CONFIDENTIAL MEMORANDUM

TO: Compensation Committee of the Board of Directors
FROM: Rick Hayes-Roth
SUBJECT: 2000 Objectives and Executive Incentive Compensation
DATE: November 22, 1999

Situation:
     We had a very  productive  1999.  Highlights  included  moving  TEKC to the
Nasdaq SmallCaps market, regaining our backlog, developing a vertical subsidiary
- GlobalStake.com,  and building our commercial  E-Commerce  business from 1% of
revenues to 20% of revenues by Q3 99. On the stock front, the temporary peak was
$6/share, with a low of $3.80/share.

     In 1999,  we said:  "the  company  will need to regain  lost  ground in the
government  services arena and convert its E-Commerce  investments into a viable
commercial  services  business that can be leveraged by 3rd party product sales.
Overall,  our single  biggest  objective in `99 is to grow the company's base of
both government and 3rd party  product-leveraged  commercial  services.  We will
also  continue the search for a  small-firm  acquisition  that  exploits our NOL
asset." On the commercial  front, this mission was accomplished by hiring Rodney
Robinson.  A well-oiled team from Edify and elsewhere  followed soon after. This
team is disciplined and committed to both  profitability and rapid growth.  They
delivered 20% of Teknowledge's  revenues in Q3. Teknowledge now has a first-rate
E-Commerce  team--the  challenge will be retaining them. They joined Teknowledge
because they saw that it has smart people, a long track record of profitability,
and a sleepy  stock  price  that  could  be  driven  much  higher  via  multiple
commercial  E-Commerce  projects with the associated revenues and profitability.
They want in on that  ride,  and have  already  threatened  to leave if they are
deprived of it via high  government  business  rates,  or having  their  profits
washed  out by  losses  from  GlobalStake.com.  We  are  planning  to get  Tek's
investment in  GlobalStake  below the 20%  threshold in 4Q99 to cut  Teknowledge
free of GlobalStake losses.

     GlobalStake is another large upside opportunity.  The real estate market is
huge and only superficially serviced by the web. It now appears that GlobalStake
will  not  have  first  or  second  mover   position  in  discount  real  estate
transactions. Those honors go to zipReality.com and HomesThatClick.com. No doubt
others are on the way. GlobalStake probably has the most comprehensive  offering
planned. No doubt it will be a battle for first,  second, and third place in the
market.  Neil has talked to a half dozen potential  investors,  and none of them
has jumped in with big  investments  yet.  Some are still  considering  it. Most
agree that the market  will evolve on the web,  but some doubt our rapid  growth
model  that  has us at  $680M in  cumulative  profits  at the end of year 5, and
others think that the real estate  companies will move faster than the brokerage
companies did to cannibalize  their  businesses.  So,  GlobalStake  will plan to
raise investment money in 4Q99. It is apparent from the speed of the market that
GlobalStake will have to accelerate to have any chance of dominating its market.

     This probably means five things: 1) raising more capital,  2) giving away a
larger stake than anticipated,  3) larger losses than anticipated, 4) hiring the
new execs  and  staff  faster,  5)  cutting  the  company  free  faster to focus
exclusively  on the on-line real estate  market.  Given the need for larger than
anticipated losses, this increases the risk to the parent company  considerably.
We do not want the needs of the parent to limit the growth or competitiveness of
GlobalStake. On the other hand, we do not want the needs of GlobalStake to trash
the business of the parent company.  TEKC faces the total loss of its E-Commerce
business  if   GlobalStake   losses   roll-up  to  the   parent.   GlobalStake's
competitiveness   will  suffer  if  TEKC  is  limiting  investment  and  maximum
deployment  velocity in order to protect its  profitability.  This suggested the
need for an earlier than anticipated  separation,  to be achieved by a change of
management and separation of control.

     As a result,  a single  Executive  (NJ) will now staff the  former  two-man
office  of the  CEO/President.  We  have  promoted  Benedict  O'Mahoney  to Vice
President to reflect his excellent performance as corporate counsel and director
of  administration.  Over time, Neil will need to identify and groom  additional
executive talent. But that is not considered a top priority for the coming year.

     Our patent  portfolio is aging, and in need of being exercised or abandoned
as worthless.  Our attempts to extract  royalties  from SAP resulted in us being
sued by and  counter  suing SAP.  If SAP fails to prevail in a summary  judgment
case in the Delaware courts, they will probably settle with us. If that happens,
others may follow their example.

Goals for 2000:
     -  Increase  the  market  cap of  Teknowledge  in 2000 by 25%
     -  Develop a profitable E-Commerce service business that is 40% of revenues
     -  Complete the  launch of  GlobalStake.com
     -  Replenish  and  build up the  backlog
     -  Leverage the patent portfolio

Objectives:
       1. Cash gating factor constraint. Cash on hand at end of year (12/31/00)
          must exceed $2.0M.
 [15%] 2. Profit. Achieve 9% EBIT.
 [15%] 3. Bookings. Land $15M in new bookings that are earnable within 18 months
          of notice of award.
 [15%] 4. Commercial business. Record $5M of E-Commerce revenue.
 [5%]  5. Licensing.  Produce $500K in patent  license fees and at least
          break even after expenses.
 [10%] 6. Launch  GlobalStake.com.  Help the company launch in 1Q00 and retain
          more than 19% ownership.

Base compensation:
I am recommending  that we raise base compensation for the new Chairman/CEO (NJ)
by 27.2% in 2000.  This new salary would be  approximately  halfway  between the
salary Neil  received in 1999 as President and that RHR received in 1999 as CEO.
The base plan would be:

       Basic Contract                                                NJ
         Base salary:                                          $195,000
         Severance:                                           12 months
         Change of control:                                   24 months
Note  specifically  that I am  recommending  this new salary be  implemented  on
11/22/99, consistent with NJ's promotion, assuming that is approved.

Specific gating factor and performance factors:
     As in the last few years, I suggest adopting a gating factor based on "cash
on hand" at  12/31/00.  This  gating  factor (GF) can scale from 0 to 1 and is a
multiplier on each  individual  performance  factor.  We are  currently  running
between a high of  approximately  $3M and a low of  approximately  $2.1M, but we
have promised approximately $1.2M to GlobalStake.com. The proposed gating factor
would be 0 below $1M,  and then scale  linearly  from 0.2 at $1M to 1.0 at $2.0M
(or above).  This  includes all items in the budget but  excludes any  potential
extraordinary   financing,   DCAA  adjustments   contrary  to  our  accountants'
interpretations, or unplanned board-authorized expenses.

     This  year I am  recommending  retaining  the  target  bonus at 60% of base
salaries.  This  reflects the need to add  additional  objectives  to maintain a
viable Teknowledge while spinning-off GlobalStake.com. This is a real challenge.

     Profit:  Target  factor would be 15% at 9% EBIT. It would scale  linearly
from 0% at 0 EBIT or below to 15% at 9% EBIT,  and then from 15% at 9% EBIT to
30% at 13.5% EBIT or higher.

     Bookings:  Target  factor  would be 15% for $15M in  backlog  for  business
awarded  in 1999  which is  earnable  within 18  months  after  award.  Revenues
produced from earlier year awards not previously  considered  part of "bookings"
for  calculating  this factor would be  considered  bookings  for this  purpose.
Target  factor would scale  linearly  from 5% at $7.5M to 15% at $15M,  and then
linearly from 15% at $15M to 30% at $22.5M or higher.

     E-commerce  business  line:  Target  factor would be 15% for $5M in revenue
earned.  It would scale linearly from 5% for $2M to 15% for $5M, and would scale
linearly  from 15% for $5M to 30% for $7.5M or above.  This  commercial  revenue
could be earned via Teknowledge employees and contractors.

     Patent  fees:  Target  factor  would be 5% for  $500K in  patent  licensing
revenue earned,  conditional upon a non-negative associated net income. It would
scale  linearly  from 2.5% for $200K to 5% for $500K,  and would scale  linearly
from 5% for $500K to 10% for $750K or higher.

     GlobalStake.com   spinout:  Target  factor  would  be  10%  for  launch  of
GlobalStake.  Com as a competent,  additionally  funded, and independent company
during the first  quarter (NLT  3/31/00).  In all cases,  the  percentage of the
company retained for Teknowledge must be at least an undilutable 19%. The target
factor would vary by month of business launch, as follows: June 2000 = 2.5%, May
2000 = 5%, April 2000 = 7.5%,  March 2000 = 10.%,  February 2000 = 14%,  January
2000  =  20%.  While  Teknowledge  has  no  influence  or  direct  control  over
GlobalStake.com,  we have agreed to provide them  facilities and support as part
of their  startup,  and we may be able to help  them  succeed  in other  ways by
providing commercial products or services that they need.

Resolution of the Compensation Committee of the Board of Directors:

We agree to  implement  the 2000 Exec  Compensation  plan as  described  in this
November 22, 1999 memorandum from Rick Hayes-Roth.


Agreed:


/s/ Neil Jacobstein
---------------------------------
Neil Jacobstein, Chairman and CEO

Approved:


/s/ James Workman
-----------------------------------------------
James Workman, Chairman, Compensation Committee