAN FOR MARKET DOMINANCE mm VISION SOFTWARETECHNOLOGIES,INC. • DECEMBER,1999 mmm CONTACT: m RUSSELL L. BABINES ANTHONY SCARPINO 1259 Balmoral Drive Vision Software Technologies, Inc. m Pittsburgh, PA 15237 2150 Ramsey Road • Telephone: 412.364.5232 Monroeville, PA 15146 E-mail: rlbab@sgi.net Telephone: 412.373.8696 • Fax: 412.373.7029 • E-mail: scarpino@vstech.com Web: www.vstech.com l I 000333mABLE OF CONTENTS m• Ex_cu_,w SUMMARY • CONSTITUENT COMPANY: OVERVIEW OF VST, INC. 6 • LmSTOF SHAREHOLDERS 9 [] MANAGEMENT TEAM 10 PRODUCT OVERVIEW: THE VST SYSTEM 14 • MARKET ANALYSIS 18 PROTECTING MARKET POSITION 22 • MARKETING STRATEGY 25 SALES PLAN 28 i MARKETING COMMUNICATIONS 31 CORPORATE CONSOLIDATION PLAN 35 • CONVERSION PLAN 37 FINANCIAL STATEMENTS 42 • FINANCIAL PROJECTIONS 43 USE OF PROCEEDS AND PROFORMA RATIONALE 45 m CUSTOMERS, ORDERS, & PIPELINE 56000334EXECUTIVE SUMMARY A long-established, highly respected provider of information systems to foodservice operations in healthcare, • Vision Software Technologies, Inc. (VST), has charted a course for becoming the sole provider of this • software to healthcare institutions in North America. A central component of the VST growth plan is an aggressive and timely acquisition strategy. To achieve a lucrative market-dominant position, VST is • seeking $14.5 million in equity capital, which is projected to provide substantial return within three • years. MARKET FOUNDATION • Healthcare is a major industry in North America--representing 13.6% of • Healthcare IndustrySpending -US the GNP in the U.S., and 10.2% in Canada. The U.S. heahhcare induszz 2.o _.0 try, commanding $1.2 trillion in annual expenditures today and an [] 1.8 L8 expected $2+ trillion by 2007, is under-invested in information technol-1.4 1:_ 1.4 ogy and "terribly far behind other industries" in this respect, according to • 1.7 12 Stephen Savas of Goldman, Sachs & Co., NY) This under-investment 1.0 • _8 translates into gross inefficiencies related to labor, productivity, and u supplies (including paper), which the industry is under extreme duress to • u correct--because of reimbursement practices, the growth of managed _0 care, and inflation. Savas observes that healthcare can't afford not to 1998 2007 invest in information technology. As a result, consultants predict an • imminent bout of catch-up spending on information systems technology, and investors regard healthcare information technology companies as growth targets. 1 • Food and Nutrition Services, the second largest department in a Ho_ital foodservice Computerization -NorihAmerica (1999) j hospital, has lagged behind other departments in the application of technol-.d_ _cu,_, ogy. The reasons: No major Healthcare Information Systems (HIS) vendor ,y_mp_ • offers a solution for Food and Nutrition. Instead, software is provided by only four small, privately owned companies: VST, Inc., The CBORD Group, • Inc., Computrition, Inc., and DFM Systems, Inc. Many solutions are piecemeeal and have not been highly visible to the healthcare IS community. • Only 850 fOodservice departments of the refined potential of 3,000 (200+ _ Mo_er Po_n_t • bed) hospitals in North America are currently computerized, with a remaining Tom_0_blem0_olf0,1_ls>200beds=3,000 potential market oppommity of 2,150 hospitals (72% of the market). • VST TECHNOLOGY • VST has the products needed to fulfill this niche industry vacuum today--a state-of-the-art suite of software products encompassing menu planning, production scheduling and control, inventory and procurement, • nutritional analysis, and paperless clinical systems that interface with major HIS clinical systems. Developed for a 32-bit Windows NT platform, the VST System incorporates open architecture, is Y2K compliant, • operates partially in a client/server (SQL) environment, and complies with mandated HL7 standards for • data communication in healthcare. The scalable VST suite will be fully Web enabled in the next year, allowing it to support a continuum of nutritional care through Internet delivery. A proven product, the VST • System has an installed base among high-profile industry leaders--such as the Johns Hopkins Hospitals, the I VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., t999 PAGE 3 000335Mayo Foundation Hospitals, and Memorial Sloan-Kettering Cancer Center. Each is applying state-of-the-art • technology in innovative fashion to optimize patient care and achieve record rates of return on investment. FOUNDATION FOR SALES • Computerization of hospital foodservice operations has been recognized for nearly 20 years as a means of control-• ling food and labor costs through intelligent financial control mechanissms and through automation of labor-intensive paperwork. Software • Total Foodservke Computer Systems also provides means for achieving standards specified by the Joint Installed: 1980-2002 Commission on Accreditationof HealthcareOrganizations (JCAHO). • 1400 p 1,as0(po_bte)Clients typically determine that system pay-back occurs within 12-18 • 1200 //__ 1.2a0 (e_) months. Newer cost-justifications extend beyond the historic benefits 1000 8s0_ 1,0s0 (w0_ =e) of automation. For example, a ground-breaking paperless menu • 8oo solution developed in conjunction with InterVoice Corporation uses 6o0 44/interactive voice recognition technology to reduce processing ex-• 40o _ _ _/" penses, with cost-justificati0n projections of as much as $1 million per • 2o0 _ year in large facilities.2a Continuous nutrition risk screening, a process 76¢,,_ pioneered by VST in 1992, can reduce length-of-stay and increase the 0 I I I I I • 1984 1989 1994 1999 2002 rate of third-party reimbursement to hospitals? According to industry consultant Zachary Gerbarg, proactive data analysis is the industry's • "best hope for improving medical quality while lowering costs.'n Enhancing productivity and quality while • reducing costs is an arena in which information technology poses expanding opportunities. CORPORATE GROWTH METHODOLOGY • V Acquisition of competitors: VST's three competitors face a common dilemma. They now • offer only DOS or UNIX-based applications, while the healthcare industry is rapidly standardizing to B MS Windows. s Each VST competitor is owned by VST:Projected Revenues and GrossProfit a private entrepreneur (age 50+) who has invited 70 _s.o [] T¢ol P.evenue • VST to make a buy-out offer. This is therefore an 60 m G__0_ • opportune time to consolidate industry resources, and VST is the prime candidate f°r taking the _s° _ _4°_ 3,5 • initiative. 30 _.1 • V New Sales: As it becomes the sole provider of 20 ,0, information systems to this industry niche, VST • will control market, reduce the sales cycle, and 10 • i | achieve higher profit margins than ever before 0 Ye0r I Year 2 Ye0r 3 • possible in this industry. Over the next three years, VST projects 380 new hospital sales ($43.2 million), and a Profit:Sales ratio approaching • 45% by Year 3. • V Conversions: VST possesses the immediate financial benefit of essentially doubling its sales through converting its existing and acquired customers from character-based applications to • Windows-based technology. Conversions generate $13.4 million in revenues over three • years. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 4 000336_' Recurring Revenues: A total installed base of at least 850 hospitals generates ongoing • revenues from support and product updates, ensuring steady income with predictable earnings. Income from the existing client base comprises approximately half of Year 1 • projected revenues and a total of almost $50 million over the first three years. • _' Business-to-business Internet Services: Taking advantage of e-commerce through the provision of software, databases and server space via the Internet to the previously ignored • 19,000+ small acute care hospitals and long term care facilities in the U.S. and Canada. • V Public offering: VST intends to make a publicofferingwithin three years. FINANCIAL PROJECTIONS • Through acquisitions, VST will secure the solidly established revenue sources of three companies, totalling • over $20 million per year today. VST will market, unopposed, to an estimated additional 2,150 heahhcare facilities in the U.S. and Canada that have not yet computerized foodservice operations. Conservative • projected total revenues are $20.6 million in Year 1, $39.5 million Year 2, and $65.0 million Year 3, with a combined before tax profit of $49 million over three years. • CAPITAL REQUEST • Based on all information available at this time, it appears that the three competitive companies can be • acquired for a total of $11 million. In addition, VST will incur one-time organization and consolidation expenses estimated at $3.5 million. Therefore, VST is seeking financing in the amount of $14.5 million. • Investors will be offered stock in the consolidated company in proportion to their investment made relative to total company worth. The net profits of the consolidated company are projected at $4.9 million in • Year 1, $15.1 million in Year 2, and $29.1 million in Year 3. Dividends will be made in each of these years as • determined by the board of directors. VST expects a return to shareholders of 17% in year 1, 40% in year 2, ' and 70% in year 3. Ii • MANAGEMENT TEAM • VST is guided by a team of individuals possessing, collectively, more than 50 years of successful experience in this niche market. These executives are dynamic, results-oriented leaders with strong financial incentive, • who are willing to forego immediate high wages in favor of an equity stake in a market-dominant company. • They are committed to providing quality products and services to customers, and maximizing value for shareholders. • References Cited 1. Anders, George. Where the Money Is: Dealing with Data. Wa//Street Journal, October 19, 1998. • 2. Grossbauer, Sue. To Improve Menu Service: Linking Computers and Phones. Food.ServiceDirector, March 15, 1998. • 3. Breda, Christina. NY Hospital Expects Cost Savings with New Paperless Voice-Menu System. Food.service Information Systems Report, April, 1998. • 4. Computer Software Advances Nutrition Screening. Byting In--the computer newsletter for food and nutrition professionals; August 31, 1992. 5. Joch, Alan. Ready for Prime "lqme?Healthcare Informatics, September, 1998. • VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 5 000337CONSTITUENT COMPANY" OVERVIEW OF VST, NC. THE VST VISION • VST is committed to becoming the sole provider of foodservice information systems to the healthcare industry. • THE VST MISSION • Vision Software Technologies, Inc. is a customer-driven company, committed to interpreting and apply-• ing state-of-the-art technologies to develop the most fully functional, feature-rich software available to healthcare foodservice operators, backed by a cogent commitment to exceptional service and support. • THE VST PHILOSOPHY • The VST philosophy is that every customer is a partner in creating an information systems vision. Customers define the dynamic business objectives, the problems to be solved, and the results that must • be achieved. VST applies technological expertise, an understanding of the foodservice and healthcare • businesses, and a vision of possibilities to craft customized, cutting-edge, cost-effective tools to help every customer realize and maintain an unrivaled level of operational effectiveness. • VST HISTORY i Vision Software Technologies, Inc. was formed in 1997 through the merger of two leading, long-estab-• lished software developers for the foodservice industry: V Carex, Inc. (Goodlettsville, TN and Pittsburgh, PA), well-known developers of the SPA • Dietary Information System, encompassing innovative clinical nutrition systems, • expertise in interfacing healthcare information systems with dietary systems, and fullbllow food management features V FSD, Inc. (Miami, FL), developer of the acclaimed System One, Windows-based food • management software excelling in foodservice cost accounting, integration with related • technologies, and Intemet/intranet solutions • Prior to the merger, each company had independently developed, marketed and supported a computer software system for automating institutional foodservice operations. The consolidation of the companies • into a single entity allowed the strengths of each to be optimized in a synergistic mix of product devel-• opment, marketing and sales expertise, and product support operations. Additional advantages ensued in name recognition and industry stature. Furthermore, the merger has provided economy of scale in • research and development, product support operations, and marketing communications. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 6 J 000338B CUSTOMER BASE VST is the third largest developer and supplier of foodservice software in North America, serving • approximately 300 foodservice facilities with software that is easy to install, easy to use, and easy to • maintain. Its customer base is comprised primarily of healthcare foodservice operations. However, VST has additional clients among correctional facilities, corporate dining operations, colleges and universi-• ties, and foodservice management organizations. PRODUCT DEVELOPMENT APPROACH • Central to all VST product development are contemporary, non-proprietary programming standards, such as open architecture, relational database management systems, compliance with HL7 standards for • healthcare information, SQL compatibility, and full use of the MS Windows operating systems. CREDENTIALS • Among its credentials, VST is: V a charter member of the Microsoft Healthcare Users Group V the software of choice for Silver Plate and Ivy Award winners • V a recommended supplier to IBM, Unisys, Data General, and Hewlett Packard Corporations • _' a member of the Microsoft Developers Network • _' a member of the HL7 Standards Committee • V a member of the American Society of Healthcare Food Service Administrators V a member of the National Society for Healthcare Foodservice Management V a member of The Society for Foodservice Management V recognized in the Intel Client/Server Solutions catalog • V named as a sole-source supplier to county and state agencies • V an educational provider recognized by the American Dietetic Association, The Educatioona Foundation of the National Restaurant Association, and the American • Correctional Food Service Association. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 7 000339• GEOGRAPHIC ORGANIZATIONAL STRUCTURE • Offices and associated personnel are located in four cities. Primary corporate functions are delineated • among these offices as follows: • Nashville Office This is the site for research, development, product testing, documentation, customer service, techni-• cal service, interface development, and customer billing/accounting operations for U.S. and Canadian customers. • Miami Office • Corporate administration, marketing communications, marketing and sales to non-healthcare markets in the U.S., and Intemet programming are managed from this site. Pittsburgh Office This is the sales headquarters for U.S. and Canadian healthcare markets. Toronto Office This is the primary service and support office for Canadian clients. m VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 8 000340__ ST OF SHAREHOLDERS mmm SHAREHOLDERS m A list of shareholders appears below. m Vision Software Technologies, Inc. (VST) was incorporated on April 24, 1997. The company was • formed through a commitment among the shareholders and directors of Foodservice Software Dynamics, Inc. and Carex, Inc. The shares of each of the companies are divided as follows: • Foodservice Software Dynamics, Inc. [] Ronald Jacobson 75% • Edwin Hill III 12.5% m Gary McGowan 12.5% • Carex, Inc. Anthony Scarpino 40% Philip Patterson 40% • Richard Kachel 20% m• The companies have agreed to issue Vision Software Technologies, Inc. shares, on an agreed upon basis, following the determination of the methodology and amount of corporate funding available. • There has been no capital investment into Vision Software Technologies, Inc. All investments were m made by and into the individual companies. These investments include expenditures for research, development, sales, marketing, professional fees, etc. There are no warrants or options granted. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 9 000341MANA(;EMENT TEAM VST is managed by three highly capable individuals: Anthony Scarpino, Phillip Patterson, and Ronald • Jacobson, founding principals of Carex, Inc. and FSD, Inc. Each of these industry veterans offers practi-• cal knowledge of foodservice-related businesses and entrepreneurial expertise. Together, the three bring to VST more than 50 years of first-hand success in the foodservice software niche market. Curriculum • vitae of these individuals appear on the following pages. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 10 000342m• ANTHONY SCARPINO EXPERIEN(,E • SCARPINO, PATTERSON 8< ASSOCIATES, INC., NASHVILLE, TN, 1981 -PRESENT • PRESIDENT, HEALTHCARE DIVISION v Responsible for the overall business operation of SPA, Inc. V Responsible for sales and business strategy of VST, Inc. • v Responsible for assisting in the software definition/development process • HASKELL, INC., PITTSBURGH, PA, 1979-1981 • VICE PRESIDENT, MARKETING AND SALES v Responsible for all marketing and sales operations of a large national steel office furniture • manufacturer v Directed the sales efforts of more than 100 independent sales representatives nationwide • ALADDIN SYNERGETICS, INC., NASHVILLE, TN, 1973 -1979 • DIRECTOR, NEW PRODUCT DEVELOPMENT v Responsible for all new ventures for the Corporation. Developed several new products and • programs which still bring over $30,000,000 in annual revenues to the company. REGIONAL/INTERNATIONAL SALES MANAGER v Responsible for sales management in 1/3 of the US and all of Canada. Area consistently • ranked highest in the company in sales. DIRECTOR, MARKETING COMMUNICATIONS v Responsible for all corporate marketing communications. Included all public relations n activities, advertising, trade shows, etc. Worked with some of the largest advertising and PR firms in the country. • SALES REPRESENTATIVE • v Worked as a sales representative in the New York, Michigan and Ohio areas. Consistently led the company in sales volume. UNITED STATESARMY, 1969 -1972 ARTILLERY OFFICER (CPT.) • HEUCOPTERPILOT • HQ BATTERYCOMMANDER(US ARMY RESERVES 1973 -1977) EDUCATION i • YOUNGSTOWN UNIVERSITY, YOUNGSTOWN, OHIO Bachelor of Science in Business Administration, 1968 • UNIVERSITY OF TENNESSEE AT NASHVILLE • MBA Program, 1978 VISION SOFTWARE TECHNOLOGIES_ INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE I 1 000343• RONALD JACOBSON EXPERIENC£ • FSD, INC., MIAMI, FL, 1987 -PRESENT • PRESIDENT • V Responsible for the overall business operation of FSD, Inc. v Responsible for the overall business operation of VST, Inc. • V Additional responsibilities include the development and marketing of institutional food service software applications THE THOREN CORPORATION, MIAMI, FL, 1984 -1987 PRESIDENT • _' Directed regional sales representatives in the eastern U.S • v Established target accounts program with computerized database system v Developed joint marketing programs with Hewlett Packard and Burroughs Corporation • v Organized a computerized Research & Development program for software applications • RAND DEVELOPMENT, INC., ESCONDIDO, CA, 1981 -1984 • PRESIDENT V Responsible for the development of patentable products with practical application to food • service • _' Major account dealings: Beatrice Foods, Nestle Corporation, General Foods Corporation, Dietary Systems, Inc. FOODSYSTEMS, INC., MIAMI, FL, 1971 -1980 l VICE PRESIDENT COMPACTCOFFEE, INC., MIAMI, FL, 1965 -1970 VICE PRESIDENT . EDUCATION: " • UNIVERSITY OF MIAMI, CORAL GABLES, FL • Bachelor of Arts, Department of Philosophy, 1965 i VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 12 000344• PHILLIP PATTERSON EXPERIENCE • SCARPINO, PATTERSON & ASSOCIATES, INC., NASHVILLE, TN, 1979 -PRESENT VICE PRESIDENT, TECHNICAL SERVICES AND SUPPORT V Responsible for all corporate technical services and support v Responsible for all customer support and service • V Full responsibility for recruiting, hiring and managing technical staff • v Full responsibility for technical aspects of corporation • v Responsible for establishing, directing and managing technical service budget NLT COMPUTERSERVICESCORPORATION, NASHVILLE, TN, 1974 -1979 • COMPUTER SERVICES DIRECTOR • V Managed Legal Division computer services operations • V Developed the JURIS III Legal Time Accounting System v Managed the installation and support of the JURIS III System v Managed all employees in the Legal Division • GEORGEPEABODYCOLLEGE, NASHVILLE, TN, 1970 -1974 U SYSTEMS ANALYST V Designed, programmed and supported new and existing systems v Established test site for PDP 11/40 software v Interviewed and trained new personnel v Recommended and implemented departmental policy changes • MIDDLE TENNESSEE STATE UNIVERSITY, MURFREESBORO, TN • Bachelor of Science, Computer Science, 1970 VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 13 000345PRODUCT OVERVIEW: THE V.C_T SYSTEM Vision Software Technologies, Inc. constructs flexible, integrated information systems, with the ability • to control quality, realize dollar savings, and improve productivity. • In a user-friendly environment, the VST System represents the state-of-the-art in control of foodservice • inventory, purchasing, forecasting, budget management, cost analysis, menu planning, nutrient analysis, and reporting. The VST System also offers: • V Productivity-enhancing tools such as diet office management software, which automates • individual patient menu processing according to prescribed diet • _' Continuous nutritional risk screening, which identifies patients at the risk of proteincallori malnutrition, with potential to decrease length-of-stay and increase third-party • reimbursement • _' Full-blown nutritional assessment features, which make clinical nutrition staff both more productive and more effective _' Interfaces and complete, real-time integration with clinical systems relevant to nutri-• tional care, such as pharmacy, laboratory, nursing data, order entry, and admission/• discharge/transfer (patient identity and location) information. The VST System accepts and transmits data in a manner that wholly complies with present and planned HL7 • standards • V A state-of-the-art dietary communications system (DIETCOM) which was co-developpe with Johns Hopkins Health System and The Mayo Foundation. This innovative application allows the complete communication of dietary related patient information • to be entered at the ordering site (nursing units) and transmitted to the VST system, improving the timeliness of patient information and increasing nursing and dietary • personnel productivity. VST has also secured cooperative marketing agreements with both Johns Hopkins Health System and The Mayo Foundation for this product. • The VST System connects readily with other applications--such as point-of-sale, spreadsheet, inventoory purchasing, or accounting systems. • The VST System provides the advantages of a relational database system, including single entry of • data, global updates in real time, powerful query capability, and robust on-demand reporting. Use of non-proprietary, open systems architecture positions customers to adopt related and emerging technolo-• gies--interactive voice response, interactive television, pen-based technologies, palmtop computers, bar code readers, debit card systems, radio frequency devices, and others. In serving international customers as well as ethnic groups within the continental U.S., VST has • developed software that is multi-lingual. The point-of-care VST menu system based on interactive • voice recognition technology can provide spoken menu choices to patients, using one or more language options. Operating on all Windows platforms, VST's versatile products scale to fit a broad variety of • requirements from a single-user system, to a network, a client/server configuration, or a corporate • intranet. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 14 000346PRODUCT BENEFITS • Primary benefits derived from the VST System are: 'g Increased management efficiency and control V Enhanced patient care • V Reduced food costs • V Reduced labor costs i • _' Increased productivity and effectiveness • V Improved patient satisfaction through advanced meal-ordering systems V Reduced patient care costs through a reduction in length of hospital stays V Improved management of clinical (nutrition) records V Compliance with relevant regulations and guidelines (from JCAHO, OBRA, state • agencies, etc.) RESEARCH AND DEVELOPMENT VST has always been the first in the industry to provide innovative and technologically advanced products to • the market. VST is committed to continuing its leadership role for the foodservice information industry, • and intends to continue to invest the R&D resources required to maintain this prestigious posture. • PRODUCT LIFE CYCLE [] The life cycle for the company's product is approximately five to seven years. The product must be I enhanced throughout this cycle, with updated versions written to take advantage of the advancements [] in the computer industry. • PLANNED PRODUCTS With a large foundation of like customers, VST is positioned to bring new products to the market--and • sell these products to both new and existing customers. Based on past experience, we believe that substantial revenue can be generated with minimal effort and overhead, especially to existing clients. • Marketing data confirms that satisfied customers are among the best prospects for future sales. Customer • support staff have well established relationships with VST clients. Therefore, new products will be marketed to existing customers by customer support staff during routine support conversations, as well as • by in-house telephone marketing staff. Prime Vendor (Food Distributor) Data Interfaces • The average VST customer purchases well over $1 million in food annually. The total VST CUB-• tomer base will command an annual food budget in excess of one billion dollars. In most cases, purchase orders for food are placed with a primary food vendor. These orders will be placed electronically through • the VST System. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 15 i 000347As VST has control of the electronic transfer of data between the customer and the vendor, VST has • the potential to influence customers' choice of prime vendor--with proper motivation. VST intends to • establish relationships with vendors such that: V The vendor will discount prices to VST customers by 1%. V The vendor will return an additional 0.5% to VST. • V VST, in turn, will assure extensive integration of the prime vendor's databases into the • VST System, which helps to assure the vendor of each participating VST customer's ongoing business. VST projects that more than $1 million in annual net profits can be generated through such an ar- rangement. Furthermore, this offering augments VST customers' perceived value of the VST System. Nursing Home Patient Records and Care Plans • As a derivative of the VST System, the company is developing a software package that is intended • to be marketed to nursing homes as small as 50 patients. This software will allow an electronic record to be maintained for each patient. In addition, the software will create a standardized care plan based on • data specified for each patient {i.e., diagnosis, medication interactions, etc.). Care plan development • and documentation is an extremely time-consuming task and is highly subject to governmental scrutiny. The product will be inexpensively priced (anticipated $2,000 per facility), and marketed through use [] of mass market•fig techniques. The objective is to gain a large share of market in a reasonably short [] period of time. • Internet Delivery of Applications • Rapid advancement of Interact technologies poses new opportunities for providing information systems to both large and small foodservice organizations. Increasingly, large organizations are using private intranets as a low-overhead, high-security means of providing critical information to geographi-• cally disparate locations. For example, foodservice contract companies are beginning to provide centralizze recipe databases on private intranets. The next step is to provide comprehensive foodservice man-• agement applications. A leading contract management company has already requested a proposal from • VST for such an application. On the other end of the spectrum, some very small organizations, such as independent long-term care facilities with limited capital budgets, currently shy away from the cash outlay required to acquire • information systems. For them, Intemet-based foodservice management applications can be offered as an economical subscription service, and dovetailed into any existing PC with Intemet access. The VST System ports readily to Internet-based delivery because of its compatibility with SQL • database management, and its full integration into contemporary and emerging Web development tools. • VST is now embarking on a new venture which will allow for Intemet business-to-business provisiio of the VST System to the 4,000+ acute care hospitals under 200 beds and the 15,000 nursing • homes in the U.S. and Canada. These facilities, previously considered non-saleable because of their • size, have traditionally been unable to license a sophisticated application like the VST System due to lower operating budgets and a lengthy pay-back period. By the end of 2000, VST will be positioned to • offer its entire suite of products to this large group of healthcare facilities through an application service VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE | 6 000348I provider approach, The VST software, databases, and space on our servers will be leased to these facili-I tiesl The cuStomers will access the software through a secure Intemet connection. Fees will be charged • via flat monthly lease payments. This approach enables the customers to: • V Mitigate many of the risks associated with new information systems, such as cost overruun and long implementation times. • V Accurately gauge costs over time. A fixed fee --with no hidden charges --is very • appealing to the management of a healthcare facility. • V Bypass large capital investments in servers and databases --and the expensive expertise needed to administer them. _g Quickly implement the System by connecting to the VST computers where the software • is already up and running. • V Rely on VST to provide 24-hour-a-day support for the System. The customer does not have to pay additional in-house technical staff or overburden existing staff. These • personnel can be focused elsewhere. • V Depend on VST to back-up the data and have disaster recovery plans in place. • Using databases provided by VST, the operations can be up and running with many of the VST System's modules in a matter of only a few weeks. Since the software provided through this approach is the same software as used in a stand-alone • environment by a large facility, there would be little or no incremental costs to VST associated with the • development and maintenance of this software. Through the use of business-to-business Internet communiccatio methods, marketing and sales costs would be kept to a minimum. VST expects that annual • recurring revenues from lease payments could amount to over $1,000,000 within three years (less than l 2% market penetration), at extremely high margins. It is expected that this segment of our business will grow exponentially as the Intemet gains popularity and facilities increasingly rely on Intemet technol-• ogy for ongoing operations. Note that these potential revenues have not been included in the proformas • provided with this plan. • Internet Based Patient Clinical Data Collection Program The company will take advantage of a large base of healthcare customers to create a program that • uses the Internet as a vehicle to securely transfer patient records from large numbers of customers to a • central repository. Specific data elements from each record will be used to establish benchmarks and will also be used for research purposes, primarily to ascertain the most effective treatment for patients at • risk of Protein/Calorie Malnutrition (PCM). PCM accounts for hundreds of millions of dollars spent • annually in U.S. hospitals, according to research conducted by The Nutritional Care Management Institute of Chicago. This has been substantiated in virtually all research conducted on PCM over the • last 30 years. Research leading to effective treatment methods will serve the industry and the nation • well. Hospital customers will subscribe to this service and will pay a monthly fee for the benchmarking and research results. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 17 000349mm IV ARKET ANALYSIS m[] m PRIMARY MARKET DEFINITION • The primary market for the company's products and services is the healthcare foodservice industry in North America. Health-International Healthcare Spending m care foodservice operators in essence have two departments to Country Healthcare as m computerize: foodservice and clinical nutrition. This provides % GNP the most extensive opportunity among foodservice segments. • us 13.6 • PRIMARY MARKET SIZE Canada 10.2 Switzerland 9.9 m In the U.S., there are approximately 6,500 hospitals, and in Canada there are 1,000. By including only the larger hospitals France 9.8 m (200 beds+) in our analysis, we have developed a refined Netherlands 8.7 m potential of 3,000 institutions in the U.S. and Canada, collec-Germany 8.6 m tively. Currently, 850 of these are computerized (28%). We Australia 8.5 project that 380 more hospitals will purchase and install food- service software by the end of the Year 2002. Even when North Italy 8.4 American market saturation is reached (estimated eight to ten New Zealand 7.7 • years), an ongoing market for new developments and services Sweden 7.5 mm exists among current customers. m CUSTOMER PROFILE Acute Care Hospitals and Conglomerations Current VST clients are primarily foodservice operators in acute care hospitals. Due to their larger m operational budgets, large hospitals (over 400 beds) have quickest return on investment, allowing for easier, faster, and larger sales of products and services. Over the years, viable target hospital size has been • reduced to all facilities with more than 200 beds. • The trend towards hospital consolidation has increased the market for comprehensive systems that • can provide instant communication among affiliated hospitals, sometimes spanning broad geographic distances. The VST System has been designed to address all the requirements of consolidated, multi-site m organizations. • The initial contact in these organizations is usually the foodservice director or a staff member who has been assigned to the evaluation project. The director is usually the decision maker for the applica-• tions software (functions and features); staff members are decision influencers. The IS director has veto • power over the sale if the technical aspects of the system do not meet the hospital's standards, and this role has gained increasing influence recently. The VST applications meet or exceed all industry stan-• dards, and there should be no technical reason for a veto from IS professionals. The hospital administra-• tor has authorizing power for the purchase. • v,s,oN SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 18 000350Non-heahhcare Operations • In addition to its use in our principal market of large acute care hospitals, the production related • portions of the VST System are well suited to other institutional foodservice operations. Universities, school systems, business and industrial dining locations, correctional facilities, etc. are all potential • clients. VST has been operating in these types of operations since the early 1980's, and dozens of non-• healthcare sites are currently included in our customer list. The potential in these market segments is at least ten times greater than in healthcare alone. With adequate resources and proper direction, VST can • easily broaden its scope and gracefully move into these arenas. • Contract Management Companies • Due to pressures on the industry, hospital executives are searching for the most cost-effective opera-• tional management approaches available. As a result, many are outsourcing food and nutrition services to large contract companies (e.g., Sodexho/Marriott, ARAMark, Cara, etc.) to provide operational • efficiencies. While each of these companies uses computers, none has a standardized, comprehensive • information tool suitable for all areas and functions. VST can fulfill this need, while also honoring the technical, networking, and consolidated reporting requirements of these companies. VST has worked • with all of these contractors and enjoys excellent relationships with each. SECONDARY MARKET DEFINITION A secondary opportunity exists in the international healthcare foodservice market. Foodservice software company consolidation will provide an immediate presence in New South Wales, Australia, where The • CBORD Group currently operates an office to serve this state through a governmental contract gained in 1996. In addition, some of the foodservice contract management companies operating in the U.S. • also have European accounts. By gaining their business, VST will have a natural opportunity to expand 1 into Europe. A VST principal has presented the VST System in Paris to the COMPASS Group, the largest contract company in Europe, and reaction was enthusiastic. In addition, VST has a contract with • Team Vantage, a division of a large Austrian company, to provide sales, marketing, and installation of • the VST software in the Far East. • INDUSTRY ANALYSIS The market for VST's products and services is growing at a rapid rate. This is because institutional • foodservice operations, which have lagged behind other industries in the adoption of computerized systems, are now attempting to streamline their operations and gain the efficiencies available through • the use of automated systems. Three trends affect VST's opportunities: • v Industry embracement of information systems • As industries, both healthcare and foodservice are under-invested in information systeem technology. They are embarking on a period of catch-up spending on information • technology as a means of limiting operational expenses and enhancing productivity. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE ! 9 000351V Elimination of a subsidy mentality • Hospital foodservice operations have historically operated as subsidized departments, and their financial bottom-line has not been scrutinized. However, in recent years, as • operating pressures on healthcare institutions have been mounting, this approach has • taken an abrupt turnabout. The trend is towards operating hospital foodservice departmeent as break-even cost centers----or even profit centers. V Self-op competition with contract management • As hospital administrators examine the financial benefits of outsourcing dietary services • to contract companies, self-operated foodservice and contract management are placed in Competition with each other. Each has incentive to operate more cost effectively, and • information technology plays a strong role. • As a result of these combined factors, the healthcare foodservice information systems industry stands on • the threshold of an accelerated growth surge. • MARKET CALCULATIONS The following is an estimate of the acute care hospital market potential in North America for the next • three years: • V Potential acute care hospital clients: 3,000 (hospitals over 200 beds, North America) V Hospitals currently computerized: 850 (28%) V Expected average annual support revenue per hospital: $15,000 • (reflects adjustments that will take place after acquisition of competitors and conversion to the Windows • application) V Average residual revenues per hospital per year: $3,000 _' Software license revenue per newly installed hospital: $40,000-$160,000 V Projected number of new North American hospitals who will computerize through 2002 • is 380 (market penetration = 41%) VST will entirely dominate and control this market, which has a proven record of price elasticity. In • addition, even limited market penetration will provide the company with a reliable source of recurring revenues. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., l 999 PAGE 20 000352• RECURRING: REVENUES: THE HOSPITAL MARKET • Year 1 Year 2 Year 3 • Number of hospitals computerized 910 1030 1230 • Total recurring revenues $12 million $20 million $29 million MARKET OPPORTUNITIES AMONG EXISTING CUSTOMERS Upon acquisition of its competitors, VST will gain a captive market of existing customers--all requiring • conversion to Windows-based systems. This in essence nearly doubles the immediate VST market • opportunity, with the added benefit of virtually guaranteed sales. Conversions will generate an estimated $13.4 million in revenues over three years. • UNEXPLOITED OPPORTUNITIES • An altogether new opportunity for VST is the ability to adapt its applications to use in other depart-• ments within the healthcare setting--specifically, the ability to easily identify patient diagnosis and to automatically create standardized care plans, regardless of the clinical specialty. m VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 21 000353PROTECT NG MARKET POSITION i • Ex..,,.A-THREATS • Maintaining dominance in the healthcare foodservice market will be accomplished through the interplay of numerous factors: Corporate Management Our greatest corporate strength is the expertise and desire to succeed on the part of the management • team. The principals active in marketing are Ronald Jacobson and Anthony Scarpino. Each of these • individuals has more than 20 years of experience in marketing products and services to the foodservice industry, including an average of more than 16 years marketing computer software to the industry. Product Once VST has entire command of this market niche, any potential competitor would face insur-• mountable obstacles. Developing a viable Windows-based product that addresses all the requirements of healthcare foodservice operators necessitates first-hand familiarity with a broad base of users in this • market niche, and costly and extensive program analysis--as well as a minimum of three years of actual • development, quality assurance, and testing. Therefore, any threat to VST's market dominance would be suppressed by the simple factors of knowledge, time, and money. • Strategic Alliances VST has made numerous strategic alliances with related companies in this industry. Among these B are IBM, Data General, Hewlett-Packard, Unisys, Microsoft, InterVoice, Inc., Software Technologies • Corporation, Siemens Corporation, and others. These alliances allow VST to maximize product integratiion enjoy synergistic marketing efforts, and provide unsurpassed levels of technical support to enhance m its market position. • Connectivity • Real-time interfaces are rapidly becoming mandatory for the effective use of clinical applications in • healthcare facilities. Consistent with the trend in the IS industry, VST bases all new development on the Windows operating system, relational database management, SQL compatibility, open architecture, • and HL7 standards--all of which assure its continuing integration into healthcare systems. Furthermore, VST has a long-standing record of success in developing real-time interfaces with hospital information systems, and has an inimitable reputation because of its existing interfaces with the major hospital m information systems products. • Marketing Communications • VST will employ an effective, comprehensive marketing communications plan in 2000. VST contracts the marketing communications services of The Grossbauer Group. A principal of this compaany Sue Grossbauer, RD, publishes a major portion of the trade news coverage for this niche industry. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 22 000354• She is a contributing editor providing technology coverage to FoodService Director magazine, the leading • foodservice industry publication. In addition, she is a founding and contributing editor to Foodservice Information Systems Report, the only publication entirely devoted to foodservice information systems news and analysis. Reputation and Name Recognition • VST, which already has substantial stature in this market, will rapidly build name recognition and m reputation in 2000. Potential customers will naturally be wary of any incipient competitor, which could not compete with the VST reputation. VST will be broadly recognized throughout the healthcare • foodservice and healthcare information systems industries as the sole source for leading-edge foodservice • information systems. • INCOMPLETE CONSOLIDATION A varied form of external threat is incomplete consolidation. For example, if acquisition of one or more • of the targeted VST competitors would be delayed, or if negotiations should fail, a competing force would remain in the industry. All indications are currently very positive, and we do not expect this l situation to occur, as long as adequate financing is obtained. If for unforeseen reasons, incomplete • consolidation should occur, by acquiring at least two competitors, VST will nevertheless hold a dominaan position in this market. VST will be able to leverage size, recognition, and reputation to competi-• tive and profitable advantage. INTERNAL THREATS • Internal threats to our company are limited to espionage on the part of employees who may provide trade secrets (programming concepts) and other information to incipient competitors. Also, the possibil-1 ity of turnover of well trained, experienced employees could hamper programming efforts and customer • service levels. • Preventive Action to Be Taken VST will maintain effective, positive human resources management policies to assure ongoing employee satisfaction and loyalty. In addition, the company will offer attractive compensation packages • to help minimize the incidence of employee turnover. CUSTOMER SERVICE Service and support are major priorities among customers. The software sells the account, but quality • service keeps customers satisfied, promotes repeat business, and provides for good references. • We intend to provide the best customer service of all companies in this business. Good service will allow us to enjoy a positive reputation and because new business is largely based on good references--will allow VST to expand its base at a rapid rate. Superior service includes the creation of implementa-• tion plans, initial training, ongoing training, and ongoing support. Documentation must be constructed to appeal to the customers and to be highly usable. Technical support is important, in that all systems • must have an up-time approaching 100%. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., i 999 PAGE 23 • 000355B[] MARKET-RELATED RISKS [] Product Risk [] VST products have traditionally received enthusiastic acceptance in this market. To assure the continuing success of its products, VST must be continuously vigilant, avoiding technical errors or [] inappropriate functionality. The VST management team has experience in directing this process, and works closely with key clients to specify, beta-test, and refine products during development cycles. [] [] Industry Changes Although there is a significant shift towards consolidation in the company's primary market segment • (acute care hospitals), we do not believe that this consolidation will reduce the market for VST prod-[] ucts and services. Instead, it will gradually alter the profile of the VST customer base, providing an opportunity for higher initial license fees and ongoing support revenues. The VST System is exception-[] ally versatile in fulfilling the requirements of a broad array of users, organizations, configurations, and [] functionality. [] Product Liability • There is little chance of product liability affecting the company's business. Although the applicatiion are partially clinical in nature, it is the responsibility of the customer to verify data accuracy and [] calculations/functioning of the system output. Minimal amounts of product liability insurance need be [] carried. [] [] [] [] [] [] [] [] [] am [] [] VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 24 000356I MARKET NG STRATE(;Y • KEY MARKETING OBJECTIVE • The company will gain the largest market share in the shortest amount of time possible. • MARKET POSITIONING VST will position itself as: V A comprehensive source for healthcare foodservice operators' information systems • requirements • V A technological leader in product design, cost-effective integration of new technologies, and platform adaptability V A professional company furnishing exceptional service and support • V A company committed to and capable of providing new products that will meet opera-• tional objectives of users now and in the future • This approach is also intended to allow the company to command the highest rational pricing for the product which will, in turn, allow for higher levels of service and support, resulting in satisfied, loyal • Customers. i MARKETING APPROACH • The marketing approach of VST is multi-faceted, and employs a variety of strategies. These include: i Cultivate a Prestigious Client Base • To date, VST has targeted the 10most-respected hospitals in the U.S. for sales, with the understanndin that these prestigious industry pacesetters lend name recognition, and influence purchasing • decisions throughout the entire industry. VST has already gained the business of the Mayo Clinic • (Rochester, MN and Scottsdale, AZ), as well as Johns Hopkins Hospital and Memorial Sloan-Kettering Cancer Center. All are implementing the new VST System. They will contribute industry leadership • and impetus that will support sales of Windows-based systems both to the remainder of the VST client • base, and to new prospects. Several other high-profile healthcare organizations are currently considering use of the VST System. [] VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., ! 999 PAGE 25 000357I Cultivate Strategic Alliances • The company will strive to develop business relationships with all companies in this business who • may recommend that VST products be used with their products, or as an adjunct to their products. Such affiliations reinforce market position, and can help generate new sales. Targeted companies • include: • _ Hospital Information System providers (HBOC, IDX, SMS, etc.) • V Food Management Companies (Sodexho/Marriott, ARAMark, Cara, etc.) • _' Food Distributors (Sysco, Alliant, Gordon, etc.) V Rethermalization System providers (Aladdin, A La Cart, etc.) V Consultants V Hospital groups and other industry groups VST principals are already extensively networked within the industry, with many personal contacts • through whom these affiliations can be readily achieved. • Cultivate a Presence in the Healthcare IS Community • VST recognizes that healthcare IS professionals are becoming increasingly influential in decisions to • purchase and/or upgrade foodservice information systems. As hospitals strive to glean the benefits of data integration, individual departments are decreasingly permitted to stand alone in their IS planning. 1 Therefore, VST is initiating marketing efforts directed towards IS staff. For example, VST is a charter member of the Microsoft Healthcare Users Group, and participates in relevant industry conferences. In 1998, VST began to include IS professionals as part of its key audience for marketing communications. Cultivate Confidence and Trust Among Customers Upon acquisition of its competitors, VST will assume an immediate market base of existing users, • with sensitive marketing needs. New VST customers may initially be wary about the consolidation. As the conversion opportunity is rolled out, some customers may initially balk. VST will judiciously craft • communications with its own client base, with these considerations in mind. VST will approach its own • customer group with communications objectives very similar to those used in making new sales--introducing VST as a company, promoting the VST System, and explaining conversion benefits in • familiar, comfortable, and persuasive terms. In addition, through leverage of prestigious reference ac-• counts, support from the IS community, and clear, two-way communications with customers, VST will assure that its own client base becomes an ongoing source of revenues. • PRICING • VST provides products (with accompanying license fees), implementation/training services, and ongo-• ing product support. Each of these items is priced separately. • Products Pricing will be based on historic industry standard pricing levels as developed over the years, by the • ability of customers to pay, and by the perceived value VST is able to communicate to its target market. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 26 000358l[] Through effective use of case studies and communication of system benefits--along with the significant [] advantage of market dominance--VST will be able to leverage the price elasticity observed in the [] healthcare software market. The proper balance of profit and credibility is required in order to take maximum advantage of this opportunity. Software License Fees [] VST provides a perpetual license for use of the applications software at each customer location. The [] license fees are currently based on: value as determined by a return on investment, and competitive • pricing. • Implementation/Training Fees • Pricing for on-site implementation and training is based on a daily personnel fee of $650 plus travel and related expenses. Competitors' personnel rates currently range from $650 to $950 per day. These [] rates will be equalized to between $850 and $950 per day following industry consolidation. [] Ongoing Support Fees [] Ongoing support is limited to a finite number of hours per year per facility. This time is used to answer customer questions, diagnose software problems, provide program fixes, provide all software • updates, etc. For this service, VST charges a percentage of the purchase price---currently 12%. Com-• petitors charge between 12% and 17%. It is anticipated that VST support fees will be raised to 15%. [] Pricing Tiers [] In acute care hospitals, there will be several pricing tiers. These include: • V Pricing for stand-alone acute care hospitals over a specific bed size (e.g., over 200 beds) V Pricing for groups of acute care hospitals V Pricing for groups of acute care hospitals and long-term care facilities V Pricing for stand-alone acute care hospitals under a specific bed size (e.g., under 200 [] beds) [] Of course, negotiated pricing will be required in many cases where groups of facilities are involved. All • pricing will be standard by category, according to an internally published pricing policy. Only upper management will have the authority to make changes to the established pricing policies. [] • Margin Structure Profits are high in the software industry, once the critical revenue point is reached where software [] development, customer support, and company administration are covered by outstanding support [] contracts. VST's strategy is to reach this critical recurring revenue point immediately upon consolidatiio of this market niche. After this point, the bulk of any new sales will contribute to profits. [] [] ] VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 27 000359SALES PLAN m•• The company will sell (and generate revenues and profits from) six distinct products and services: m v Applications Software V Interface Development V Implementation Services V Ongoing Software Support • • Custom Programming • •Conversion Services m Generally, the customer purchase is centered on the applications software. Interface software is pur-• chased through necessity to achieve desired integration of information systems. Some customers choose to use data entry and implementation services to conserve in-house labor resources, and to achieve • system activation as quickly as possible. Ongoing software support is accepted by the customer as a cost- effective service needed to support the company's applications. Custom programming is sometimes requested by customers with unique needs. Extensive conversion services will be required by existing • customers who are using character-based applications, and need to convert to Windows software. Converrsio services will include planning, software upgrades, testing, training, and interface development. m SALES CYCLE • The sale of the product should be considered long term. Generally, the sales cycle ranges from six • months to one year. Two factors---competitive product evaluations (including RFPs, demonstrations, reference checks and site visits) and budget requests--often prolong the sales cycle. Upon market • consolidation, the sales cycle will be reduced through elimination of the competitive evaluation process. DIRECT SALES PROCESS m The majority of the company's sales functions are handled through direct sales by our sales staff, face-to-face. The community of decision makers is small and tightly knit and, because of the complexity of the product • and the relatively high purchase price, the sales function requires a considerable amount of professionalism and follow up. Generally, the sales process will be designed around the following four steps: V Interest generation _r Product demonstration W Site visits/current customer reference checks • V Follow up/proposal presentation/close VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 28 000360m Interest Generation • Interest generation will be accomplished via the company's marketing communications program. • We believe that this communications program will generate sufficient interest and leads so that the sales force will not be required to make cold calls. Product Demonstration Product demonstrations give the first and the most lasting impression to the prospect. We will • initially hire and train two individuals who will be responsible for conducting highly professional dem-• onstrations of the software with the sales representatives. Their objective will be to provide the most impressive presentation possible. This can more easily be accomplished by individuals devoted to this • role, rather than by sales people. • Site Visits and Reference Checks • Prospects often request a list of facilities with a profile similar to their own who currently use the software. They almost always call these facilities and interview the appropriate personnel at the site in an effort to obtain additional information about both the product and the services provided by the • company. In many cases (60%+), representatives from the potential client facility visit at least one client site to view the operation and question users in person. Over the years, VST has developed • several reference accounts who are quite willing to entertain potential customers. Follow up/Proposal Presentation/Close • The lengthy sales cycle requires that continuous follow-up with the prospect be maintained. This • follow-up process, along with proposal presentations, will be the responsibility of the sales representative. • SALES: CONVERSION SERVICES i A proactive sales approach will be employed with all current customers comprising the newly consoli-• dated customer based (850 hospitals) who are not using the Windows-based applications. Customers will • be offered upgrades and conversions at established fees. This process will be supported by persuasive marketing communications and individualized assistance in cost-justification of the conversion. All • clients must convert to the new applications in a reasonable time frame, since the support for the character based software will eventually be discontinued. • OTHER SALES TO EXISTING CUSTOMERS • Existing customers are a superb source of repeat business in other respects, as well. They provide a ready • market for newly developed software, additional training services, and custom programming. Such sales will be conducted by the company's support service and telephone marketing personnel, at very low [] overhead, with the objective of selling an average of $3,000 per year in additional software products and [] related services to each customer. [] VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC._ 1999 PAGE 29 000361B SALES SEMINARS To expose the company's software products to potential customers in the most direct and effective manner possible, VST will hold a series of well-promoted, free sales seminars in selected North Ameri-• can cities. High-potential decision makers and decision influencers will be invited to the seminars, where the company and its products will be explained in a presentation fashion. The initially identified cities are: Northeast Midwest Southeast Canada • Boston Chicago Atlanta Toronto • New York Detroit Jacksonville • Philadelphia Cleveland Tampa Washington, DC Columbus Miami Pittsburgh Cincinnati Charlotte • SALES ORGANIZATION • Anthony Scarpino and Ronald Jacobson will direct the sales and marketing efforts of the company. n These individuals are highly experienced in all aspects of sales and sales management, as well as in marketing and marketing communications. • To support their efforts, six core sales personnel will be selected during the first year. Following • acquisitions, the most effective sales personnel available among the four companies will be chosen to represent the company. In the first year, these sales personnel, working from virtual offices, will be • responsible for selling in the U.S. and Canada, serving the following territorial areas: • _' New England states, Ontario, and the Maritime Provinces • v Southwestern states • v Mid Atlantic states • _' Midwestem states and Central Canada v Southeastern states Western states and Western Canada To achieve targeted growth, the sales team will be increased to 12 sales representatives in the second B year of the plan, and 20 representatives (plus Technical Sales Assistants) in the third year. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 30 000362II IV ARKETING COMMUNICAT ONS .I II• COMMUNICATIONS PROGRAM OBJECTIVES • The objectives of the marketing communications program are to: • V Establish universal VST name recognition among members of the target market V Promote recognition of VST as the comprehensive source for fulfilling all information systems requirements of healthcare foodservice operations now and in the future • v Generate an image of responsiveness to customers, and a reputation for exceptional, • highly knowledgeable service and support V Build, expand, and reinforce the perceived value of the VST System among existing, • acquired, and potential customer groups • v Generate qualified sales leads to be followed up by the field sales organization TARGET AUDIENCE [] The primary target audiences are: hospital foodservice directors and administrators in large organizatioons and executives of contract companies with responsibility for selecting foodservice information [] systems for hospital organizations. Secondary audiences include healthcare information systems professioonal and hospital administrators. [] i Decision makers and decision influencers are identifiable. Their titles are as follows: V Hospital/Health System Corporate Executive (decision maker) • ' Hospital Administrator (decision maker) V Foodservice Director (decision maker/decision influencer) • V Clinical Dietitian (decision influencer) • V Information Systems Director (decision influencer) • V Purchasing Directors (decision influencer) • V Nursing Director (decision influencer for the DIETCOM product) • COMMUNICATIONS VEHICLES The company recognizes the key to success is extensive promotion and highly focussed messages. This must • be done aggressively and on a broad scale. VST plans to incorporate a combination of communications vehicles to inform prospects and customers of our company, its products, and its services. To accomplish all marketing and sales goals, the company will use the services of an extremely capable agency/public • relations firm. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 3 ! 000363PUBLICITY AND PRESS RELATIONS In this industry, press releases and publicity pieces are easy to develop and are readily accepted by trade publications. Initially, press releases will be developed to announce and explain the acquisitions. These • will be followed by releases and articles regarding the VST Windows-based system, case histories, successful conversion stories, etc. VST will also allot a reasonable budget for preparation of photos and • supporting graphics. These are in high demand among trade editors, and their inclusion with publicity • helps to assure publication of press releases. The objective will be to have at least one publicity piece published in a major trade publication at least every month. Targeted publications include: V FoodServiceDirector V FoodManagement • V FoodserviceInformation Systems Report • V HFM Publications (Innovator, Member Directory) • _ Healthcare Informatics V Health Data Management _' Hospitals As appropriate, influential reporters and editors from selected trade journals will be invited to visit both VST corporate and user sites for system demonstrations. These editors and reporters will have an oppor-• tunity to conduct interviews in person in order to develop major stories. TRADE ADVERTISING The company will create a limited budget for advertising in trade journals and industry group publica- tions. The purpose of these ads is to increase exposure to our target prospects, reinforce the buying • decisions of our customers, and to give the journals and publications incentive to publish news releases. • DIRECT MAIL ADVERTISING Because potential clients can be identified by name and title, direct mail is a cost-effective form of • communication. Direct mail pieces will be routinely sent to decision makers and decision influencers in • our target market segments. In the acute care hospital market segment, pieces will be sent at least four times each year to hospital foodservice directors and chief clinical dietitians, and twice each year to • hospital administrators and IS directors. The mail pieces will be tailored to the perspectives and hot buttons of each respective audience. • CASE HISTORIES • VST has adopted a policy of using case histories to publicize high-profile facilities, unique applications • of technology among its customers, and exceptionally cost-effective systems. Set forth systematically and objectively, this type of information harnesses compelling motivation to purchase and/or upgrade • systems. Among the VST target audience of well-educated professionals, case histories build credibility, VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 32 000364BB validate the company and its products, reinforce buying decisions, and motivate software purchase • decisions. Case histories have the added benefit of placing VST customers in high profile, which fortifies • relationships with these customers. • WHITE PAPERS • Similarly, VST has positioned itself as an industry educator through the offering of technical White • Papers about the application of information technology to foodservice. These are pre-approved for continuing education credit by relevant professional organizations, and offered through both print and • Web media. AWARDS • As another credibility-building tactic, the company will systematically apply for industry awards that will enhance its marketing strength. Awards provide prestigious credentials, superb press coverage, and • the opportunity to give recognition to individual VST customers and build customer relations. When the award is being offered by a trade magazine, applying provides the advantage of gaining editorial attention, which may in turn result in additional press coverage. Targeted awards may include: _¢ The Health Management Technology What Works Award • V The Healthcare Foodservice Award sponsored by Healthcare Foodservice magazine • (awarded to VST client The Mount Sinai Hospital of New York in 1998) V The HITS Partnership in Technology Award sponsored by Healthcare Informatics, The • National Managed Health Care Congress, and others. U• TRADE SHOWS • Presence at trade shows reinforces company/product recognition. It gives potential clients an opportuniit to meet company representatives face-to-face, and to view the VST System in person. It also generates new sales prospects. VST will participate in all relevant national healthcare and foodservice trade • shows, and in several regional trade shows each year. VST will publicize its presence in advance through targeted mailings to attendees. • INTERNET PRESENCE (WWW.VSTECH.COM) • The World Wide Web is an essential vehicle for marketing communications, and is particularly critical • for a high-tech company with--at least in part--a high-tech, Intemet-savvy audience. Major website sections provide product detail, operating and hardware specifications, corporate background, the VST • mission statement, press releases, user profiles, an online newsletter, full text of the White Papers, and contact information. Aggressively indexing with Intemet search engines and professional associations' • websites is part of VST's Intemet strategy. • VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 33 000365NEWSLE_ER, _..... . _ .. ...... : :, .,. : The company will publish a quarterly newsletter to be directed towards both current and prospective customers. It will feature the accomplishments of key customers, technology updates, development • updates, new services, marketing events, and more. USERS GROUP Of the constituent companies, The CBORD Group already has an active and successful users group. • Upon consolidation, a new users group will be formed, with an objective of fostering positive relation-• ships with all existing customers. Users group conferences will be held in highly attractive locations. Each conference will be designed as a dynamic meeting of the minds, to include timely and stimulating • ' presentations from both foodservice and technology industry leaders. Users will be able to meet each • other, network, and exchange valuable ideas. Conferences will also provide a comfortable forum for two-way communication between company representatives and clients about planned conversions. A tangential benefit of conferences will be prime • opportunities for news coverage. In addition, events will provide excellent publicity and marketing communications material for newsletters, sales support, and more. • CONTACT MECHANISMS AND MAILING DATABASE • As possible, each marketing Communications piece issued by the company will provide clear, easy-to-use • contact mechanisms--such as a toll-free number to call, a reply postcard, and e-mail access (from the website). The company will examine effective means of maintaining centralized inquiry/prospect lists for • inclusion in newsletter mailings and other important communications. SALES MATERmALS • Professionally written and designed sales materials will be developed on two levels: V To generate interest in the products (e.g. at trade shows, through direct mail) V To inform active prospects about the products (technological background, product • benefits, specification sheets, sample reports, case studies, etc.) VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 34 000366[] CORPORATE CONSOLIDAT ON PLAN mm STRUCTURE AN EXECUTIVE TEAM • The Board of Directors will be asked to assist in structuring an executive team for the company. We recommend establishment of a CEO position, which may be recruited from outside the organization. • This person would be a highly capable individual with extensive business experience (preferably includ-• ing both healthcare and international business expertise), fiscal management expertise, and organizatioona vision. In addition, a chief financial officer will be recruited to help structure and guide fiscal • management throughout the transition and beyond. Current VST principals will continue in executive • positions as deemed best fits with their respective abilities and first-hand expertise in this market. • FISCAL PLAN Preliminary financial projections for the company have been prepared. However, some detail is difficult • to evaluate until proprietary information has been released from the companies targeted for acquisition. Based on information received and the financial plan charted to date, the company's CFO will be asked to refine the fiscal plan, with consideration of cash flow requirements. During the transition period and • until conversions have been completed, it will be necessary to operate support services for four distinct software product suites. To accomplish this, support operations of the component companies will be • continued. The operating budget for these services can logically be drawn from support revenues of • respective customer bases. m Marketing, sales, some administrative costs, and much of the R&D effort currently expended by the companies can be consolidated immediately. It is anticipated that following a transitional period, the • operational expenses of the consolidated company will be less that the sum total of operating expenses of its components, due to improved economy of scale. • OPERATIONAL OFFmCES AND FUNCTIONAL TEAMS m The executive team will need to evaluate the office locations and functions of all operations of acquired m companies, as well as the current VST offices and teams. As soon as possible, the team should determine what office locations are required to serve the company's geographic base, and consolidate in every • possible instance. Selected technical, programming, and support staff of acquired companies will be • retained to provide product knowledge, the ability to support current products, and the ability to fix program bugs if necessary. In addition, support representatives who have positive relationships with • current customers will be retained in order to help foster and maintain positive customer relations. [] VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 35 000367PROVIDE CONTINUITY OF SERVICEAND SUPPORT To maintain its acquired customer base, the company will place prime importance on providing uninter-• rupted, high-quality support operations. Customers will be surveyed immediately upon acquisition--to • determine the state of their products, and to identify both immediate and long-term needs. COMMUNICATE EFFECTIVELY The company will use a marketing communications program to inform all customers about the consoli-• dation, and to set the stage for positive relationships. Likewise, communications with employees will • receive top priority for two reasons: 1) Employee support, satisfaction, and loyalty will promote a high level of operational effectiveness, and 2) Employees' attitudes (especially those of support employees) • may have a great deal of influence on customers' perceptions of the reorganization and consolidation. B[] [] VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE36 000368mmm[] VST intends to convert all newly acquired and pre-existing customers from character-based software to • Windows-based applications. Conversion Objectives The requirement for a major conversion at all facilities, where both software and hardware must be • upgraded, will allow VST to accomplish several goals. These include: • _ Upgrade all customers to a common, modem platform, and operate a standard set of • applications. This will streamline VST support operations. V Generate millions of dollars in sales from the existing and acquired client bases through • the provision of technical services, interface upgrades, training services, and data entry • services. _' Increase customer service revenues to an annual average of $15,000 per customer per • year. At this rate, service fees alone for the existing base of 850 clients total more than • $12 million in annual revenues. m CONVERSION COMMUNICATIONS PROGRAM The company will use a marketing communications program to inform all customers of the new applica- tions, conversion methodology, and the financial incentives and options being offered by VST. This m effort will be supplemented by demonstrations of the software at customer locations and at users group conferences. Demonstration will also be offered by video, which will be provided to the customer by • VST. This video will be professionally produced and will serve two purposes: 1) to demonstrate new applicatiion to existing clients, and 2) to support the sales process to new accounts. Although the basic information m will be the same, there will be slight variations in format to accommodate the two audiences. • The communications project will be a joint effort by the marketing department and the customer • service department. The marketing department will structure the program, and the customer service department will execute the program, with full marketing communications support. m CONVERSION iNCENTIVE PROGRAM • Customers will be informed from the outset that support for the character-based applications will cease in five years, giving them generous lead time to plan for, schedule, and implement conversions. VST recognizes the need to provide an incentive to all clients to convert to the new applications. This • incentive program will take two forms: m w Customers will be offered the entire suite of applications software, amounting to over $100,000 in software (less currently licensed modules), at no additional charge--if they m sign a letter of intent to convert to the new applications within 90 days of the offer and VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE37 000369agree to a scheduled conversion date as mutually agreed between the account and the • company. This conversion date will be based on available conversion schedule dates at • the time the letter of intent is submitted. If a letter of intent is not received, the free software offer will be withdrawn, and the customer will be charged list price for this i software at some future date. • • VST will provide the required equipment, implementation services, interface programmiin services, travel expenses, etc., on a lease basis. This lease will eliminate the need • to budget for capital funds. Turnkey services will also be included in the lease. • Other incentives and conversion-related pricing strategies may be developed as appropriate. CONVERSION METHOD • Actual conversion will require several steps and will be accomplished by the customer service and technical departments. These steps, and the responsible parties, are outlined below: Planning Step A detailed implementation plan will be required for each account. This plan will include six sec-• tions and will be based on a generic set of activities and responsibilities, but will be tailored for each • facility to accommodate facility-specific requirements. The sections of the plan will include: a) an equipment recommendation and installation section b) an interface conversion/implementation section • c) a data conversion section • d) a user training section (for currently used applications) e) an applications implementation and user training section (for new applications) • f) a follow-up section • This plan will be created off-site, sent to the account for study, and discussed by telephone with representaative from all appropriate customer departments (generally, foodservice and information systems). • All aspects of the plan will be agreed upon by all parties prior to proceeding. Conversion plans will be • maintained electronically by the customer service department. There will be no charge to the customer for the planning function. • Equipment Installation/Software Loading Step The required equipment and third-party software will be installed at the customer site by the hospi-• tal. (VST can provide contracted assistance for a fee, if required.) Specifications for all required equip-• ment, cabling, electrical needs, database configurations, etc. will be sent to the client in advance. Prior to equipment installation, the client will note in writing that the site is prepared for installation. VST • personnel will visit the site to load and test the software. The VST representative will assure that the • server and all devices (modems, client PCs, printers, etc.) are fully operable, and that interface connectiion are in place. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE38 000370After the equipment is installed by the hospital, a VST technical representative will travel to the site to load the VST software. The VST representative will be ultimately responsible for the successful • installation of the software, reviewing the operation of the equipment, and general orientation/training of the facility personnel, including the technical aspects of the VST System. The VST representative • will follow a standard testing and training checklist, which will be accepted and signed by the client. A • copy of this checklist will be sent to both the foodservice and IS departments in advance of installation. This checklist will serve as verification and documentation that all equipment and devices are operable, • and that the system is functioning properly. The VST representative will also provide the client with a • general technical operations manual and explain its contents. On-site time for this service will be charged to the customer per the current rate at the time of service (not less than $850 per day). The customer will be responsible for all travel and related expenses. • Following each installation, the VST representative will prepare a written report---detailing the • installation, and identifying accomplishments and any problems encountered within two days of the visit. This report will be submitted to the foodservice department and to the IS department. A copy will • be reviewed by VST management and retained in company flies for future reference by support personnel. • An evaluation form will be sent to the client within one week after installation. This will be compleete and returned by the client, reviewed by VST management, and retained in the company flies. If it • is not returned within two weeks, the technical manager will follow up with the client to assure completion. Interface Conversion/Installation Step • All current interfaces will be converted from the existing software to the new applications. If the • customer requires any additional interfaces in order to operate the new applications provided as part of the conversion process, we will encourage the customer to install these interfaces during the software • conversion. All of the interfaces will be tested in accordance with the standard interface testing plan. m Again, as part of the conversion incentive plan, new interfaces will also be created at a reduced cost. This charge will be at approximately one-half the normal rate, but the development process will be • limited to a finite number of programmer hours. Any time spent over the defined limit will be charged • at the current rate. • Data Conversion Step • Conversion programs will be developed to transfer the majority of the customer's data electronically from the existing applications to the new applications. This conversion process will be performed off-site • (at the company location) immediately prior to the orientation and training visit. Programs will be • developed and executed at the company location to assure that the customer's data has converted properly, and that all programs are functioning correctly. Software utilities will be written to execute and • test all programs. • User Orientation and Training Step (for currently used applications) • A company representative will visit the account to orient the customer's staff to the new applica-• tions and perform all required user training. This will be limited to the applications licensed by the customer, and will not include any new applications provided to the customer as part of the conversion • plan. All user documentation will be provided to the customer at the time of the orientation/training • session(s). m v_o, SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 39 000371B The amount of on-site time spent by the company representative will depend on the modules • licensed by the customer. The customer will be charged at the standard daily rate for the on-site time • (plus travel and expenses). The company training representative will submit a detailed report about the sessions held, including • the names of the personnel oriented/trained, within two days of training. Copies of this report will be • sent to the customer, and a copy will be retained in the company files. An evaluation form will be sent to the appropriate person at the facility within one week after training. This evaluation form will be returned by the client, reviewed by VST management, and • retained in the company files. If it is not returned within two weeks, the customer service manager will follow up to assure completion. • User Orientation and Training Step (for new applications) Installation of new applications provided as part of the conversion process will be included in the • implementation plan. This implementation will be an extension of the conversion process and will be • provided using standard implementation and training methods. This training and implementation service will be charged to the customer at the standard daily rate. VST's standard reporting and quality • control procedures will be used for this implementation and training process. • Quality Control and Monitoring Step • The customer will be monitored by the customer service department and/or the customer service man-• ager, via proactive telephone calls made on a routine basis. Any issues arising will be addressed immediately. All calls placed to the customer, as well as any activity generated, will be documented appropriately, accord-• ing to company customer service procedure. CONVERSION TIMETABLE Ii The conversion timetable will be dependent on scheduling requirements and the ability of the accounts to convert to the new applications. A few facilities may not be able to convert because of factors beyond • their control--primarily because of equipment. The customer base will be studied, and facilities which can be converted most readily will be converted first. These will be followed by remaining accounts. • VST will maintain a detailed, well-organized timetable, making the best use of all available resources at • all times. • EXPECTED CONVERSION REVENUES Revenues will be generated from the conversion process as described below. Travel and related expenses • are pass-through revenues, which have not been considered. • Technical Service Revenue • It is expected that the clients will use one to three days of technical services time. This will generate more than $850,000 over three years. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 40 ooo372mm Interface Revenue m it is expected that an average of at least $8,000-$10,000 per facility will be generated from the installa-• tion and conversion of interfaces to support the new software. This totals $3.65 million over three years. • Training Revenues (for currently licensed applications) • It is expected that an average of three days of on-site time per facility will be expended and charged at the standard daily rate, generating approximately $1.285 million over three years (charged at $650 per day). • Training Revenues (for newly provided applications) • It is expected that an average of four days of training time per facility will be expended over the first • three'year period for the existing client base. This amounts to approximately $1.13 million in the first three years (charged at $650 per day). Additionally, data entry services will be offered. Approximately • $2,500 will be generated from each facility electing to use the data entry services--a total of $1.15 • million over three years. • Turnkey Revenues Many facilities can not justify hiring personnel to install systems, but can acquire funds to have the • vendor install the applications. It is estimated that approximately 45% of the customer base (400 cus-• tomers) will hire VST personnel to provide turnkey installation services, with an average revenue of over $13,000 per facility. This will generate approximately $5.35 million in revenues. m VtSiON SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 41 000373F NANC AL STATEMENTS 1997 and 1998 were transition years for both companies. The major factors impacting the companies in • this period were: • v The creation of Vision Software Technologies, Inc. and the shift to marketing under this new banner T The development and rollout of the new Windows-based product T The hesitancy of potential customers to purchase character-based applications, knowing • that Windows applications would soon be available v Year 2000 conversion issues. m VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 42 000374n•" -"-'"--, _.I" -,---• :_ _.! _.o_o,-'-_ -_'_"-_' _° ._°-°_ .i _"_ o__ ._ ° • -_ _ | _l _ -• _ • ) 'o • ( • _ _ :') • ))1_ ) ) ) i))I m 000375l _=__I _ _ _ _ ______ o -) _®_ _ _ _ _ __-_ -= _E___ = o ® _ _ _ _ ) . ._ _ -• °.._., . ) _ • -."--o,_o ) 'o _ ) ::_ r: _l) #-0-_l--_01--f.-q ) • m , ,_ ._-. • ))) -.--. •• ') ) | . • o _ _ ._ E _-_w_ _:=--o ®'_> >oooE_¢_ _o _oo_ mm L, 000376mmmmnu o-®(D®--(D _ Imm-C l,U"o IU U c.o _ __ccZ_ ca --• ) )J)l =I] ) • ) mm -)) o _ mm o= m ==cE _ mmm T • 000377ll '" m O _ i • c o • _ m '--* *--_ m Q) * * .... * > .o_ .. ..... _ _ ___ _ -. =->,8 =" _ '_ = = _E_ ® >"°® _ _.C: _ _ {_ .*>,._____ _ _ '-_® _ O. m _ n"__ _ ,,, _-W.J _ _ "_.Z _ r_ , _ui ' ' W* _ m ,_ __ | _1 o • _ = _.c_ _ o _,-, _ .-_,_ _ _ _," I--,--• _ o-_ _ -_ , ,_ _ _ • " " m _ _ "o § __ .= ___ ----o ( ) .__ . _,_ _ _ _ .|_._ _ _ --_ ( -'_'°-'_ _. _ |" o _-_ _ .-• 000378mmm .'_._ _-° _I • _ _ ,-._ m ,-m 0" • ,,, • , ) _ o = _ => ,,, m ). •=, _ _ • =" o 8, _ "_ -_ _-_-_.-o ._ _o_ • ) i_ _._ _ .,.., , = • -_._ ) ,-)o , o,:)) ,--c m _ ° ° . .9.o ..J in E _ _ • _ -_ mmm o mmm ) -[] _ _ _-_ °o_"-o, [] mit 0003791 0 LOb-_ ....................... 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These projections reflect a conservative • approach to revenues and a liberal approach to expenses. SUMMARY: SALES AND PROFITS • General sales, expenses and profit projections for the first three years are as follows: • YEAR1 YEAR2 YEAR3 TOTALS • New Client Revenues $8,540,000 $19,460,000 $35,400,000 • Existing Client Revenues Conversion Revenues 2,730,000 4,620,000 6,075,000 Support Revenues 7,800,000 11,900,000 16,300,000 New Product Revenues 1,495,000 3,255,000 6,705,000 1 Miscellaneous Revenues 90,000 270,000 550,000 • TOTALSALES $20,655,000 $39,505,000 $65,030,000 $125,190,000 EXPENSES TOTALEXPENS_ $15,723,500 $24,393,800 $35,928,800 $76,046,100 m_nmmkxoJ,In--hmma,--EIlm $4,931,500 $15,111,200 $29,101,200 $49,143,900 • These proforma amounts consider a conservative sales estimate with liberal expenses. Not included are any potential revenues generated from product sales via the Intemet, or to non-healthcare market • segments. VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 4.3 000382The plan accounts for maintaining virtually 100% market share, and gleaning the benefits that • accompany this unique position. The anticipation that the company will market unimpeded by competition will result in: v a reduced sales cycle v improved marketing efficiencies v cost-effective economies of scale in both product development and support v a markedly enhanced Profit:Sales ratio higher rate of return on investment. U VISION SOFTWARE TECHNOLOGIES_ INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 44 000383USE OF PROCEEDS AND PROFORMA RATIONA_= • The funding request is based on the following financial plan: • v The estimated $11,000,000 stated in the plan will be used, in its entirety, as payment or • partial payment for the assets, customer base, etc. of the acquisition targets. v The $3,500,000 shown in the plan will be used to fund the consolidation effort. • ITEM EXPENSE • CEO salary and benefits $250,000 CFO salary and benefits $125,000 Hire, equip, train and support an outside sales force of six quality individuals in the • first four months of the first year. In addition, two Technical Sales Assistants will support/• assist the sales force with expert product demonstrations, applications expertise, etc. * $760,000 • Initiate (or enhance) a marketing communications program to include the following components: ** 565,000 • Existing customer communications program $75,000 • Corporate capabilities brochure $40,000 • • Publicity $45,000 • • Case histories $25,000 • • Trade advertising $35,000 i • Direct mail advertising $55,000 • • Company newsletter $30,000 • • Intemet web site improvement & maintenance $25,000 • • Sales seminars (8 in the first year) $120,000 • • Trade shows (12) $200,000 • Annual Users Group Conference $250,000 • Miscellaneous marketing costs $100,000 Relocation expenses, management transition costs, office closeouts, miscellaneous • training and communications costs, etc. for internal personnel $550,000 • Miscellaneous costs (legal, accounting, consulting fees, etc.) $1,250,000 • TOTAL $3,500,000 • Notes: • The actualsalescostsshownin thissectionare valuedat $1,110,000. The $760,000 notedaboveis incrementalto theexistingsales • budgetfor theconsolidatedcompanies. •* The actual marketingexpensesshownin thissectionare valuedat $1,000,000. The $565,000 notedaboveis incrementalto the • e_dstingmarketingbudgetfor the consolidatedcompanies. VISION SOFTWARE TECHNOLOGIES_ INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 45 000384i 0 l _ _ _ _ ° " + + _ _° °° _.._ o o _ _ _ o ._o o-_ _,_.-_ o o o _0a_ o o N o oN _.go oo_ o "_, o_ oo_o_ _0 _ _ _-__._, _ oo _o '_--_ o _ = o_-° _-_ o" _ , o= : o= _ _ _= ,-._ _d o_-_ _ "_,8, "_ _ -"_ , o_-_o , >, _._ _ o'=_ _ • _ "_° _,o a,o o'_ m _ _ __ o o o _ o • _ o o o o oooo o c5 _ o . C:_ ,-_ r'q 0 0 I::_ 0 ., .-._. _ -_ o ._ m z _j -_J _ o _ I I0 0 I • _0 ' 0 0 . 0 m _ o00 0 _ c_ o _ o o 0 m o o o o "-o _ • _-o oe_ • _ -_ • z z m VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 46 000385mi + " _ + + _ o _ + + + -_ " 00_ _ _ o _o _o_ + _ _ ...... _._ + i '_ C, 0 0 0 CD O i _ ;_ _ _ _ _ _ _ _ _ a I _ _, _ o _. _ _. _ _ __ .. m _ _00o_oo=°o___ _ ooO_ _o_o_o: _o_ o__ oOoOo _ _o ) -_= _._ _ ,.., , _ _,.,. _,o o._ .= _ _ _o .o oo oo oo o _',,o "_ _ _ _d _o o_, _0_ _ _, -_,_ _ _ _ o_, (#) " ?,,1_1-("_-d-?_6"h c'tSr_m m• . _ _ 0 0 0 0 0 0 -0 0 0 C) 0 0° br_ " _ _ _ _ .-• _ _ _ _ _ o _ o _c: o o ,.c: '-_ 'J_ 0 _ ,..C 0 m .._ o o rq o c, o I I i I i i • ==. _ _ _ _ (2:) • .,o o o d m o(123; 0 o o o o m o m .o<5 o • o o m ._aa • ._0> _ • ) z _ -_ I ) l I VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE47 000386m + 4-+ _ _ II • o o o = o oO_ _ o. o o_°_°_ _ o I _ o_ _ _ _ _ o _ o°_ _ i_" _ _ _ _" _ ' o° _o° I _o :o _o _ _ o o 0 ._ 0 ."_ 0 .. 0 o I "_'_ '_" '_ _ • _o _o _o _oO_ _ _ _ 0_ o,_ o_ o,_ .._ _-• _ __ _ _ __< • _ _ 0 0 0 0 0 0 m _ _ • _ _ _ o -_ ._ o m __ o o I I I 00 0 _ o m o0 • o [] ,. o0o • o mI _ ) _I ._ m ) m VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 48 0003870 0 0 + + + _ _ _ , o o _ 0 o _-_ ,._ m _' O0 O0 _'_ --+ _ _ 0 _ o _ o _ o_ _._ _ _ _ _ _ o_ _ o _.__.__o._ "' _" _ _o_o_-_ ._ _ o o _ o o oo oo -_ _ 0 = i_.m _ "" o° _ o _.o _ _ _ _ _ • _ -o o em t_ ..,._ e_ 0 _ O. • • 0 L¢_ 0 Ill • _oo _ _ ._ _'_ o 0 o_ _ o_ _ ._ o o " I I I _ * I l I • ,,, _ _ _ _._._= _ (2) • _ °o o I o _1 0 0 0 0 -q I _ °0 0 _ C_ II °0 0 _" 0 0 _ uh • ] _ mm -__ o z ._ • . ,_ • .__ z )) • -_ _ _ VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 49 000388_ _ , =o = _ _o ° o o o _. o _ -j. o $ o o O_oO_oo _ __o _ • _._o._ __o o _ _ <5,2° _ .._ ._ 0 o.._ o.._ _ o_ _ o o -_ _ --._ --._K => o ,_ _ _ _ o 8 o 8 o 8 "_o "_o _.o o > ._o__o .=o _s __0__ _. _ _ o ...... • >_ _ o o m o o ) 0 0 0 "" 0 0 _ _'_ 0 _ u'h • _ _ _ _ _ _ _ _ _ _ -_ -) -_. -.._ g _ .-._ ._..__-_ _-_o _o oo _ ._ _°__ mm _ _ "_ __ ' kmlkm, 00 • o o m ).. .,_, ._ • o00 C, • ,.l ° ° o0 c_ 0 u'h • °0 0 ',,-0 o ,_ o o • oo0 ,.o ),,, ',,o • -= 8 Id • a " _ ) I mm I _ _--_ , o _ o "_ • _ , _ VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 50 000389+ + + II 0 o o o --_ o .o. 0 _-o 0.1 0 0a _ o l_D • o ooo N_-+ 0 o o:o:oo0: .0 0a _a _a o = _ o _-._o _o° ._o ._ c _o [g 8+ 8+ 8 + _ _ __--_"_ _ . _,_,o__-o o • 0 "_ m _ _ _ _ @@@@@@• )].)] • _ o o _ o I z , I I -_-00o IN _ o o m d q _ m • o00 m ) o o L¢_ 0 )., _ r,,I • o o _ o q • d o 0 _ _ -i • _._ _ • ° • _ _ VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE51 000390• o o o o_ _o o_ -__ _ _ _ o S S " o_ "_ o o _ o _ o _.o "-a_ _' ._ o _ _o 0 ._ 0 ."_ _ _ 0 OC) r'-.I _,_ _,_ ._ .__ o o , _ _._ _._ _o. _o _o o_ _ _ o_ _ 8 _°.. <_ 0 0 _" _ -_ o o o • o o o _ o o o ,o 0o o ._. d _-4 n @o @_ o @@• o o o N o o o 0 _ _'_ 0 _ _'_ I'-_ i-_ I-_ _ I I I 0 • ° 0 I_ 0 0 0 un • o00G o N 00 • o0 i ° ° _ d • _ _° • ._ o i _ _° VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE52 000391. 8 _ _ + + + _ _ ._ _ : _-o_ _ =_ +_ +_ + .-_ _ " '-._._ _ _ o° o° Z o_ o° _: d _" _ _0 • _ #_ _q__q_ o_ ._ _ __ _ o _ _ _ _t_ _ _-__J o_ _i _ ''q_ o_..__ ,sg-_, ,, __ __ _ o _ _o _-oo oo _ oo _ _= _,." 8_ _ #._ " .= o-,, -o-9 _ _ _ • _ _ _ _ _ r'_ _ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 " .... 0 • _ _ _ _ _ I _, # _" .... _ n 8 o 8 _ _ 8 I_ "= "_ '-= 8 8 ,.,= 0 0 _:l ,._l O_ • o o_o_ hl 0 _t_ Um 0 I I I m I _ I • _ _ _ _ _ _ _,_ I 00• _ o o 0 -o o ,._ o. I _ _ • o0 o • ,_o o 0 u'_ .. 0 0 o 0 • o o0 I _ • ,_ =I = I .._ i _ _'_" • _ _ z z • v,s,oNSO_A_ T_C.NO,O_,B,me. PLAN_O__AR_TDO_,,ANC_ D_C.,_ _A_ _ 0003920 • ) _ _ _ ., p,,. n _ _ 8 .8 _ o ,,8_._ ) • _ _ _. ] _ _ _ _ _ _o-Hg • _ ._ ._._.= _ z , , , , , , _°_ _' _o ._ _ °° mm _ _ __ [] 00 ¢"4 _ m _. _ _ m o m• o 0 0 _'-co I _ _ _ I -_ > _ _ _ _o mn _ _ _I _) -I oo oo "_m_. • _ , • _ Z Z I VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE54 000393m• _ _ o _ , _ •• o o o -.o _ _ _ _ _ ._ _o°-_-_ _ m ) z __ _ _ _ _o° _ _ _.. _> _. _. _o _o u _ 0 ,_,_ o_ _. _ o -o _ _ _ mm ,'__° io _o _ _ _ _0_ _ _ • 0_ _ • _ o o _ o [] _ _ = __Oo _ [i • _ _)_Oo_O_o _ 1_)_ __ _ [] 0 0 0 0 0 mm c) o mm _ o _ o _ ('-.-m,m br_ f,,") m 0 _ 0 o 0 _Z 0 _: C_ 0 0 [] _ o _ _ _ o d ,., o _ o m _ n _ o Z 0 m _ _ -° o _ O ._ m .j c o I ) _: _ = _, VISION SOFTWAR[ T_CHNO_OGI_$, INC. PLAN FOR _ARX_T DOMINANCE DEC., )999 PAGE[_ 000394CUSTOMERS, ORDERS, & PIPELINE mm A listing of ten of our largest customers with contact names is included in this section. VST has signed contracts for the new Windows-based software with the Mayo Clinic hospitals (2) in Rochester, MN, • Memorial Sloan-Kettering Cancer Center, and the Johns Hopkins Health System in Baltimore, MD. These are three of the most prestigious healthcare facilities in the world, and will serve as valuable • support for our future sales and marketing efforts. In addition, we have quasi-partnership agreements • with these facilities, which are designed to augment our marketing programs. m The current order backlog list shows outstanding uncollected revenues from new sales of $756,075 and first-year support revenues of $127,130, which will be billed in 2000. Potential orders with a high • likelihood of signing in 2000 amount to $2,720,450, with associated annual support fees of $512,800. • These contracts should accrue to VST regardless of the consolidation occurring. However, it is virtually assured that these and other prospects currently being sold by our competitors would commit to the • consolidated company. m" VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., ! 999 PAGE56 • ! 000395• PARTIAL CUSTOMER LiST Baptist Health System Morton Plant Hospital • 800 Montclair Road 823 JeffordsStreet • Birmingham, AL 35213 Clearwater, FL 34616 Mr. TimSofferin Ms. Janet Simon • Food Service Department Food Service Department 205/592-1135 813/462-7000 • Gunderson Lutheran Medical Center Northwest Community Hospital/Care Center 1910 South Avenue 800 West Central Road • LaCrosse, WI 54601 Arlington Heights, IL 60005 • Ms. Janet Roth Ms. Linda Foster/Mr. Forbes Borthwick Food Service Department Food Service Department • 608/785-0530 x3678 847/618-7465 Hospital of the University of Pennsylvania Owensboro-Mercy Health System • 3400 Spruce Street 811 East 12thStreet • Philadelphia, PA 19104 Owensboro, KY42301 Ms. Marge Alford Ms. Debra Kramer • Food Service Department Food Service Department • 215/662-2155 502/688-2858 • Kettering Medical Center Penn State Geisinger Medical Center 3535 Southern Boulevard North Academy Avenue 1 Kettering, OH 45429 Danville, PA 17822 • Ms. Cheryl Shimmin Mr. Bruce Thomas Food Service Department Food Service Department • 513/298-3399 800/441-6205 Mease Hospital and Clinic Tennessee Cook-Chill Food Plant • 833 Milwaukee Avenue 6404 Centennial Boulevard • Dunedin, FL 34698 Nashville, TN 37209 Ms. Kathy Barton Ms. Cassandra Blatt • Food Service Department 615/350-4007 • 813/734-6063 "B VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 57 000396• BACKLOG OF ORDERS • JohnsHopkinsHealth System $268,000 $67,000 $201,000 $24,000 • Middletown Regional Hospital 130 000 65,000 65,000 14,400 Hospital for Special Care 45 000 33,750 11,250 2,695 • Mayo Foundation -Scottsdale 170 000 68,000 102,000 13,800 • Mayo Foundation -Rochester 213 000 60,275 152,725 25,000 Mount Sinai Medical Center 108 100 77,250 30,850 0 • Enloe Hospital 55 500 27,750 27,750 4,575 • Hospital Selayang 50 000 25,000 25,000 10,000 St. Alexius Hospital 109 000 54,500 54,500 15,900 • Memorial Sloan-Kettering Cancer Center 141 800 55,800 86,000 16,760 • TOTALBACKLOG $756,075 $1 27,130 mm VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 58 000397Ii • PIPELINE OF ORDERS BayCare Health System, Tampa, FL $318,650 $118,600 • Cedars Sinai Health Center, Los Angeles, CA 416,000 139 300 MD Anderson Cancer Center, Houston, TX 137,000 15 600 Methodist Health System, Houston, TX 124,000 11 800 • MultiCare, Tacoma, WA 210,000 25 600 • National Institutes of Health, Bethesda,MD 140,000 16 500 Nova Scotia Hospital, Halifax, NS 86,000 14 500 • Pomona Valley Medical Center, Pomona, CA 64,000 9,600 • Riverview Hospital, Port Coquitlam, BC 133,800 16,900 Scripps Health System 521,000 75,000 • St. Francis Hospital, Evanston, IL 46,000 6,900 • St. Vincent Health System, Worchester, MA 55,000 7,500 SUNY Health Science Center, Syracuse,NY 134,500 14,000 • UCLA Medical Center, Los Angeles, CA 108,000 10,200 • University of Illinois at Chicago Medical Center, Chicago, IL 169,500 23,000 Woodward State Hospital 57,000 7,800 • TOTAL POTENTIAL $2,720,450 $512,800 i,n VISION SOFTWARE TECHNOLOGIES, INC. PLAN FOR MARKET DOMINANCE DEC., 1999 PAGE 59 /000398
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