NETWORK SOLUTIONS INC /DE/, S-1, 1997-07-03

NETWORK SOLUTIONS INC /DE/
S-1, 1997-07-03

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1997

REGISTRATION NO. 333-
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------

Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NETWORK SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 7379 52-1146119
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or organization)
</TABLE>

505 HUNTMAR PARK DRIVE, HERNDON, VIRGINIA 20170 (703) 742-0400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
GABRIEL A. BATTISTA
Chief Executive Officer
Network Solutions, Inc.
505 Huntmar Park Drive, Herndon, Virginia 20170 (703) 742-0400
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
------------------------
Copies to:

<TABLE>
<S> <C> <C>
JORGE DEL CALVO, ESQ. DOUGLAS E. SCOTT, ESQ. MICHAEL D. NATHAN, ESQ.
KEITH J. MENDELSON, ESQ. ALOMA H. AVERY, ESQ. SIMPSON THACHER &
DAVINA K. KAILE, ESQ. SCIENCE APPLICATIONS BARTLETT
PILLSBURY MADISON & INTERNATIONAL 425 Lexington Avenue
SUTRO LLP CORPORATION New York, NY 10017
2700 Sand Hill Road 10260 Campus Point Drive (212) 455-2000
Menlo Park, CA 94025 San Diego, CA 92121
(415) 233-4500 (619) 546-6000
</TABLE>

------------------------
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement numbers of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C>
=====================================================================================================
PROPOSED
CLASS OF SECURITIES MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------
Class A Common Stock, $0.001 par value............... $35,000,000 $10,606
=====================================================================================================
</TABLE>

(1) Estimated solely for the purpose of computing the registration fee. The
estimate is made pursuant to Rule 457(o) of the Securities Act of 1933, as
amended.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JULY 3, 1997
PROSPECTUS

NETWORK SOLUTIONS, INC. [LOGO]
CLASS A COMMON STOCK

All of the shares of Class A Common Stock offered hereby are being
sold by Network Solutions, Inc. ("NSI" or the "Company"). The Company has two
classes of authorized Common Stock, Class A Common Stock and Class B Common
Stock. Holders of Class A Common Stock generally have identical rights to
holders of Class B Common Stock, except that holders of Class A Common Stock are
entitled to one vote per share while holders of Class B Common Stock are
entitled to ten votes per share on all matters submitted to a vote of
stockholders. See "Relationship with SAIC and Certain Transactions" and
"Description of Capital Stock."

The Company is a wholly-owned subsidiary of Science Applications
International Corporation, a Delaware corporation ("SAIC"). Upon completion of
this offering, SAIC will own 100% of the Company's outstanding Class B Common
Stock, which will represent approximately % of the outstanding Common
Stock of the Company (approximately % if the Underwriters' over-allotment
option is exercised in full) and will continue to control the Company. See
"Principal Stockholders" and "Relationship with SAIC and Certain Transactions."

Prior to this offering, there has been no public market for the Class A
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $ and $ per share. See "Underwriting" for
a discussion of the factors to be considered in determining the initial public
offering price. The Company has applied to have the Class A Common Stock
approved for quotation on the Nasdaq National Market under the symbol NSOL.

------------------

THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 8.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C> <C>
===========================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------------------
Per Share............................ $ $ $
- -----------------------------------------------------------------------------------------------------------
Total(3)............................. $ $ $
===========================================================================================================
</TABLE>

(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.

(2) Before deducting expenses payable by the Company estimated at $ .

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to additional shares of Class A Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------

The shares of Class A Common Stock are offered by the several Underwriters
subject to prior sale, receipt and acceptance by them and subject to the right
of the Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1997, at the office of the agent of Hambrecht
& Quist LLC in New York, New York.

HAMBRECHT & QUIST
J.P. MORGAN & CO.
PAINEWEBBER INCORPORATED
, 1997
<PAGE> 3

[INSIDE FRONT COVER OF PROSPECTUS]

[ARTWORK]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

The Company's name and logo are service marks of the Company. This
Prospectus also includes trademarks of companies other than the Company.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus. Unless the context requires otherwise, all references to the
"Company," "Network Solutions" and "NSI" shall refer to Network Solutions, Inc.,
a Delaware corporation, and its predecessor, Network Solutions Incorporated, a
Washington, D.C. corporation. The Class A Common Stock offered hereby involves a
high degree of risk. See "Risk Factors." References in this Prospectus to the
"Common Stock" shall include both the Company's Class A Common Stock, par value
$0.001 per share, and the Company's Class B Common Stock, par value $0.001 per
share. As used herein, net registrations are defined as the gross number of
domain name registrations less management's estimates of uncollectible
registrations and of non-renewals.

THE COMPANY

Network Solutions is the leading Internet domain name registration service
provider worldwide. The Company currently acts as the exclusive registrar for
second level domain names within the .com, .org, .net, .edu and .gov top-level
domains ("TLDs"). By registering Internet domain names, the Company enables
businesses, other organizations and individuals to establish a unique Internet
presence from which to communicate and conduct commerce. Net registrations
within the TLDs maintained by the Company increased by 233% from approximately
246,000 domain names registered at March 31, 1996 to approximately 818,000
domain names registered at March 31, 1997. The Company believes that commercial
enterprises and individual Internet users worldwide are increasingly recognizing
the .com TLD as a desirable address for commercial presence on the Internet. Net
registrations in the .com TLD increased from approximately 217,000 at March 31,
1996 to approximately 721,000 at March 31, 1997, representing 88% of the
Company's total net registrations at March 31, 1997. With over 10 million
businesses and over 750,000 active trademarks and service marks in the United
States alone, the Company believes that the potential for continued growth of
domain name registrations by commercial entities and services related to those
registrations is substantial. Net revenue from Internet domain name registration
subscriptions accounted for 76.5% of the Company's net revenue for the three
months ended March 31, 1997.

The Company also provides Intranet consulting services to large companies
that desire to establish or enhance their Internet presence or "re-engineer"
legacy network infrastructures to accommodate the integration of both Internet
connectivity and Intranet network technology into their information technology
base. The Company's Intranet services presently include: (i) Intranet
development and re-engineering; (ii) network and systems security; and (iii)
Intranet-enabled business solutions. According to Zona Research, Inc., the
market for Intranet services in the year 1999 will exceed $14 billion, up from
$3 billion in 1996. Net revenue from Intranet services accounted for 23.5% of
the Company's net revenue for the three months ended March 31, 1997.

The Company currently acts as the exclusive registrar for second level
domain names within the .com, .org, .net, .edu and .gov TLDs pursuant to a
cooperative agreement (the "Cooperative Agreement") with the National Science
Foundation (the "NSF"). Prior to September 14, 1995, the Cooperative Agreement
was a cost reimbursement plus fixed-fee contract and the Company was paid
directly by the NSF for providing registration services. Effective September 14,
1995, the NSF and the Company amended the Cooperative Agreement to authorize the
Company to charge customers a subscription fee of $50 per year for each second
level domain name registered. The Company's registration services customers in
the .com, .org and .net TLDs are invoiced for a two-year subscription fee of
$100 for initial registrations and $50 per year for renewals of initial
registrations. Pursuant to the Cooperative Agreement, the Company presently is
required to set aside 30% of the subscription fees collected for the enhancement
of the intellectual infrastructure of the Internet. These funds are not
recognized as revenue by the Company and will be disbursed in a manner approved
by the NSF. The Cooperative Agreement by its terms expires in March 1998, but
may be terminated at any time by the NSF at its discretion or by mutual
agreement. The NSF has stated that the Cooperative Agreement will

3
<PAGE> 5

not be re-awarded to the Company or awarded to any other entity. See "Risk
Factors -- Uncertain Status of the Cooperative Agreement," "-- Recommendations
and Proposals to Increase Competition in Registration Services" and
"Business -- Relationship with the NSF; Recent Developments in the Internet
Community."

The Company believes that it has certain competitive advantages in the
domain name registration business, including: (i) brand recognition of the .com
TLD; (ii) a large established customer base; (iii) strategic agreements with
Internet access providers; (iv) an established technical infrastructure; (v)
experience in the administration of a domain name dispute policy; and (vi)
skilled technical personnel who are experienced in the domain name registration
business. The Company believes that the technical and procedural requirements to
build and to operate a competitive domain name registry are significant.
Substantial portions of the Company's registration software have been custom-
developed and are proprietary. The Company's in-house registration software
includes an automated registration capability which currently processes in
excess of 90% of all new registration requests without human intervention. In
connection with the Company's domain name registration service, the Company: (i)
cooperates with government and nonprofit organizations that develop and
implement Internet standards and policies; (ii) provides customer service
support, which includes back office capability, a telephone help desk and
electronic support via e-mail and the World Wide Web; and (iii) disseminates
domain name database information to root servers throughout the world.

The Company is working to expand its domain name registration business and
to continue to improve the registration process by: (i) increasing the brand
recognition of the .com TLD worldwide; (ii) expanding its relationships with
Internet access providers by offering enhanced registration services to their
customers; (iii) stimulating demand for domain names in targeted customer
segments; (iv) working with major platform providers to embed the registration
function into server software applications; (v) facilitating ease of use and
access to registration services; and (vi) establishing international alliances
and developing multilingual capability. In addition, the Company intends to
develop a portfolio of Internet enabling products and services, which may
include directory and distribution services, that allows the Company to build
upon its position in the registration process and makes proper use of the
customer data that the Company collects.

The Company was incorporated in Washington, D.C. in 1979 as Network
Solutions Incorporated and was reincorporated as Network Solutions, Inc. in
Delaware in November 1996. The Company's principal executive offices are located
at 505 Huntmar Park Drive, Herndon, Virginia 20170, and its telephone number is
(703) 742-0400.

4
<PAGE> 6

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered by the Company...... shares
Common Stock to be outstanding after the offering
Class A Common Stock........................... shares(1)
Class B Common Stock........................... shares(2)
Voting Rights.................................... The holders of Class A Common Stock, par
value $0.001 per share (the "Class A
Common Stock"), generally have rights,
including as to dividends, identical to
those of holders of Class B Common Stock,
par value $0.001 per share (the "Class B
Common Stock"), except that holders of
Class A Common Stock are entitled to one
vote per share and holders of Class B
Common Stock are entitled to ten votes
per share. Holders of Class A Common
Stock and Class B Common Stock generally
vote together as a single class. See
"Description of Capital Stock -- Common
Stock -- Voting Rights."
Use of proceeds.................................. For working capital and general corporate
purposes
Proposed Nasdaq National Market symbol........... NSOL
</TABLE>

- ------------------------------

(1) Excludes 2,556,250 shares of Class A Common Stock reserved for issuance
under the Company's 1996 Stock Incentive Plan, of which 1,496,725 shares
were subject to options outstanding as of June 30, 1997, with a weighted
average exercise price of $13.15 per share. See "Capitalization" and
"Management -- 1996 Stock Incentive Plan" and Notes 10 and 14 of Notes to
Financial Statements.

(2) Upon completion of the offering, SAIC will own 100% of the Class B Common
Stock.

SUMMARY FINANCIAL AND OPERATING INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

THREE MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------------- ----------------
1992 1993 1994 1995(1) 1996 1996 1997
------ ------ ------ ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue........................ $1,160 $4,369 $5,029 $ 6,486 $18,862 $ 2,333 $8,655
Income (loss) from continuing
operations...................... 93 (110) 189 (1,434) (1,625) (1,102) 516
Net income (loss).................. $ 681 $ (386) $ (980) $(2,837) $(1,625) $(1,102) $ 516
Pro forma net income (loss) per
share........................... $ $ $
Pro forma shares used in computing
income (loss) per share(2)......
OTHER OPERATING DATA(3):
Net new registrations.............. -- 13 24 141 489 75 197
Less: registrations not renewed.... -- -- -- 1 39 6 6
Net registrations at period end.... -- 13 37 177 627 246 818
</TABLE>

5
<PAGE> 7

<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------
ACTUAL AS ADJUSTED(4)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................ $12,483 $
Working capital(5)............................................... 4,637
Total assets(6).................................................. 66,850
Deferred revenue, net............................................ 36,900
Capital lease obligations........................................ 1,138
Total stockholders' equity....................................... 1,953
</TABLE>

SUMMARY QUARTERLY FINANCIAL AND OPERATING INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1996 1996 1996 1996 1997 1997
-------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.............. $1,533 $ 2,333 $4,496 $ 5,180 $6,853 $8,655 $
Income (loss) from
continuing
operations............ (844) (1,102) (356) (293) 126 516
Net income (loss)........ $ (851) $(1,102) $ (356) $ (293) $ 126 $ 516 $
Pro forma net income
(loss) per share...... $ $ $ $ $ $
Pro forma shares used in
computing income
(loss) per share(2)...
OTHER OPERATING DATA(3):
Net new registrations.... 43 75 105 139 170 197
Less: registrations not
renewed............... 1 6 11 18 4 6
Net registrations as of
period end............ 177 246 340 461 627 818
</TABLE>

- ------------------------------
(1) The Summary Financial Data for the year ended December 31, 1995 was derived
by combining the Company's Results of Operations for the period January 1,
1995 through March 10, 1995 and the period March 11, 1995 through December
31, 1995 which, respectively, are periods before and after the date of the
SAIC acquisition discussed below. The data for these two periods were
prepared on differing bases of accounting and, accordingly, the
comparability of such data with other periods is limited, primarily as a
result of goodwill amortization, new corporate services agreements and the
repayment of outstanding debt balances. See Note 1 of Notes to Financial
Statements for a discussion of the presentation for each of these periods.
(2) See Note 2 of Notes to Financial Statements for an explanation of the
determination of shares used in computing pro forma net income (loss) per
share.
(3) Net new registrations for each period include gross new registrations less
an estimate of registrations that are uncollectible. Net registrations
include net new registrations less management's estimate of registrations
not renewed. Prior to September 14, 1995, net registrations equaled gross
registrations because the Company was reimbursed by the NSF for all
registrations under a cost plus fixed-fee contract.
(4) As adjusted to give effect to the $ dividend to SAIC and to reflect
the sale of shares of Class A Common Stock offered by the Company
hereby at an assumed initial public offering price of $ per share and the
receipt of the estimated net proceeds therefrom. See "Use of Proceeds,"
"Dividend Policy" and "Capitalization."
(5) Working capital calculation includes $25,345 of current deferred revenue at
March 31, 1997.
(6) Total assets include $23,813 of restricted assets at March 31, 1997. See
Notes 2 and 3 of Notes to Financial Statements.
------------------------------

Except as otherwise noted, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. See "Description of Capital
Stock," "Underwriting" and Notes to Financial Statements.

6
<PAGE> 8

RELATIONSHIP WITH SAIC AND FINANCIAL PRESENTATION

The Company was acquired by Science Applications International Corporation
("SAIC"), an employee-owned, diversified professional and technical services
company, on March 10, 1995. The financial statements of the Company presented
for periods subsequent to March 10, 1995 are presented on the new basis of
accounting arising from the SAIC acquisition. The Company is currently a wholly-
owned subsidiary of SAIC. Upon completion of the offering, SAIC will own 100% of
the Company's outstanding Class B Common Stock, which will represent
approximately % of the outstanding Common Stock of the Company
(approximately % if the Underwriters' over-allotment option is exercised
in full) and approximately % of the combined voting power of the
Company's outstanding Common Stock (approximately % if the Underwriters'
over-allotment option is exercised in full). As a result, SAIC will continue to
have the ability to elect all of the directors of the Company and otherwise
exercise control over the business and affairs of the Company. See "Principal
Stockholders," "Risk Factors -- Control By SAIC," "-- Potential Conflicts of
Interest" and "Relationship with SAIC and Certain Transactions."

Upon completion of the offering, SAIC will continue to provide certain
services to the Company in a manner generally consistent with past practices.
Prior to completion of the offering, the Company and SAIC will enter into a
number of intercompany agreements with respect to such services and other
matters, including a tax sharing agreement. See "Risk Factors -- Intercompany
Agreements Not Subject to Arm's-Length Negotiations," and "Relationship With
SAIC and Certain Transactions."

Prior to the acquisition of the Company by SAIC, the Company's business
included commercial and government contracts awarded to the Company on a
competitive basis, including government contracts that were awarded to the
Company based partially upon the Company's then minority-owned status. The
contracts which had been awarded to the Company based in part on the Company's
then minority-owned status were transferred into a separately-owned entity
immediately prior to the acquisition of the Company by SAIC. In November 1995,
SAIC adopted a plan to transfer the Company's remaining government-based
business to SAIC in order to enable the Company to focus on the growth of its
commercial business, which includes registration services and Intranet services.
This transfer was effective as of February 1996. The operating results of both
the minority-based government contracts business and the remaining
government-based business are reflected as discontinued operations in the
Company's financial statements for all periods presented.

7
<PAGE> 9

RISK FACTORS

An investment in the shares of Class A Common Stock offered hereby involves
a high degree of risk. Prospective investors should consider carefully the
following risk factors, in addition to the other information presented in this
Prospectus, before purchasing the shares of Class A Common Stock offered hereby.
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements as a result of certain
factors, including, but not limited to, those set forth under "Risk Factors" and
elsewhere in this Prospectus.

Limited Operating History. While the Company has been in business since
1979, it has been involved in the domain name registration business pursuant to
the Cooperative Agreement since 1993. Further, prior to September 14, 1995, the
Company operated its domain name registration business under a cost
reimbursement plus fixed-fee contract with the NSF and the Company was paid
directly by the NSF for providing registration services. Accordingly, the
Company has only a limited operating history under its current
subscription-based pricing model for its domain name registration business, upon
which an evaluation of the Company and its prospects can be based. The Company's
prospects must be considered in light of the risks frequently encountered by
companies in their early stages of development, particularly companies in new
and rapidly evolving markets. To address these risks, the Company must, among
other things, respond to competitive developments, increase its sales and
marketing organization, continue to identify, attract, retain and motivate
qualified persons and continue to upgrade its technologies and commercialize
products and services incorporating such technologies. While the Company has
been involved in network services and consulting since its inception, due to the
rapidly evolving nature of Internet technologies, the Company's Intranet
services business faces similar risks. There can be no assurance that the
Company will be successful in addressing such risks or that the Company will
continue to obtain new registrations at current rates or renew the registration
of a significant portion of its customers. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "-- Absence of
Sales and Marketing Experience; Evolving Distribution Channels."

As a result of the Company's limited operating history, especially with
regard to its subscription-based registration services business, the Company
does not have significant historical financial data on which to base planned
operating expenses. Accordingly, the Company's expense levels are based in part
on its expectations as to future revenue and to a large extent are fixed. As a
result, quarterly sales and operating results generally depend on the volume of
and ability to fulfill registration requests, which are difficult to forecast.
The Company may be unable to adjust spending in a timely manner to compensate
for any unexpected revenue shortfall. Accordingly, any significant shortfall of
demand for the Company's services in relation to the Company's expectations
would have an immediate adverse impact on the Company's business, operating
results and financial condition. In addition, the Company expects a significant
increase in its operating expenses as it funds greater levels of product and
services development, increases its sales and marketing operations, upgrades
systems and infrastructure, opens new offices, develops new distribution
channels and broadens its customer support capabilities. To the extent that such
expenses precede or are not subsequently followed by an increase in revenue, the
Company's business, operating results and financial condition will be materially
and adversely affected.

Uncertain Status of the Cooperative Agreement. In 1993, the Company
entered into the Cooperative Agreement with the NSF to act as the exclusive
registrar for second level domain names within the .com, .org, .net, .edu and
.gov TLDs. With the commercialization of the Internet, the role, if any, that
the NSF will play in the future of the Internet and the legal authority
underlying any such continuing role are at present unclear. Withdrawal of the
NSF's sponsorship of the Company's activities could create a public perception
that the Company lacks authority to continue in its role as registrar or to
charge fees for its domain name registration services. The impact, if any, of
any such public perception is unknown but could materially and adversely affect
the Company's business, financial condition and results of operations. Further,
the Cooperative Agreement by its terms expires in March 1998, although the NSF
may, at its option, extend the Cooperative Agreement to September 1998. The
Cooperative

8
<PAGE> 10

Agreement is subject to review by the NSF and may be terminated by the NSF at
any time at its discretion or by mutual agreement. If the Cooperative Agreement
(or the Company's status as the exclusive registrar for domain names in the .com
TLD) is terminated, the Company's business, financial condition and results of
operations could be materially and adversely affected. The NSF has stated that
the Cooperative Agreement will not be re-awarded to the Company or awarded to
any other entity. However, there can be no assurance that the NSF will not award
the Cooperative Agreement to another entity and, if the Cooperative Agreement is
awarded to another entity, the Company's business, financial condition and
results of operations would be materially and adversely affected. See
"Business -- Relationship with the NSF; Recent Developments in the Internet
Community."

Competition in Domain Name Registration Business. The Company currently is
the exclusive registrar for second level domain names in the .com, .org, .net,
.edu and .gov TLDs. Multiple registries do not currently register names in the
same TLD, but this may change in the future. The Company currently faces
competition in the domain name registration business from registries for country
codes, third level domain name providers such as Internet access providers and
registries of TLDs other than those TLDs currently being registered by the
Company. A number of entities have already begun to offer competing registration
services using other TLDs. Future competition in the Company's domain name
registration business could come from many different companies, including, but
not limited to, major telecommunications firms, cable companies and Internet
access providers. Such entities have core capabilities to deliver registration
services, such as help desks, billing services and network management, along
with strong name recognition and Internet industry experience. Other companies
with some or all of these capabilities may also enter the registration business.
Also emerging are a growing contingent of domain name resellers. The Company's
position as the leading registrar of domain names could be materially and
adversely affected by the emergence of any of the foregoing competitors and
potential competitors, many of which have longer operating histories and
significantly greater financial, technical, marketing, distribution and other
resources and name recognition than the Company. In addition, the Company's
revenues and fees could be reduced due to increasing competition. For example,
if other entities are allowed to share the registration of domain names, these
entities may bundle domain name registrations with other products or services,
effectively providing such registration services for free. If operational and
administrative arrangements and technology permitting multiple competitors to
register domain names in the same TLDs are developed and competition occurs
within the Company's existing TLDs, the Company's business, financial condition
and results of operations would be materially and adversely affected. See
"Business -- Competition."

Recommendations and Proposals to Increase Competition in Registration
Services. The Cooperative Agreement does not prohibit the establishment of
competing registries by entities other than the Company or the NSF. No single
organization or entity (including the NSF) currently has formal authority over
all aspects of the Internet and the Internet currently operates under a system
of mutual cooperation. Various governmental, technical and Internet groups are
currently discussing how the award and administration of future contracts for
registration services in the .com TLD, other existing TLDs and new TLDs may take
place and are considering whether and how to enable other parties to enter the
domain name registration business. The Company is also an active participant in
this process. A consensus regarding such issues could be reached and implemented
in the near future and prior to the expiration of the Cooperative Agreement. For
example, some members of the Internet community have discussed various concepts
such as adding new TLDs which could result in significant competition for domain
name registrations, including competition on the price charged by the Company
for domain name registrations. In February 1997, an international ad hoc
committee (the "IAHC"), the members of which have been selected by certain
entities involved in the Internet and intellectual property fields, issued its
recommendation designed to increase competition in domain name registration in
which it proposed the creation of additional registries, additional TLDs and the
possible sharing of new and existing TLDs. In April 1997, the IAHC issued a
Memorandum of Understanding ("MOU") seeking support for its recommendations.
This MOU has been signed by a number of organizations in the Internet community.
In April 1997, the Company issued its own recommendations to increase
competition in domain name registration. The Company's recommendations focus on
creating addi-

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<PAGE> 11

tional TLDs as well as on the future administration and technical operation of
the Internet. Other groups or entities may also make other proposals concerning
these and other issues. Implementation of additional TLDs, the sharing of the
Company's TLDs or other recommendations or proposals of these groups could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "-- Government Regulation and Legal Uncertainties"
and "Business -- Relationship with the NSF; Recent Developments in the Internet
Community."

Competition in Intranet Services and Internet-Enabling Businesses.
Companies with Internet expertise are current or potential competitors to the
Company's Intranet services business. An Intranet is an internal network which
uses Internet technologies. Such companies include systems integrators and
consulting firms, such as Andersen Consulting, IBM Global Services and
International Network Services. The Company also competes with certain
companies that have developed products that automate the management of Internet
Protocol ("IP") addresses and name maps throughout enterprise-wide Intranets,
and with companies with internally-developed systems integration efforts. An IP
address allows a router, a computer which connects networks together, to
determine to which network the router should send the data it receives. A
number of these competitors and potential competitors have longer operating
histories and significantly greater financial, technical, marketing,
distribution and other resources and name recognition than the Company. There
can be no assurance that the Company will be able to successfully compete in
the Intranet services area. Failure by the Company to compete successfully in
the Intranet services area could have a material adverse effect on the
Company's business, financial condition and results of operations.

In developing and distributing future products and services for the
Internet-enabling markets, the Company faces intense competition and expects to
have multiple competitors for each of the products or services, if any, which it
develops or sells. Many of the Company's potential competitors have longer
operating histories and significantly greater financial, technical, marketing,
distribution and other resources and name recognition than the Company.
Furthermore, the industry in which the Company intends to compete is
characterized by rapid changes and frequent product and service introductions.
To the extent a competitor introduces a product or service prior to the
introduction of the same or similar product or service by the Company, market
acceptance of the competitor's product or service may adversely affect the
Company's competitive position. See "Business -- Competition."

Uncollectible Receivables; Modifications to Billing Practices. The Company
was reimbursed by the NSF for providing domain name registration services prior
to September 14, 1995, at which time the Company began charging its customers
fees for new domain name registrations pursuant to an amendment to the
Cooperative Agreement. The Company invoices customers and permits them to pay
the subscription fee after the domain name is registered. The Company believes
it has experienced a high level of uncollectible receivables due to, among other
factors, the large number of individuals and corporations that have registered
multiple domain names with the apparent intention of reselling such names at a
profit. The Company's experience has been that, in contrast to other customers,
such resellers have a greater tendency to default on their subscription fees.
Management has established a provision for uncollectible accounts which it
believes to be adequate to cover anticipated uncollectible receivables; however,
actual results could differ from management's estimate and could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 3 of Notes to Financial Statements.

The Company continually reviews its billing practices for modification to
respond to market conditions and to implement operational improvements. Any such
modification could have unanticipated consequences which could result in a
material adverse effect on the Company's business, financial condition and
results of operations.

Limited Service Offerings to Date; Reliance on Domain Name Registration
Services and Intranet Services for Substantially All Revenue. The Company's
domain name registration services and Intranet services businesses have in the
past generated substantially all of the Company's revenue from

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<PAGE> 12

continuing operations and are expected to continue to account for substantially
all of the Company's revenue from continuing operations in the near term. The
Company's future success will be highly dependent upon the continued increase in
domain name registrations with the Company, renewal rates of its customers, the
ability of the Company to maintain its current position both as a registrar of
domain names and as the leading registrar of domain names within the .com TLD
and the successful development, introduction and market acceptance of new
services that address the demands of Internet users. Although the Company has
experienced revenue growth in recent periods, such growth may not be sustainable
and may not be indicative of future operating results. There can be no assurance
that the Company will be able to successfully retain its current position in
providing domain name registration services or develop or market additional
services. Failure to do so would materially and adversely affect the Company's
business, financial condition and results of operations.

The Company's future success will also be dependent on its ability to
maintain and expand its Intranet services business. NationsBanc Services, Inc.
("NationsBanc"), the Company's largest Intranet services customer, accounted for
47.9% of the Company's Intranet services net revenue and 11.2% of the Company's
total net revenue from continuing operations for the three months ended March
31, 1997. NationsBanc originally contracted with the Company in 1993 to provide
ongoing analysis, design, implementation and support engineering for its
enterprise network. The Company currently provides network design and
engineering services as well as a variety of project specific services for
NationsBanc. The Company's current contract with NationsBanc is a three-year
contract which commenced January 1, 1997 and is a requirements contract under
which the Company's services are ordered by task orders issued by NationsBanc.
The NationsBanc contract may be terminated by NationsBanc at any time upon
30-days' prior written notice to the Company. During the first quarter of 1997,
a number of services the Company had historically performed for NationsBanc were
not renewed. The Company believes that this reflects NationsBanc's focus on
increasing its internal information technology staff as well as its continued
efforts to integrate information technology staff from recent acquisitions. The
Company believes NationsBanc will continue to be a significant customer for its
Intranet services group but less so than in previous years, both in terms of
dollars and as a percentage of the Company's total net revenue. There can be no
assurance that the Company will obtain any additional task orders under the
NationsBanc contract or maintain or be able to expand its Intranet services
business. Failure to do so would materially and adversely affect the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Technological Change and Additional Technology, Products and Services. The
development of RWhois, a Company-developed, standard open protocol, and the
associated technology, allows remote registration by others. The Company's
efforts to standardize and proliferate RWhois as the registration standard may
result in a material adverse effect on the Company's future competitive position
by enabling others to establish registries more easily. RWhois is also the
protocol that the Company may employ for any global directory services which the
Company might offer. The successful introduction of such directory services may
blur the distinction between directory services and domain name registration.
Should this or another global directory service become widely proliferated,
domain name registration may be subsumed into such a service. In that case,
should the Company fail to secure a leadership position in providing such a
global directory service or establish a system for charging for such service,
the Company's business, financial condition and results of operations would be
materially and adversely affected. See "Business -- NSI Services -- Registration
Services" and "-- Other Products and Services Development."

The Company's future financial success will be highly dependent upon its
ability to develop and commercialize in a timely manner new technology, products
and services that can be offered in conjunction with the Company's current
domain name registration and Intranet services and that can meet the changing
requirements of its current and future customers. The market for such
technology, products and services is characterized by rapidly changing
technology, evolving industry standards and frequent introductions of new
Intranet and Internet-related products and services. Generally, the

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<PAGE> 13

successful development and commercialization of new technology, products and
services involves many risks, including the identification of new Intranet and
Internet-related product and service opportunities, the successful completion of
the development process, and the identification, retention and hiring of
appropriate research, development and technical personnel. There can be no
assurance that the Company can successfully identify new service opportunities
and develop and bring to market in a timely manner new technologies, products or
services, or that services, products or technologies developed by others will
not render the Company's services, products or technologies noncompetitive or
obsolete. Failure by the Company to develop new technologies, products or
services and bring them to market in a timely manner could have a material
adverse effect on the Company's business, financial condition and results of
operations.

Dependence on Future Growth of the Internet and Internet
Infrastructure. The Company's future success is substantially dependent upon
continued growth in the use of the Internet. Rapid growth in the use of and
interest in the Internet is a relatively recent phenomenon and there can be no
assurance that use of the Internet will continue to grow at its current pace.
Even if the Internet continues to experience significant growth in the number of
users and level of use, there can be no assurance that the Internet
infrastructure will continue to be able to support the demands placed upon it by
such growth. The Company's success and the viability of the Internet as an
information medium and commercial marketplace will depend in large part upon the
development of a robust infrastructure for providing Internet access and
carrying Internet traffic. Failure to develop a reliable network system, or
timely development of complementary products, such as high speed modems, could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, the Internet could lose its viability
due to delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity or due to increased
government regulation. The lack of Internet governance or the future imposition
of restrictive governance or regulation could adversely affect the growth of the
use of the Internet and have a material adverse effect on the Company's
business, financial condition and results of operations. Because global commerce
and on-line exchange of information on the Internet are new and evolving, it is
difficult to predict with any assurance that the infrastructure or complementary
products will be developed, or, if developed, that the Internet will become a
viable information medium or commercial marketplace. If the use of the Internet
does not continue to grow, if the necessary infrastructure or complementary
products are not developed or do not effectively support growth that may occur,
or if the Internet does not become a viable information medium or commercial
marketplace, the Company's business, financial condition and results of
operations would be materially and adversely affected. See "Business -- Industry
Background."

Litigation. As of June 30, 1997, the Company had received approximately
2,500 written objections to the registration and use of certain domain names. Of
these, approximately 1,200 were disputes in which the Company's domain name
dispute policy was involved. As of June 30, 1997, the Company had been named as
a defendant in 26 lawsuits. As of such date, the Company had been dismissed as a
party from 21 of the 26 lawsuits and no damages have been awarded against the
Company to any plaintiff. The lawsuits have generally involved domain name
disputes between trademark owners and domain name holders. The Company's domain
name dispute policy seeks to take a neutral position regarding these competing
claims and is designed to address claims that a domain name registered by the
Company infringes a third party's federal trademark. The Company is drawn into
such disputes, in part, as a result of claims by trademark owners that the
Company is legally required, upon request by a trademark owner, to terminate the
right the Company granted to an alleged trademark infringer to register the
domain name in question. Further, trademark owners have also alleged that the
Company should be required to monitor future domain name registrations and
reject registrations of domain names which are identical or similar to their
federally registered trademark. The holders of the domain name registrations in
dispute have, in turn, questioned the Company's right, absent a court order, to
take any action which suspends their registration or use of the domain names in
question. Such litigation has resulted in, and any future litigation can be
expected to result in, substantial legal and other expenses to the Company and a
diversion of the efforts of the Company's personnel.

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<PAGE> 14

On June 27, 1997, SAIC received a Civil Investigative Demand ("CID") from
the U.S. Department of Justice ("DOJ") issued in connection with an
investigation to determine whether there is, has been, or may be a violation of
antitrust laws under the Sherman Act relating to Internet registration products
and services. The CID seeks documents and information from SAIC and the Company
relating to their Internet registration business. Neither SAIC nor the Company
is aware of the scope or nature of the investigation. The Company cannot predict
whether a civil action will ultimately be filed by the DOJ or by private
litigants as a result of the DOJ investigation or, if filed, what such action
would entail. The Company is unable to predict the form of relief that might be
sought in such an action or that might be awarded by a court or entered as a
result of any settlement between the Company and the DOJ or private litigants.
Any such relief could have a material adverse effect on the Company's business,
financial condition and results of operations.

On March 20, 1997, PG Media, Inc., a New York-based corporation ("PG
Media"), filed a lawsuit against the Company in the United States District
Court, Southern District of New York alleging that the Company had restricted
access to the Internet by not adding TLDs in violation of the Sherman Act. The
Company has answered the complaint, but no motions are pending and no schedule
has yet been set by the court for these proceedings. In addition, the Company
recently received written direction from the NSF not to take any action to
create additional TLDs or to add any new TLDs to the Internet root servers until
further guidance is provided by the NSF. Although the Company believes that it
has meritorious defenses and intends to vigorously defend itself against such
claims, a successful claim under the plaintiff's theory could have a material
adverse effect on the Company's business, financial condition and results of
operations.

There can be no assurance that the Company will not be involved in
additional litigation, investigations or other proceedings in the future. Any
such proceedings, with or without merit, could be costly and time-consuming to
defend, could divert management's attention and resources and could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Litigation."

Intellectual Property Rights. The Company's principal intellectual
property consists of, and its success is dependent upon, the Company's
proprietary software utilized in its registration services business and certain
methodologies and technical expertise it utilizes in both the design and planned
implementation of its current and future registration service and proposed
Internet enabling services businesses. Some of the software and protocols used
by the Company in its registration service and proposed Internet enabling
services businesses are in the public domain or are otherwise available to the
Company's competitors. In addition, in-depth technical knowledge and unique
processes are critical to the Company's Intranet services business, in which a
full range of consulting and systems integration services are offered in order
to transition organizations from private, legacy networks to more scalable and
efficient Intranets. The Company has no patents or registered copyrights but has
several trademarks and service marks, including the Company's logo.

The Company has compiled a database of information relating to customers in
its registration business. While a portion of this database is available to the
public, the Company believes that it has ownership rights in this database and
is seeking to protect such rights. If it were determined that the Company does
not have ownership rights in this database or if the Company is unable to
protect such rights in this database or is required to share the database with
its potential competitors, any such development would have a material adverse
effect on the Company's business, financial condition and results of operations.

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<PAGE> 15

successful, there can be no assurance that others will not develop technologies
that are similar or superior to the Company's proprietary technology. Although
the Company believes that its services do not infringe on the intellectual
property rights of others and that it has all rights necessary to utilize the
intellectual property employed in its business, the Company is subject to the
risk of claims alleging infringement of third party intellectual property
rights. Any such claims could require the Company to spend significant sums in
litigation, pay damages and develop non-infringing intellectual property or
acquire licenses to the intellectual property which is the subject of asserted
infringement. Failure by the Company to adequately protect its proprietary
rights or litigation relating to intellectual property rights could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Intellectual Property Rights."

Management of Growth; Dependence on Key Personnel. The Company has
recently experienced growth in the number of its employees and in the scope of
its operating and financial systems. This growth has resulted in an increase in
responsibilities for both existing and new management personnel. In addition,
the Company is currently seeking additional key marketing and business
development personnel. The Company's ability to manage growth effectively will
require it to successfully integrate its management team, continue to implement
and improve its operational, financial and management information systems and to
train, motivate, manage and retain its employees. There can be no assurance that
the Company will be able to manage its expansion effectively and a failure to do
so could have a material adverse effect on the Company's business, financial
condition and results of operations.

The rapid growth of the Company's domain name registration business during
1995 and 1996 significantly exceeded the Company's back office capabilities and
control infrastructure. As a result, the Company was unable to keep current in
the processing, billing, collection, reconciliation and other administrative and
financial functions relating to the domain name registration business. In late
1996, the Company entered into outsourcing arrangements with third parties,
which, in conjunction with new invoicing procedures implemented in 1997, enabled
the Company to become current in these functions. There can be no assurance that
such outsourcing arrangements and procedural changes will continue to be
successful in addressing the current or future needs of the Company's domain
name registration business or that the Company will remain current on the
various administrative and financial functions relating to the domain name
registration business. In addition, growth of the Company's customer base may
strain the capacity of its computers and telecommunications systems, and the
Company's inability to sufficiently maintain or upgrade its systems could lead
to degradation in performance or system failure.

The Company's future success depends in part on the continued service of
its key engineering, sales, marketing, executive and administrative personnel,
and its ability to identify, hire and retain additional personnel. In addition,
the future success of the Company's Intranet services will depend in large part
on its ability to hire, train and retain network systems engineers who have
expertise in a wide array of network and computer systems and a broad
understanding of the industries the Company serves. An inability of the Company
to identify, hire, train and retain a sufficient number of qualified network
systems engineers could impair the Company's ability to adequately manage and
complete its existing projects or to obtain new projects, which, in turn, could
have a material adverse effect on the Company's business, financial condition
and results of operations and could impair the Company's expansion of its
business. Competition for engineering, sales, marketing and executive personnel
is intense and there can be no assurance that the Company can retain existing
personnel or identify, hire or retain additional qualified personnel. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Absence of Sales and Marketing Experience; Evolving Distribution
Channels. The Company has limited experience in marketing and selling its
services under its current subscription-based pricing model. The Company's
ability to achieve revenue growth in the future will depend in large part on its
ability to establish a sales and marketing organization. There can be no
assurance that the Company will be able to identify, attract and retain
experienced sales and marketing personnel with relevant

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<PAGE> 16

experience, that the cost of such personnel will not exceed the revenue
generated or that the Company's sales and marketing organization will be able to
successfully compete against the significantly more extensive and well-funded
sales and marketing operations of the Company's current or potential
competitors.

In addition to establishing its direct sales channels, the Company's
distribution strategy is to develop multiple distribution channels. Accordingly,
the Company's ability to achieve revenue growth in the future will also depend
in large part on establishing and maintaining relationships with Internet access
providers and other third parties and on effectively using the Internet as a
medium of distribution. There can be no assurance that the Company will be able
to successfully establish its sales and marketing organization, develop third
party distribution channels, develop its own capabilities to distribute services
using the Internet or that any such expansion will result in an increase in
revenue. Any failure by the Company to establish its sales and marketing
organization, expand its distribution channels or use the Internet as a medium
of distribution could materially and adversely affect the Company's business,
financial condition and results of operations.

Reliance on Third Parties. Reliable communications over the Internet are
dependent upon Internet root servers, which serve as the equivalent of master
"white pages" of the Internet. Each root server points to the servers of the
Company's TLDs, as well as to the servers of the country TLDs. In this way, each
root server contains a complete list of all domain names registered within such
TLDs and the associated TLD servers for each domain name. When communication
with a particular host within a domain name is required and the IP address of
that host is not known locally, the root servers make that information available
or "point" to a source of the information. Multiple root servers are required
for purposes of load balancing and redundancy. Currently, there are ten
operational root servers, eight of which are located in the United States and
two of which are located in Europe. The Company controls only one of these root
servers. The other nine root servers are maintained and controlled by
independent operators on a volunteer basis. These volunteer operators may at any
time, for any reason, fail to properly maintain such servers or abandon such
servers. The occurrence of any such events would have a material adverse effect
on the Company's business, financial condition and results of operations.

Further, as no single organization or entity currently has formal authority
over all aspects of the Internet, no organization or entity (including the
Company) has the legal authority to direct where the root servers are to be
pointed. However, the operators of the root servers have historically taken
guidance from an unincorporated body referred to as the Internet Assigned
Numbers Authority ("IANA"). It is possible that IANA could direct the root
servers to "point to" servers other than the Company's TLD servers. In the event
that the root servers were changed to exclude the information maintained by the
Company, all new domain names registered by the Company since the last update of
the data in the TLDs for which the Company acts as the registrar would no longer
be accessible by other users of the Internet. If some, but not all, of the root
servers were changed to exclude the Company's data, the multiple root servers
would contain inconsistent information. The failure by any or all of the root
servers to include or provide accessibility to the Company's data would
materially and adversely affect the Internet and the Company's business,
financial condition and results of operations.

The Company's success and ability to compete are also dependent upon the
relationships between the Company and Internet service providers ("ISPs")
worldwide. Thus, if ISPs were to elect not to route Internet communications to
or from domain names registered by the Company or if enough ISPs were to elect
to provide routing to a set of accepted root servers which did not point to the
Company's TLD servers, the Company's business, financial condition and results
of operations would be materially and adversely affected.

Government Regulation and Legal Uncertainties. The Internet historically
has been loosely administered by a number of government agencies which were
involved in the creation of its infrastructure, initially the Department of
Defense's Advanced Research Projects Agency ("ARPA") and, more recently, the
NSF. No single organization or entity (including the NSF) currently has formal

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<PAGE> 17

authority over all aspects of the Internet and it currently operates under a
system of mutual cooperation. Since the original role of the Internet was to
link computers at governmental and academic institutions to facilitate
communication and research, the Internet was historically administered by
entities which were involved in sponsoring research rather than by any of the
traditional federal or state regulatory agencies. With the commercialization and
internationalization of the Internet, the role of these entities in Internet
administration has become less clear and private parties have begun to assume a
larger role in the enhancement and maintenance of the Internet's infrastructure.
The NSF, for example, has completed a two-year phased withdrawal of its funding
for the Internet "backbone" and has transferred this responsibility to a group
of private telecommunications carriers which are commercially funded. This lack
of regulation and the legal uncertainties arising from it pose a number of risks
to the Company and to the commercial Internet industry in general. The effective
operation of the Internet is dependent on the continued mutual cooperation and
consensus among an increasing number of entities, many of which have widely
divergent interests. For example, the IP addresses allocated by ISPs to their
customers are originally allocated by the IANA. Thus, the effective operation of
the Internet is dependent on such continued allocation of IP addresses by IANA.
Continuing to achieve consensus may become difficult or impossible and may
become extremely time-consuming and costly. Achieving consensus may be made more
difficult because of the lack of leadership by any one entity. This lack of
regulation creates great uncertainty as to the legality of any action, making
business planning and operations difficult. Conversely, the lack of regulation
could theoretically result in individuals and entities taking harmful or
disruptive actions with respect to the Internet with impunity. There is a risk
that a failure to achieve consensus among the various groups which are now
informally administering the Internet could result in the disruption of Internet
operations, the inability of any user to communicate with another user or
otherwise utilize the Internet or the delay of infrastructure improvements
necessary to the maintenance and expansion of the Internet. Any disruption to
the administration, effective operation or maintenance and expansion of the
Internet would have a material adverse effect on the Company's business,
financial condition and results of operation. See "-- Uncertain Status of the
Cooperative Agreement; "-- Recommendations and Proposals to Increase Competition
in Registration Services" and "Business -- Relationship with the NSF; Recent
Developments in the Internet Community."

The current lack of any centralized Internet management could also cause
the U.S. federal or other governments to intervene with uncertain results. The
U.S. government has formed an interagency task force ("ITF") consisting of
various federal agencies to study the issues surrounding domain name
registration and governance of the Internet. The ITF is expected to solicit
broad public input to these and other issues. This process is expected to be
completed in early 1998. There can be no assurance that this process will result
in policies favorable to the Company or consistent with the Company's current or
future plans. The outcome of this activity, therefore, could have a material
adverse effect on the Company's business, financial condition and results of
operations.

In the United States, apart from its obligations under the Cooperative
Agreement, the Company is not currently subject to direct regulation other than
federal and state regulation applicable to businesses generally. However,
changes in the regulatory environment relating to the telecommunications and
media industry could result in the Company being subject to direct regulation,
in which case the Company's business, financial condition and results of
operations could be materially and adversely affected. The Company is aware of
certain industry requests of the Federal Communications Commission (the "FCC")
to review the impact of Internet usage on the U.S. telecommunications service
providers, in particular, the generally lower cost structure for data
transmission versus voice. FCC regulatory review and rulemaking could result in
regulation of the Internet industry, changes in current rules governing
telecommunications or both. In addition, as Internet usage becomes more
widespread internationally, there is an increased likelihood of international
regulation. The Company cannot predict whether or to what extent any such new
rulemaking or regulation will occur and what impact, if any, it would have on
the Company's business, financial condition and results of operations.

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<PAGE> 18

Additionally, the applicability to the Company of existing laws governing
issues such as intellectual property ownership is uncertain. Courts have
indicated that, under certain circumstances, ISPs could be held responsible for
the failure to prevent the distribution of material that infringes on others'
copyrights and other intellectual property. The future interpretation by the
courts of the obligation of domain name registration providers to prevent
trademark infringement and other legal issues is uncertain. See "-- Litigation"
and "Business -- Litigation."

Costs incurred or decisions rendered as a result of government
investigations or lawsuits relating to any of the foregoing could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Government Regulation and Legal
Uncertainties."

System Interruption and Security Risks. The Company's operations are
dependent upon its ability to maintain its computer and telecommunications
equipment in effective working order and to protect its systems against damage
from fire, natural disaster, sabotage, power loss, telecommunication failure or
similar events. The vast majority of the Company's computer and
telecommunications equipment is located in a single facility. Although the
Company is in the process of establishing back-up facilities at another site,
this measure, when implemented, will not eliminate the significant risk to the
Company's operations from a natural disaster or system failure at its principal
site. Despite the implementation of security measures, the Company's
infrastructure may also be vulnerable to computer viruses, hackers or similar
disruptive problems caused by its customers or other Internet users. Computer
break-ins and other disruptions may jeopardize the security of information
stored in and transmitted through the computer systems of the Company and may
deter potential customers from utilizing the Company's services. In addition,
growth of the Company's customer base may put strain on the capacity of its
computers and telecommunications systems and the Company's inability to
sufficiently maintain or upgrade its systems could lead to degradation in
performance or system failure. Any damage, failure or delay that causes
significant interruptions in the Company's systems would have a material adverse
effect on the Company's business, financial condition and results of operations.

Potential Fluctuations in Quarterly Results. The Company believes that
future operating results will be subject to quarterly fluctuations due to a
variety of factors, many of which are beyond the Company's control. Such factors
may include, but are not limited to, termination of the Cooperative Agreement,
the introduction of additional competing registrars or TLDs, variations in the
number of requests for domain name registrations or demand for the Company's
services, introduction or enhancements of services by the Company or its
competitors, market acceptance of new service offerings, increased competition,
costs associated with providing domain name registration services, litigation
costs, patterns of growth in the use of and interest in the Internet and general
economic conditions. The Company is continuing to increase its operating
expenses for personnel, facilities and new services development and, if its
revenues do not correspondingly increase, the Company's business, financial
condition and results of operations would be materially and adversely affected.

Since professional services revenue for Intranet services is recognized by
the Company only when network systems engineers are engaged on client projects,
the relative utilization of network systems engineers directly affects the
Company's operating results. In addition, a majority of the Company's Intranet
services operating expenses, particularly personnel and related costs,
depreciation and rent, are substantially fixed in advance of any particular
quarter. As a result, any underutilization of network systems engineers may
cause significant variations in operating results in any particular quarter and
could result in losses for such quarter. Termination or completion of contracts
in the Company's Intranet services business or failure to obtain additional
contracts in its Intranet services business could have a material adverse effect
on the Company's business, financial condition and results of operation. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

International Operations. The Company anticipates that revenue from
sources outside the U.S. may increase in the future. As a result, the Company
will increasingly be subject to the risks of

17
<PAGE> 19

conducting business internationally, including unexpected changes in regulatory
requirements, fluctuations in the U.S. dollar, tariffs and other barriers and
restrictions and the burdens of complying with a variety of foreign laws. In
addition, the Company will increasingly be subject to general geopolitical
risks, such as political and economic instability and changes in diplomatic and
trade relationships, in connection with its international operations. There can
be no assurance that such regulatory, geopolitical and other factors will not
adversely impact the Company's operations in the future or require the Company
to modify its business practice. In addition, the laws of certain foreign
countries may not protect the Company's proprietary rights to the same extent as
do the laws of the United States.

Control by SAIC. Upon completion of this offering, SAIC will own 100% of
the Company's outstanding Class B Common Stock, which will represent
approximately % of the outstanding Common Stock of the Company
(approximately % if the Underwriters' over-allotment option is exercised
in full) and approximately % of the combined voting power of the
Company's outstanding Common Stock (approximately % if the Underwriters'
over-allotment option is exercised in full). As a result, SAIC will be able to
effectively control all matters requiring approval by the stockholders of the
Company, including the election of members of the Company's Board of Directors,
changing the size and composition of the Board of Directors and preventing a
change in control of the Company. The Class B Common Stock is convertible into
Class A Common Stock, subject to certain limitations set forth in the Company's
Amended and Restated Certificate of Incorporation. See "Description of Capital
Stock." SAIC has no agreement with the Company not to sell or distribute its
shares of the Company's Common Stock and, except for the restrictions in the
Underwriting Agreement set forth below, there can be no assurance that SAIC will
maintain its ownership of the Company's Class B Common Stock. Pursuant to the
Underwriting Agreement, SAIC has agreed, subject to certain exceptions, not to
sell or otherwise dispose of, directly or indirectly, any shares of Common Stock
owned by it for a period of 180 days after the date of this Prospectus without
the prior written consent of Hambrecht & Quist LLC.

The Internal Revenue Code of 1986, as amended (the "Code"), requires
beneficial ownership by SAIC of at least 80% of the total voting power and value
of the outstanding Common Stock of the Company in order to include the Company
in its consolidated group for federal income tax purposes. In addition, SAIC
must beneficially own at least 80% of the total voting power and 80% of each
class of nonvoting capital stock of the Company in order to be able to effect a
tax-free spin-off of the Company under the Code. Because SAIC may seek to
maintain its beneficial ownership percentage of the Company for tax planning
purposes or otherwise and may not desire to acquire additional shares of Common
Stock in connection with a future issuance of shares by the Company, the Company
may be constrained in its ability to raise equity capital in the future or to
issue Common Stock or other equity securities in connection with acquisitions.
See "Relationship with SAIC and Certain Transactions."

Control of Tax Matters; Tax and ERISA Liability. By virtue of its
controlling ownership and the terms of a tax sharing agreement (the "Tax Sharing
Agreement") to be entered into between the Company and SAIC, SAIC will
effectively control all of the Company's tax decisions. Under the Tax Sharing
Agreement, SAIC will have sole authority to respond to and conduct all tax
proceedings (including tax audits) relating to the Company, to file federal,
state and local returns on behalf of the Company and to calculate the amount of
the Company's liability to SAIC under the Tax Sharing Agreement. Further,
pursuant to the terms of the Tax Sharing Agreement, upon deconsolidation, the
Company's ability to recognize a benefit for tax losses it incurs is subject to
SAIC's approval. SAIC may choose to contest, compromise or settle any adjustment
or deficiency proposed by the relevant taxing authority in a manner that may be
beneficial to SAIC and detrimental to the Company.

Each member of a consolidated group for federal income tax purposes is
jointly and severally liable for the federal income tax liability of each other
member of the consolidated group. In addition, under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and federal income tax law,
each member of the controlled group is jointly and severally liable for funding
and termination liabilities of tax qualified defined benefit retirement plans as
well as certain plan taxes.

18
<PAGE> 20

Accordingly, during the period in which the Company is included in SAIC's
consolidated or controlled group, the Company could be liable if such liability
or tax is incurred, and not discharged, by any other member of SAIC's
consolidated or controlled group. See "Relationship with SAIC and Certain
Transactions -- Tax Sharing Agreement."

Intercompany Agreements Not Subject to Arm's-Length Negotiations. Prior to
the completion of the offering, SAIC and the Company will enter into certain
intercompany agreements, including an agreement pursuant to which SAIC will
provide various corporate services to the Company that may be material to the
conduct of the Company's business (the "Corporate Services Agreement"). With
respect to matters covered by the Corporate Services Agreement, the relationship
between SAIC and the Company is intended to continue in a manner generally
consistent with past practices. Because the Company is currently a wholly-owned
subsidiary of SAIC, none of the intercompany agreements will result from
arm's-length negotiations. These agreements may include terms and conditions
that may be more or less favorable to the Company than terms contained in
similar agreements negotiated with third parties. Further, the Corporate
Services Agreement will be terminable by either party upon 180 days' prior
written notice. In the event that SAIC elects to terminate the Corporate
Services Agreement, there can be no assurance that the Company would be able to
secure alternative sources for such services within 180 days or that such
services could be obtained for costs comparable to costs to be charged by SAIC.
See "Relationship with SAIC and Certain Transactions."

Potential Conflicts of Interest. Various conflicts of interest between the
Company and SAIC could arise following the completion of this offering, and
persons serving as directors, officers and employees of both the Company and
SAIC may have conflicting duties to each. Currently, Michael A. Daniels, the
Company's Chairman of the Board, also serves as a Sector Vice President and
Sector Manager of SAIC, Donald N. Telage, the Company's Senior Vice President,
Internet Relations and Special Programs and one of the Company's directors, also
serves as a Group Senior Vice President of SAIC, Robert J. Korzeniewski, the
Company's Chief Financial Officer, also serves as a Corporate Vice President for
Administration of SAIC, Raymond S. Corson, the Company's Senior Vice President,
Business Development, also serves as a Vice President of SAIC, A. Scott
Williamson, the Company's Vice President, Engineering, also serves as a Vice
President of SAIC and Russell L. Helbert, the Company's Controller, also serves
as an Assistant Vice President for Administration of SAIC. Further, J. Robert
Beyster, a director of the Company, is also the Chief Executive Officer and
Chairman of the Board of SAIC, John E. Glancy, a director of the Company, is
also a Corporate Executive Vice President and a director of SAIC and William A.
Roper, Jr., a director of the Company, is also Senior Vice President and Chief
Financial Officer of SAIC. It is currently contemplated that, upon completion of
the offering, all of the Company's executive officers who currently also hold
positions with SAIC (other than Donald N. Telage) will resign from their
respective positions with SAIC. Ownership interests of directors or officers of
the Company in the common stock of SAIC could also create or appear to create
potential conflicts of interest when directors and officers are faced with
decisions that could have different implications for the Company and SAIC. In
addition, for financial reporting purposes, the Company's financial results will
be included in SAIC's consolidated financial statements. The members of the
Board of Directors of the Company and executive officers of the Company who are
affiliated with SAIC will consider not only the short-term and long-term impact
of financial and operating decisions on the Company, but also the impact of such
decisions on SAIC's consolidated financial results. In some instances, the
impact of such decisions could be disadvantageous to the Company while
advantageous to SAIC.

Certain Charter Provisions and Limitations on Liability. The Company's
Second Amended and Restated Certificate of Incorporation (the "Amended and
Restated Certificate of Incorporation") includes provisions relating to
competition by SAIC with the Company, allocations of corporate opportunities,
transactions with interested parties and intercompany agreements and provisions
limiting the liability of certain persons. See "Description of Capital
Stock -- Certain Certificate of Incorporation and Bylaw Provisions." The
enforceability under Delaware corporate law of such provisions which eliminate
certain rights that might have been available to stockholders under

19
<PAGE> 21

Delaware law had such provisions not been included has not been established and
thus counsel to the Company is not able to render an opinion regarding the
enforceability of such provisions. The Company's Amended and Restated
Certificate of Incorporation provides that any person purchasing or acquiring an
interest in shares of capital stock of the Company, including the Underwriters,
shall be deemed to have consented to the provisions in the Amended and Restated
Certificate of Incorporation relating to competition by SAIC with the Company,
conflicts of interest, corporate opportunities and intercompany agreements, and
such consent may restrict such person's ability to challenge transactions
carried out in compliance with such provisions. The Company intends to disclose
the existence of such provisions in its Annual Reports on Form 10-K as well as
in certain other filings with the Securities and Exchange Commission (the
"Commission"). The corporate charter of SAIC does not include comparable
provisions and, as a result, persons who are directors and/or officers of the
Company and who are also directors and/or officers of SAIC may choose to take
action in reliance on such provisions rather than act in a manner that might be
favorable to the Company but adverse to SAIC. See "Description of Capital
Stock -- Certain Certificate of Incorporation and Bylaw Provisions."

Under the Company's Amended and Restated Certificate of Incorporation, the
personal monetary liability of the directors of the Company for breach of their
fiduciary duty of care, including actions involving gross negligence, is
eliminated to the fullest extent permitted under Delaware law. See "Description
of Capital Stock -- Certain Certificate of Incorporation and Bylaw Provisions."

Shares Eligible for Future Sale. Sales of substantial amounts of Class A
Common Stock in the public market, whether by purchasers in the offering or
other stockholders of the Company, or the perception that such sales could
occur, may materially and adversely affect the market price of the Class A
Common Stock.

Upon completion of the offering, SAIC will own 100% of the Company's
outstanding Class B Common Stock, which will represent approximately % of
the outstanding Common Stock of the Company (approximately % if the
Underwriters' over-allotment option is exercised in full). A decision by SAIC to
sell such shares could materially and adversely affect the market price of the
Class A Common Stock. The Company and SAIC have entered into a registration
rights agreement which requires the Company to effect a registration statement
covering some or all of the shares of Class A Common Stock to be owned by SAIC
upon conversion of the Class B Common Stock owned by SAIC and any other shares
of Class A Common Stock otherwise acquired by SAIC, subject to certain terms and
conditions. The Company intends to register a total of 2,556,250 shares of Class
A Common Stock reserved for issuance under its 1996 Stock Incentive Plan as soon
as practicable following the date of this Prospectus. See "Relationship with
SAIC and Certain Transactions -- Registration Rights Agreement," "Shares
Eligible for Future Sale" and "Description of Capital Stock."

In certain circumstances, including without limitation, a public offering
or distribution of Class B Common Stock by SAIC, the Class B Common Stock would
trade separately from the Class A Common Stock in the public market. Separate
trading of the Class B Common Stock in the public market, or the perception that
such trading could occur, may materially and adversely affect the market price
of the Class A Common Stock.

Upon completion of the offering, the shares of Class A Common Stock offered
hereby will be freely tradable without restriction or further registration under
the Securities Act by persons other than executive officers and directors of
SAIC or the Company (the "Restricted Persons"). The shares of Common Stock which
are held by SAIC and certain Restricted Persons are subject to a "lock-up"
agreement under which SAIC and such Restricted Persons have agreed, subject to
certain exceptions, not to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock without the prior written consent of Hambrecht &
Quist LLC, for a period of 180 days after the date of this Prospectus. Following
such period, SAIC and any such Restricted Person who is an affiliate of the
Company may sell such shares only pursuant to the requirements of Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act") or pursuant to an
effective registration statement under the Securities Act. The Securities and
Exchange Commission has recently enacted revisions to Rule 144 which

20
<PAGE> 22

shortened the holding periods under Rule 144 from two years to one year and
under Rule 144(k) from three years to two years. See "Shares Eligible for Future
Sale" and "Underwriting."

Lack of Prior Public Market and Possible Volatility of Stock Price. Prior
to this offering, there has been no public market for the Company's Class A
Common Stock and there can be no assurance that an active trading market will
develop or be sustained after this offering. The initial public offering price
will be determined through negotiations among the Company and the
representatives of the Underwriters based on several factors and may not be
indicative of the market price of the Class A Common Stock after this offering.
See "Underwriting." The market price of the shares of Class A Common Stock is
likely to be highly volatile and may be significantly affected by factors such
as actual or anticipated fluctuations in the Company's results of operations,
announcements of technological innovations, changes in Internet governance,
announcement of additional competing registrars or TLDs, introduction of new
products or services by the Company or its competitors, developments with
respect to patents, copyrights or proprietary rights, conditions and trends in
the networking and other technology industries, changes in or failure by the
Company to meet securities analysts' expectations, general market conditions and
other factors. In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have particularly affected the
market prices for the common stocks of technology companies. These broad market
fluctuations may adversely affect the market price of the Company's Class A
Common Stock. In the past, following periods of volatility in the market price
of a particular company's securities, securities class action litigation has
often been brought against that company. There can be no assurance that such
litigation will not occur in the future with respect to the Company. Such
litigation could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect upon the
Company's business, financial condition and results of operations.

Dilution. Based upon the initial public offering price per share of
$ (and assuming no exercise of the Underwriters' over-allotment option),
the Company's net tangible book value per share of Common Stock as of March 31,
1997, after giving effect to the transactions set forth in "Capitalization,"
would have been $ . This represents an immediate increase in net
tangible book value of $ per share to the existing stockholder and an
immediate dilution of $ per share to purchasers of the Class A Common
Stock in the offering. See "Dilution."

Effect of Certain Charter Provisions; Anti-takeover Effects of Certificate
of Incorporation and Delaware Law. The holders of Class A Common Stock are
entitled to one vote per share and holders of Class B Common Stock are entitled
to ten votes per share. Holders of Class A Common Stock and Class B Common Stock
generally vote together as a single class. The Class B Common Stock held by SAIC
is convertible into Class A Common Stock under certain conditions set forth in
the Company's Amended and Restated Certificate of Incorporation. See
"Description of Capital Stock." Upon completion of this offering, the Company's
Board of Directors will have the authority to issue up to 10,000,000 shares of
Preferred Stock and to determine the price, rights, preferences, privileges and
restrictions, including voting rights of such shares, without any further vote
or action by the Company's stockholders. Such charter provisions could have the
effect of delaying or preventing a change of control of the Company. The rights
of the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. The Company has no
current plans to issue shares of Preferred Stock. Further, certain provisions of
the Company's Certificate of Incorporation and of Delaware law could delay or
make more difficult a merger, tender offer or proxy contest involving the
Company. See "Description of Capital Stock -- Preferred Stock" and "-- Delaware
Antitakeover Law and Certain Charter Provisions."

Discretion as to Use of Proceeds. The Company intends to use the proceeds
of this offering for working capital and other general corporate purposes,
including business development, marketing and promotional activities, continued
development of enhancements or new services complementary to

21
<PAGE> 23

the Company's registration business and other uses as deemed appropriate by the
Board of Directors. The amounts and timing of these expenditures will vary
significantly depending upon a number of factors, including the amount of cash
generated by the Company's operations, the progress of the Company's product and
services development activities and the market response to the introduction of
any new products and services. In addition, the Company may use a portion of the
net proceeds of this offering to acquire or invest in businesses, products,
services or technologies complementary to the Company's current business,
through mergers, acquisitions, joint ventures or otherwise. However, the Company
has no specific agreements or commitments and is not currently engaged in any
negotiations with respect to such transactions. Accordingly, the Company's
management will retain broad discretion as to the allocation of the net proceeds
of this offering. See "Use of Proceeds."

22
<PAGE> 24

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Class
A Common Stock offered by the Company hereby at an assumed initial public
offering price of $ per share are estimated to be $
($ if the Underwriters' over-allotment option is exercised in full).
The Company intends to use the proceeds of this offering for working capital and
other general corporate purposes, including business development, marketing and
promotional activities, continued development of enhancements or new services
complementary to the Company's registration business and other uses as deemed
appropriate by the Board of Directors. The amounts and timing of these
expenditures will vary significantly depending upon a number of factors,
including the amount of cash generated by the Company's operations, the progress
of the Company's product and services development activities and the market
response to the introduction of any new products and services. In addition, the
principal purposes of this offering include increasing the Company's equity
capital, creating a public market for the Company's Class A Common Stock,
providing liquidity for the Company's stockholders and facilitating future
access by the Company to public equity markets.

In addition, the Company may use a portion of the net proceeds of this
offering to acquire or invest in businesses, products, services or technologies
complementary to the Company's current business, through mergers, acquisitions,
joint ventures or otherwise. However, the Company has no specific agreements or
commitments and is not currently engaged in any negotiations with respect to
such transactions. Accordingly, the Company's management will retain broad
discretion as to the allocation of the net proceeds of this offering. Pending
the uses described above, the Company intends to invest the net proceeds of this
offering in short-term, interest-bearing investment grade securities.

DIVIDEND POLICY

With the exception of a $ dividend to be paid to SAIC declared on
and payable on , to date, the Company has neither declared
nor paid dividends on its Common Stock. Other than the dividend to be paid to
SAIC, the Company currently intends to retain its earnings, if any, for future
growth and does not anticipate paying any dividends in the foreseeable future.
The Company's future dividend policy will be determined by its Board of
Directors on the basis of various factors, including the Company's results of
operations, financial condition, capital requirements and investment
opportunities.

23
<PAGE> 25

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1997: (i) on an actual basis, (ii) on a pro forma basis to give effect
to the dividend paid on , 1997 to SAIC and (iii) as adjusted to
give effect to the sale by the Company of the shares of Class A
Common Stock offered hereby at an assumed initial public offering price of
$ per share and the application of the estimated net proceeds therefrom.
This table should be read in conjunction with the Financial Statements of the
Company and the Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------------
ACTUAL PRO FORMA(2) AS ADJUSTED
------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.001 par value, 10,000,000
shares authorized; none issued and
outstanding..................................... $ -- $ -- $ --
Class A Common Stock, $0.001 par value,
100,000,000 shares authorized; none issued and
outstanding, actual and pro forma; issued
and outstanding, as adjusted(1)................. -- --
Class B Common Stock, $0.001 par value, 40,000,000
shares authorized; 12,500,000 issued and
outstanding, actual and pro forma; 12,500,000
issued and outstanding, as adjusted............. 12
Additional paid-in capital........................ 4,468 --
Accumulated deficit............................... (2,527) --
------- -------- ---------
Total stockholders' equity................... 1,953
------- -------- ---------
Total capitalization.................... $ 1,953 $ $
======= ======== =========
</TABLE>

- ------------------------------

(1) Excludes 2,556,250 shares of Class A Common Stock reserved for issuance
under the Company's 1996 Stock Incentive Plan, of which 1,496,725 shares
were subject to outstanding options as of June 30, 1997 at a weighted
average exercise price of $13.15 per share. See "Management -- 1996 Stock
Incentive Plan" and Notes 10 and 14 of Notes to Financial Statements.

(2) See Note 2 of Notes to Financial Statements.

24
<PAGE> 26

DILUTION

As of March 31, 1997, the Company had a pro forma net tangible book value
before the offering of approximately $ or $ per share of Common
Stock. Pro forma net tangible book value represents the amount of total tangible
assets(1) of the Company less total liabilities after giving effect to the
dividend to SAIC, divided by the pro forma number of shares of Common Stock
outstanding. Without taking into account any other changes in the pro forma net
tangible book value after March 31, 1997, other than to give effect to the
receipt by the Company of the net proceeds from the sale of the
shares of Class A Common Stock offered by the Company hereby at an assumed
initial public offering price of $ per share and the application of the
estimated net proceeds therefrom, the pro forma net tangible book value of the
Company at March 31, 1997 after the offering would have been approximately
$ or $ per share. This represents an immediate increase in such
net tangible book value of $ per share to the existing stockholder and an
immediate dilution of $ per share to new investors purchasing shares of
Class A Common Stock in this offering. The following table illustrates this per
share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $
------
Net tangible book value per share before the offering.......... $
Decrease in net tangible book value attributable to dividend...
------
Pro forma net tangible book value per share before the
offering......................................................
Increase per share attributable to new investors...............
------
Pro forma net tangible book value per share after the offering......
------
Dilution per share to new investors............................ $
======
</TABLE>

The following table summarizes, on a pro forma basis, as of March 31, 1997,
the differences between the existing stockholder and purchasers of shares in
this offering with respect to the number of shares of Common Stock purchased
from the Company, the total consideration paid by the existing stockholder for
its shares based on a valuation of the shares of SAIC Class A Common Stock used
to acquire the Company, the total consideration paid to the Company by the
purchasers of shares in this offering and the average consideration paid per
share (based upon an assumed initial public offering price of $ per share
and before deduction of estimated underwriting discounts and commissions and
offering expenses payable by the Company):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholder......... % $ % $
New investors................ % %
---------- ------ ----------- ------
Total................... 100.0% $ 100.0%
========= ====== =========== ======
</TABLE>

The foregoing table assumes no exercise of the Underwriters' over-allotment
option or of any outstanding stock options. As of June 30, 1997, there were
outstanding options to purchase 1,496,725 shares of Class A Common Stock, with a
weighted average exercise price of $13.15 per share. To the extent that options
are granted and exercised, there may be further dilution to new investors. See
"Management -- 1996 Stock Incentive Plan" and Notes 10 and 14 of the Notes to
Financial Statements.
- ------------------------------
(1) Total tangible assets include deferred tax assets of $14,151 at March 31,
1997.

25
<PAGE> 27

SELECTED FINANCIAL DATA

The following table sets forth selected financial and operating data of the
Company for the periods indicated and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Financial Statements and the Notes related thereto included
elsewhere in this Prospectus. The selected financial data for the years ended
December 31, 1996 and 1994 and for the periods January 1, 1995 to March 10, 1995
and March 11, 1995 to December 31, 1995 were derived from the Company's audited
financial statements included elsewhere in this Prospectus. The information for
fiscal years 1992 and 1993 and the three months ended March 31, 1996 and 1997 is
derived from the Company's unaudited financial statements which, in the opinion
of management, reflect all adjustments (consisting only of normal recurring
items) necessary to present fairly the financial position and results of
operations for the periods then ended. The selected financial data for the year
ended December 31, 1995 was derived by combining the Company's Results of
Operations for the period January 1, 1995 through March 10, 1995 and the period
March 11, 1995 through December 31, 1995, both as derived from the Company's
audited financial statements included elsewhere in this Prospectus.
Comparability of pre-acquisition periods to post-acquisition periods is limited
because the financial statements have been prepared on differing bases of
accounting as a result of the acquisition by SAIC. See Note 1 of Notes to
Financial Statements. The accompanying financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" for
all periods presented for continuing operations reflect the results of
operations of the commercial business of the Company, which includes
registration services and Intranet services. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview -- The
SAIC Acquisition" and "-- Registration Services."

<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------- ------------------
1992 1993 1994 1995(1) 1996 1996 1997
------ ------ ------- ------- ------- ------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue........................ $1,160 $4,369 $ 5,029 $ 6,486 $18,862 $ 2,333 $8,655
Cost of revenue.................... 695 2,924 3,073 5,704 14,666 2,950 5,294
------ ------ ------- -------- ------- ------- ------
Gross profit....................... 465 1,445 1,956 782 4,196 (617) 3,361
Research and development
expenses......................... -- -- -- -- 680 -- 311
Selling, general and administrative
expenses......................... 275 1,401 1,544 2,394 6,280 921 2,301
Interest expense (income).......... 42 120 109 61 (496) -- (149)
------ ------ ------- -------- ------- ------- ------
Income (loss) from continuing
operations before income taxes
and cumulative effect of a change
in accounting principle.......... 148 (76) 303 (1,673) (2,268) (1,538) 898
Provision (benefit) for income
taxes............................ 55 34 114 (239) (643) (436) 382
------ ------ ------- -------- ------- ------- ------
Income (loss) from continuing
operations....................... 93 (110) 189 (1,434) (1,625) (1,102) 516
Income (loss) from discontinued
operations, net of income
taxes(2)......................... 588 (936) (1,169) (1,403) -- -- --
Cumulative effect of change in
accounting for income taxes...... -- 660 -- -- -- -- --
------ ------ ------- -------- ------- ------- ------
Net income (loss).................. $ 681 $ (386) $ (980) $(2,837) $(1,625) $(1,102) $ 516
====== ====== ======= ======== ======= ======= ======
PRO FORMA:
Net income (loss) per share........ $ $ $
======= ======= ======
Shares used in computing income
(loss) per share(3).............. ======= ======= ======
OTHER OPERATING DATA(4):
Net new registrations.............. -- 13 24 141 489 75 197
Less: registrations not renewed.... -- -- -- 1 39 6 6
Net registrations at period end.... -- 13 37 177 627 246 818
</TABLE>

26
<PAGE> 28

<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.... $ -- $ -- $ 136 $ 5 $15,540 $ 13 $12,483
Working capital(5)........... (307) (179) (1,340) (559) 1,362 401 4,637
Total assets(6).............. 1,272 3,124 2,448 11,748 66,118 19,784 66,850
Deferred revenue, net........ 32 73 137 3,346 29,352 8,198 36,900
Long-term obligations,
excluding current
portion.................... 479 344 81 1,353 9,440 3,165 12,594
Total stockholders' equity... 56 1,221 252 3,062 1,437 1,960 1,953
</TABLE>

- ------------------------------

(1) The Selected Financial Data for the year ended December 31, 1995 was derived
by combining the Company's Results of Operations for the period January 1,
1995 through March 10, 1995 and the period March 11, 1995 through December
31, 1995, which, respectively, are periods before and after the date of the
SAIC acquisition. The data for these two periods were prepared on differing
bases of accounting and, accordingly, the comparability of such data with
other periods is limited, primarily as a result of goodwill amortization,
new corporate services agreements and the repayment of outstanding debt
balances. See Note 1 of Notes to Financial Statements for a discussion of
the presentation for each of these periods.

(2) See Note 11 of Notes to Financial Statements for a discussion of
discontinued operations.

(3) See Note 2 of Notes to Financial Statements for an explanation of the
determination of shares used in computing pro forma net income (loss) per
share.

(4) Net new registrations for each period include gross new registrations less
an estimate of registrations that are uncollectible. Net registrations
includes net new registrations less an estimate of registrations not
renewed. Prior to September 14, 1995, net registrations equaled gross
registration because the Company was reimbursed by the NSF for all
registrations under a cost plus fixed-fee contract.

(5) Working capital calculation includes $32, $73, $137, $1,993, $19,912,
$5,033, and $25,345 of current deferred revenue as of December 31, 1992,
1993, 1994, 1995 and 1996 and March 31, 1996 and 1997, respectively.

(6) Total assets include $0, $0, $0, $1,408, $17,453, $3,909 and $23,813 of
restricted assets as of December 31, 1992, 1993, 1994, 1995 and 1996 and
March 31, 1996 and 1997, respectively. See Notes 2 and 3 of Notes to
Financial Statements.

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<PAGE> 29

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's Financial Statements and Notes
thereto included elsewhere in this Prospectus. Except for the historical
information contained herein, the discussion in this Prospectus contains certain
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this Prospectus should be read as being applicable
to all related forward-looking statements wherever they appear in this
Prospectus. The Company's actual results may differ materially from the results
discussed in the forward-looking statements as a result of certain factors,
including, but not limited to, those discussed in "Risk Factors" and elsewhere
in this Prospectus. Unless otherwise indicated, the accompanying financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for all periods presented for continuing operations
reflect the financial position and results of operations of the Company's
commercial business, which includes registration services and Intranet services.

OVERVIEW

The SAIC Acquisition. The Company was incorporated in the District of
Columbia in 1979 and was reincorporated in Delaware in 1996. The Company was
acquired by SAIC on March 10, 1995 in a stock-for-stock transaction accounted
for as a purchase and is currently a wholly-owned subsidiary of SAIC. Prior to
the acquisition of the Company by SAIC, the Company's principal lines of
business consisted of providing integration, engineering for computer and
telecommunications networks for government and commercial customers and domain
name registration services. The Company's business included commercial and
government contracts awarded to the Company on a competitive basis, including
government contracts that were awarded to the Company based partially upon the
Company's then minority-owned status. The contracts which had been awarded to
the Company based in part on the Company's then minority-owned status were
transferred into a separately-owned entity immediately prior to the acquisition
of the Company by SAIC. In November 1995, SAIC adopted a plan to transfer the
Company's remaining government-based business to SAIC in order to enable the
Company to focus on the growth of its commercial business, which includes
registration services and Intranet services. This transfer was effective as of
February 1996. The operating results of both the minority-based government
contracts business and the remaining government-based business are reflected as
discontinued operations in the Company's financial statements for all periods
presented.

The Company. The Company currently acts as the exclusive registrar for
second level domain names within the .com, .org, .net, .edu and .gov TLDs
pursuant to the Cooperative Agreement with the NSF. Net registrations (gross
registrations less management's estimates of uncollectible registrations and of
non-renewals) within the TLDs maintained by the Company increased by 233% from
approximately 246,000 domain names registered at March 31, 1996 to approximately
818,000 domain names registered at March 31, 1997. Net registrations in the .com
TLD represented 88% of the Company's total net registrations as of March 31,
1997. Net revenue from Internet domain name registration subscriptions accounted
for 59.1% and 76.5% of the Company's net revenue for the year ended December 31,
1996 and the three months ended March 31, 1997, respectively.

The Company also provides Intranet consulting services to large companies
that desire to establish or enhance their Internet presence or "re-engineer"
legacy network infrastructures to accommodate the integration of both Internet
connectivity and Intranet network technology into their information technology
base. The Company's Intranet services presently include: (i) Intranet
development and re-engineering; (ii) network and systems security; and (iii)
Intranet-enabled business solutions. Net revenue from Intranet services
accounted for 40.9% and 23.5% of the Company's net revenue for the year ended
December 31, 1996 and the three months ended March 31, 1997, respectively.

Registration Services. In January 1993, the Company entered into the
Cooperative Agreement with the NSF under which the Company provides Internet
registration services for five TLDs: .com, .org, .net, .edu and .gov. With the
commercialization of the Internet, the role, if any, that the NSF will

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<PAGE> 30

play in the future of the Internet and the legal authority underlying any such
continuing role are at present unclear. The Cooperative Agreement is subject to
review by the NSF and may be terminated by the NSF at any time at its discretion
or by mutual agreement. The Cooperative Agreement by its terms expires in March
1998, although the NSF may, at its option, extend the Cooperative Agreement to
September 1998. The NSF has stated that the Cooperative Agreement will not be
re-awarded to the Company or awarded to any other entity. See "Risk
Factors -- Limited Operating History," "-- Uncertain Status of the Cooperative
Agreement," and "-- Recommendations and Proposals to Increase Competition in
Registration Services."

Originally, the Cooperative Agreement was structured as a cost
reimbursement plus fixed-fee contract. Effective September 14, 1995, the NSF and
the Company amended the Cooperative Agreement to authorize the Company to begin
charging customers a subscription fee of $50 per year for each second level
domain name in the .com, .org, .net, .edu and .gov TLDs. The Company's
registration services customers in the .com, .org and .net TLDs are invoiced for
a two-year subscription fee of $100 for initial registrations and $50 per year
for renewals of initial registrations. The NSF has agreed to pay the
registration and renewal fees for registrations within the .edu and .gov TLDs
through March 31, 1997. The Company has recently agreed with the NSF to provide
registrations in the .gov and .edu TLDs free of charge from April 1, 1997
through March 31, 1998. The cost of providing these registration services is not
expected to have a material adverse effect on the Company's business, financial
condition or results of operations. At September 14, 1995, the Company had
approximately 131,000 registered domain names that were subject to annual
renewal. From September 14, 1995 through March 31, 1997, the Company had
approximately 733,000 net new registrations.

Under the terms of the amendment to the Cooperative Agreement, 30% of the
new registration or renewal fees collected is required to be set aside to be
reinvested for the enhancement of the intellectual infrastructure of the
Internet and, as such, is not recognized as revenue by the Company. The Company
reflects these funds along with the appropriate percentage of net accounts
receivable as restricted assets and has recorded an equivalent, related current
liability. The Company maintains the cash received relating to the set aside
funds in a separate interest bearing account. These funds, plus any interest
earned, will be disbursed in a manner approved by the NSF. At March 31, 1997,
the restricted assets totaled $23.8 million. None of the restricted set aside
funds have been disbursed. Future disbursements of these funds will not have an
effect on the Company's business, financial condition or results of operations.

The Company was reimbursed by the NSF for providing domain name
registration services prior to September 14, 1995, at which time the Company
began charging its customers fees for new domain name registrations pursuant to
the amendment to the Cooperative Agreement. The Company began charging its
customers fees for renewals of existing domain name registrations in December
1995. The Company invoices customers and permits them to pay the subscription
fee after the customer's domain name is registered. The Company's experience has
been that, for the period from September 1995 to March 1997, approximately 30%
of registrations have ultimately been deactivated for non-payment. As a
consequence, the Company has recorded a comparable provision for uncollectible
accounts in determining net registration revenue. See Note 3 of Notes to
Financial Statements. The Company believes that it has experienced a high level
of uncollectible receivables due to, among other factors, the large number of
individuals and corporations that have registered multiple domain names with the
apparent intention of reselling such names at a profit. The Company's experience
has been that, in contrast to other customers, such resellers have a greater
tendency to default on their subscription fees. The Company believes that the
new procedures implemented in 1997 regarding invoicing and prompt deactivation
of delinquent customers has significantly improved timeliness of customer
payments. See "Risk Factors -- Limited Operating History," "-- Uncertain Status
of the Cooperative Agreement," "-- Uncollectible Receivables; Modifications to
Billing Practices" and "Business -- Operations."

Prior to September 14, 1995, the Company recognized revenue under the
Cooperative Agreement on the basis of direct cost plus allowable indirect costs
and the earned portion of the fee. Since

29
<PAGE> 31

September 14, 1995, fees for services provided by the Company pursuant to new
registrations have been recognized as revenue evenly over the initial 24-month
subscription period. Fees from renewals are recognized as revenue evenly over
the 12-month subscription period. The Company records revenue net of an
estimated provision for uncollectible accounts. At March 31, 1997, the Company
had deferred net revenue of $36.9 million, of which $25.3 million will be
recognized over the next twelve months. See Notes 2 and 3 of Notes to Financial
Statements.

Intranet Services. Substantially all of the Company's Intranet services
revenue is derived from professional services which are generally provided to
clients on a "time and expense" basis. Professional services revenue is
recognized as services are performed. The Company also performs a limited number
of fixed-price projects under which revenue is recognized using the
percentage-of-completion method. The Company also derives revenue from remote
monitoring and hosting services; however, such revenue has not been significant
to date. Remote monitoring and hosting revenue is recognized ratably over the
term of the contract.

Since professional services revenue for Intranet services is recognized by
the Company only when network systems engineers are engaged on client projects,
the relative utilization of network systems engineers directly affects the
Company's operating results. In addition, a majority of the Company's Intranet
services operating expenses, particularly personnel and related costs,
depreciation and rent, are substantially fixed in advance of any particular
quarter. As a result, any underutilization of network systems engineers may
cause significant variations in operating results in any particular quarter and
could result in losses for such quarter. Termination or completion of contracts
in the Company's Intranet services business or failure to obtain additional
contracts in its Intranet services business could have a material adverse effect
on the Company's business, financial condition and results of operation. See
"Risk Factors -- Potential Fluctuations in Quarterly Results."

NationsBanc is the Company's largest Intranet services customer and
accounted for 47.6% and 47.9% of the Company's Intranet services net revenue and
19.5% and 11.2% of the Company's total net revenue for the year ended December
31, 1996 and the three months ended March 31, 1997, respectively. NationsBanc
originally contracted with the Company in 1993 to provide ongoing analysis,
design, implementation and support engineering for its enterprise network. The
Company currently provides network design and engineering services as well as a
variety of project specific services for NationsBanc. The Company's current
contract with NationsBanc is a three-year contract which commenced January 1,
1997 and is a requirements contract under which the Company's services are
ordered by task orders issued by NationsBanc. The NationsBanc contract may be
terminated by NationsBanc at any time upon 30-day prior written notice to the
Company. There can be no assurance that the Company will obtain any additional
task orders under the NationsBanc contract or maintain or be able to expand its
Intranet services business. Failure to do so would materially and adversely
affect the Company's business, financial condition and results of operations.
See "Risk Factors -- Limited Service Offerings to Date; Reliance on Domain Name
Registration Services and Intranet Services for Substantially All Revenue."

Financial Presentation. The accompanying historical financial statements
for all periods presented reflect the results of continuing operations related
to the commercial activities of the Company only. The operating results of both
the minority-based government contracts business, which was transferred into a
separate entity prior to the acquisition of the Company by SAIC, and the
remaining government-based business, which was transferred to SAIC effective
February 1996, are reflected as discontinued operations in the Company's
financial statements.

Subsequent to the acquisition, the Company's Statements of Operations
include revenue and costs directly attributable to the Company, as well as
certain allocations from SAIC of indirect costs. Such allocations generally are
based upon a number of factors, including, but not limited to, the proportionate
labor costs of the Company to the rest of SAIC. The results of operations also
include allocations of: (i) costs for administrative functions and services
performed on behalf of the Company by centralized staff groups within SAIC; (ii)
SAIC's general corporate expenses; (iii) other benefit costs, including, but not
limited to, health insurance, disability and retirement costs; and (iv) cost of
capital (through

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<PAGE> 32

December 31, 1996). Current and deferred income taxes and related tax expense
have been recorded by the Company as if it were a separate taxpayer. The
allocations and estimates in the financial statements are based on assumptions
that the Company's management believes are reasonable under the circumstances.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
relationship to net revenue of certain items in the Company's Statement of
Operations. The percentage relationships for the year ended December 31, 1995
were derived by combining the Company's results of operations for the period
January 1, 1995 through March 10, 1995 and the period March 11, 1995 through
December 31, 1995 which, respectively, are periods before and after the date of
the SAIC acquisition. Accordingly, the data for these two periods and the
periods preceding and following the acquisition were prepared on differing bases
of accounting and, as a result, the comparability of such percentage
relationships with other periods is limited, primarily as a result of the
goodwill amortization, new corporate services agreements and interest expense
related to outstanding debt balances.

<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUE
---------------------------------------------
THREE MONTHS
FISCAL YEAR ENDED
ENDED DECEMBER 31, MARCH 31,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenue....................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................................... 61.1 87.9 77.8 126.4 61.2
----- ----- ----- ----- -----
Gross profit...................................... 38.9 12.1 22.2 (26.4) 38.8
Research and development expenses................. -- -- 3.6 -- 3.5
Selling, general and administrative expenses...... 30.7 36.9 33.3 39.5 26.6
Interest expense (income)......................... 2.2 0.9 (2.7) -- (1.7)
----- ----- ----- ----- -----
Income (loss) from continuing operations before
income taxes.................................... 6.0 (25.7) (12.0) (65.9) 10.4
Provision (benefit) for income taxes.............. 2.2 (3.6) (3.4) (18.7) 4.4
----- ----- ----- ----- -----
Income (loss) from continuing operations, net of
income taxes.................................... 3.8% (22.1)% (8.6)% (47.2)% 6.0%
===== ===== ===== ===== =====
</TABLE>

In September 1995, the Cooperative Agreement between the Company and the
NSF was amended from a cost reimbursement plus fixed-fee contract to a fee-based
registration contract. The Company believes that the change to a
subscription-based pricing model, combined with the Company's recent growth,
make period to period comparisons of its operating results less meaningful and
that the results for any period should not be relied upon as an indication of
future performance. The limited operating history of the Company in its current
business model makes the prediction of future results of operations difficult
and, therefore, the recent revenue growth experienced by the Company should not
be taken as being indicative of the rate of revenue growth, if any, that can be
expected in the future. See "Risk Factors -- Limited Operating History" and
"-- Potential Fluctuations in Quarterly Results."

COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 AND 1997

Net Revenue. Net revenue increased 271% from $2.3 million for the three
months ended March 31, 1996 to $8.7 million for the three months ended March 31,
1997. This increase in net revenue was primarily attributable to the increase in
the number of domain name subscriptions, principally in the .com TLD.
Subscription growth has been driven by the widespread use and adoption of the
Internet and Intranets by businesses and individuals. Net revenue from
registration services increased 623% from $913,000 for the three months ended
March 31, 1996 to $6.6 million for the three months ended March 31, 1997. Net
registrations increased 233% from approximately 246,000 at March 31, 1996 to
approximately 818,000 at March 31, 1997. Notwithstanding the $36.9 million of
deferred revenue at

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<PAGE> 33

March 31, 1997, of which $25.3 million will be recognized over the next twelve
months, the Company's revenue is dependent in large part on the continued growth
of the Internet and the Company's ability to maintain its position as the
leading Internet domain name registration service provider worldwide.

Net revenue from Intranet services increased 43% from $1.4 million for the
three months ended March 31, 1996 to $2.0 million for the three months ended
March 31, 1997. The growth was mainly attributable to several new contracts that
were entered into subsequent to March 31, 1996, primarily with non-U.S.
customers. A number of these contracts were obtained through subcontracts with,
or with leads originated by, SAIC.

NationsBanc, the Company's largest Intranet services client, accounted for
$972,000 or 11.2% of the Company's total net revenue for the three months ended
March 31, 1997 and $796,000 or 34.1% of the Company's total net revenue for the
three months ended March 31, 1996. During the first quarter of 1997, a number of
services the Company's had historically performed for NationsBanc were not
renewed. The Company believes this reflects NationsBanc's focus on increasing
its internal information technology staff as well as its continued efforts to
integrate information technology staff from recent acquisitions. These actions
had minimal financial impact on the first quarter, but will have a negative
financial impact on the Company's Intranet services revenue for the balance of
1997. The Company believes NationsBanc will continue to be a significant
customer of its Intranet services business, but to a lesser extent than in
previous years, both in terms of dollars and as a percentage of its total net
revenue. See "Risk Factors -- Limited Services to Date; Reliance on Domain Name
Registration Services and Intranet Services for Substantially All Revenue,"
"-- Uncertain Status of the Cooperative Agreement," "-- Competition in Domain
Name Registration Business," "-- Recommendations and Proposals to Increase
Competition in Registration Services" and "-- Dependence on Future Growth of the
Internet and Internet Infrastructure."

Cost of Revenue. Cost of revenue consists primarily of salaries and
employee benefits, fees paid to subcontractors for work performed in connection
with projects, depreciation, lease costs of the operations infrastructure and
the associated operating overhead. Cost of revenue increased 79% from $3.0
million for the three months ended March 31, 1996 to $5.3 million for the three
months ended March 31, 1997. This increase was primarily associated with labor
and overhead associated with the Company's registration business. The Company
continues to invest in improvements to the back office component of its domain
name registration business and has made investments in additional hardware,
software and staffing and currently anticipates that it will continue to make
significant investments in its back office for the foreseeable future.

As a percentage of net revenue, cost of revenue decreased from 126.4% for
the three months ended March 31, 1996 to 61.2% for the three months ended March
31, 1997. This decrease primarily reflects economies of scale that the Company
has begun to achieve due to the growth of its subscription-based domain name
registration business. In the near term, the continued need for back-office
investments is expected to significantly offset any overall margin improvements
arising from economies of scale.

Research and Development Expenses. Research and development expenses
consist primarily of compensation expenses to support the development and
enhancement of the Company's technologies. There were no research and
development expenses for the three months ended March 31, 1996. For the three
months ended March 31, 1997, research and development expenses were $311,000 or
3.5% of net revenue. To date, all of the Company's development costs have been
expensed as incurred. The Company expects that the level of research and
development expenses will increase significantly in the near future in absolute
dollars and as a percentage of net revenue as the Company invests in new product
and service offerings.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of salaries of business development,
general management, administrative and financial personnel, outside professional
fees and amortization of goodwill associated with the Company's acquisition by
SAIC. Selling, general and administrative expenses increased 150% from $921,000
for the three months ended March 31, 1996 to $2.3 million for the three months
ended March 31, 1997. The

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<PAGE> 34

increase was primarily attributable to increased management and administrative
staff and an increase in legal costs associated with the administration of the
Company's domain name dispute policy. During the quarter, the Company was
notified that one of its Intranet services customers had filed for bankruptcy,
resulting in a $194,000 bad debt write-off.

As a percentage of net revenue, selling, general and administrative
expenses decreased from 39.5% for the three months ended March 31, 1996 to 26.6%
for the three months ended March 31, 1997. The decrease in percentage of net
revenue reflects economies the Company has begun to achieve due to the growth of
both its domain name registration and Intranet services businesses. The Company
expects that the level of selling, general and administrative expenses will
increase significantly in the near future in absolute dollars as operations
expand.

Interest Expense (Income). The Company had no interest income or expense
for the three months ended March 31, 1996 as compared to interest income of
$149,000 for the three months ended March 31, 1997. The change is primarily
attributable to positive cash flow associated with the Company's registration
services business.

Income Taxes (Benefit). The income tax benefit was $436,000 for the three
months ended March 31, 1996 as compared to an income tax expense of $382,000 for
the three months ended March 31, 1997. The effective tax rate changed from 28.3%
for the three months ended March 31, 1996 to 42.5% for the three months ended
March 31, 1997. The difference between the effective rates was attributed to the
relative impact that non-deductible goodwill had on pre-tax operating income or
loss for the quarter. The goodwill amount is being amortized by the Company over
five years and is associated with the acquisition of the Company by SAIC.

COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1996

Net Revenue. Net revenue increased 191% from $6.5 million in 1995 to $18.9
million in 1996. This increase in net revenue was primarily attributable to the
increase in the number of domain name subscriptions, principally in the .com
TLD, as well as the Company's shift to a subscription-based pricing model. Net
revenue from registration services increased 594% from $1.6 million in 1995 to
$11.1 million in 1996. Net revenue in 1995 primarily reflects the cost
reimbursement plus fixed-fee contract with the NSF whereas net revenue for 1996
reflects the Company's subscription-based pricing model. Net registrations to
the Company's domain name registration service increased 254% from 177,000 at
December 31, 1995 to approximately 627,000 at December 31, 1996.

Net revenue from Intranet services increased 57% from $4.9 million in 1995
to $7.7 million in 1996, including an increase in net revenue from NationsBanc,
the Company's largest Intranet services customer, which increased 42% from $2.6
million in 1995 to $3.7 million in 1996. The growth was primarily attributable
to increased funding within NationsBanc to support internal network integration
and expansion. The Company also experienced growth from a number of new Intranet
services customers, many of which were obtained through subcontracting with and
utilizing leads from SAIC.

NationsBanc accounted for 19.5% of total net revenue in 1996. NationsBanc
accounted for 40.8% of total net revenue and the NSF (under the cost
reimbursement plus fixed-fee contract) accounted for 20.8% of total net revenue
in 1995. No other source of revenue accounted for more than 5% of total net
revenue in either year.

Cost of Revenue. Cost of revenue increased 157% from $5.7 million in 1995
to $14.7 million in 1996. The increase in cost was related primarily to
increases in the cost of labor and overhead as a result of the Company's rapid
growth. Effective with the September 14, 1995 amendment to the Cooperative
Agreement which implemented the subscription-based pricing model, the Company
has established and continues to develop its back office capability. This
required the Company to make significant investments in hardware and software as
well as to utilize a number of third-party vendors in support of back office
requirements. In particular, the Company began to outsource portions of its back
office operations during the fourth quarter of 1996. The principal benefit of
outsourcing was to increase the capacity and efficiency of its back office
operations; however, such action alone has not significantly impacted operating
margins.

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<PAGE> 35

As a percentage of net revenue, cost of revenue decreased from 87.9% in
1995 to 77.8% in 1996. This decrease reflects economies of scale that the
Company has begun to achieve due to the growth of its subscription-based
registration business.

Research and Development Expenses. There were no research and development
expenses in 1995, in large part because registration system enhancements were
reimbursable under the Cooperative Agreement. In 1996, research and development
expenses were $680,000 or 3.6% of net revenue. To date, all of the Company's
development costs have been expensed as incurred.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 162% from $2.4 million in 1995 to $6.3 million
in 1996. The increase was primarily attributable to increases in management,
administrative and business development staff, as well as additional facility
costs and increased legal costs associated with the administration of the
Company's domain name dispute policy.

As a percentage of net revenue, selling, general and administrative
expenses decreased from 36.9% in 1995 to 33.3% in 1996, reflecting the generally
fixed nature of certain general and administrative expenses as well as
management's control of such costs.

Interest Expense (Income). The Company had net interest expense of $61,000
in 1995 as compared to interest income of $496,000 in 1996. The change is
primarily attributable to positive cash flow in 1996 associated with the
Company's subscription-based registration business.

Income Taxes (Benefit). The income tax benefit was $239,000 in 1995 as
compared to $643,000 in 1996. The effective tax rate increased from 14.3% in
1995 to 28.4% in 1996. The difference between the effective tax rates was
primarily attributable to non-deductible goodwill comprising a higher percentage
of the Company's net loss in 1995.

Discontinued Operations. Immediately prior to the acquisition of the
Company by SAIC, the portion of the Company's business relating to the
minority-based government business had been transferred into a separately-owned
entity. In November 1995, SAIC adopted a plan to transfer the Company's
remaining government-based business to SAIC in order to enable the Company to
focus on the growth of its commercial business, which includes registration
services and Intranet services. This transfer was effective as of February 1996.
November 1995 was the measurement date for discontinued operations for
accounting purposes. The activities of both the minority-based government
business and the remaining government-based business are reflected as
discontinued operations. Net income (loss) from discontinued operations excludes
general corporate overhead of the Company. No gain or loss was incurred as a
consequence of the transfer of these businesses.

In 1995, discontinued operations incurred a net loss of $1.4 million. The
loss was primarily attributable to the Company's remaining government business,
which increased the Company's provision for uncollectable accounts associated
with the bankruptcy of a prime contractor, high interest costs associated with
payment issues from other prime contractors and over-runs of fixed-price and
fixed-rate contracts. As mentioned above, this business was transferred to SAIC
effective as of February 1996.

COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1995

Net Revenue. Net revenue increased 29% from $5.0 million in 1994 to $6.5
million in 1995. The increase in net revenue was primarily attributable to the
Company's Intranet services business which increased its revenue 26% from $3.9
million in 1994 to $4.9 million in 1995. The Company developed a number of new
customers mainly in the banking industry, as well as subcontracting with and
utilizing leads from SAIC. NationsBanc and the NSF (under the cost reimbursement
plus fixed-fee contract) together accounted for 85.2% and 62.0% of net revenue
in 1994 and 1995, respectively. No other source of revenue accounted for more
than 5% of net revenue in either year.

Cost of Revenue. Cost of revenue increased 86% from $3.1 million or 61.1%
of net revenue in 1994 to $5.7 million or 87.9% of net revenue in 1995. The 1995
increase in absolute dollars and as a percentage of net revenue was attributable
to increased costs in the Company's Intranet services

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<PAGE> 36

business as the Company invested in technical support and additional
infrastructure in order to attract and maintain clients in 1995. In addition,
the Company began to significantly expand its back office capability in support
of the September 14, 1995 amendment to its Cooperative Agreement with the NSF,
which introduced a subscription-based pricing model for its domain name
registration services.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 55% from $1.5 million or 30.7% of net revenue
in 1994 to $2.4 million or 36.9% of net revenue in 1995. The increase was
primarily attributable to additional costs necessary to support the growth in
the Company's business and professional staff during 1995.

Interest Expense (Income). Net interest expense decreased 44% from
$109,000 or 2.2% of net revenue in 1994 to $61,000 or 0.9% of net revenue in
1995. The decrease was primarily attributable to cash flow improvements from the
Company's Intranet services business.

Income Taxes (Benefit). The income tax provision was $114,000 in 1994
compared with a $239,000 benefit for income taxes in 1995. The 1994 effective
tax rate was 37.6% as compared to the 1995 effective tax rate of 14.3%. The
difference between the effective rates was attributed to the relative impact
which non-deductible goodwill had on pre-tax operating income or loss for the
year.

Discontinued Operations. Discontinued operations incurred a net loss of
$1.2 million in 1994 as compared to a net loss of $1.4 million in 1995. The 1994
loss was primarily attributable to the minority-based government business which
experienced several large over-runs related to fixed-price and fixed-rate
contracts. This business was transferred into a separately-owned entity
immediately prior to the acquisition of the Company by SAIC on March 10, 1995.
The loss in 1995 was primarily attributable to the Company's remaining
government business, which increased the Company's provision for uncollectable
accounts associated with the bankruptcy of a prime contractor, high interest
costs associated with payment issues from other prime contractors and over-runs
of fixed-price and fixed-rate contracts. As mentioned above, this business was
transferred to SAIC effective as of February 1996.

FACTORS AFFECTING OPERATING RESULTS

As a result of the Company's limited operating history, especially with
regard to its subscription-based registration service business, the Company does
not have significant historical financial data on which to base planned
operating expenses. Accordingly, the Company's expense levels are based in part
on its expectations as to future revenue and to a large extent are fixed. As a
result, quarterly sales and operating results generally depend on the volume of
and ability to fulfill registration requests, which are difficult to forecast.
The Company may be unable to adjust spending in a timely manner to compensate
for any unexpected revenue shortfall. Accordingly, any significant shortfall of
demand for the Company's services in relation to the Company's expectations
would have an immediate adverse impact on the Company's business, operating
results and financial condition. In addition, the Company expects a significant
increase its operating expenses as it funds greater levels of product and
services development, increases its sales and marketing operations, updates
systems and infrastructure, opens new offices, develops new distribution
channels and broadens its customer support capabilities. To the extent that such
expenses precede or are not subsequently followed by an increase in revenue, the
Company's business, operating results and financial condition will be materially
and adversely affected.

The Company believes that future operating results will be subject to
quarterly fluctuations due to a variety of factors, many of which are beyond the
Company's control. Such factors may include, but are not limited to, the
introduction of competing TLDs, variations in the number of requests for domain
name registrations, demand for the Company's services, introduction or
enhancements of services by the Company or its competitors, market acceptance of
new service offerings, increased competition, costs associated with providing
domain name registration services, litigation costs, termination or completion
of contracts in the Company's Intranet service business or failure to obtain
additional contracts in its Intranet services business, patterns of growth in
the use of and interest in the Internet and general economic conditions.
Operating results would be adversely affected by a downturn, or increased
competition, in the market for domain name registrations or a failure to
maintain existing or obtain anticipated contracts in its Intranet services
business. Because the

35
<PAGE> 37

Company expects an increase in its operating expenses for personnel and new
services development, the Company would be materially and adversely affected if
its revenues did not correspondingly increase. See "Risk Factors -- Uncertain
Status of the Cooperative Agreement," "-- Competition in Domain Name
Registration Business," "-- Recommendations and Proposals to Introduce
Competition in Registration Services," "-- Competition in Intranet Services and
Internet-Enabling Businesses," "-- Uncollectible Receivables; Modifications to
Billing Practices," "-- Technological Change and Additional Technology, Products
and Services," and "-- Potential Fluctuations in Quarterly Results."

36
<PAGE> 38

SELECTED QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited quarterly financial
information for each of the seven quarters in the period ended June 30, 1997. In
the opinion of management, this information has been presented on the same basis
as the audited financial statements appearing elsewhere in this Prospectus, and
all necessary adjustments (consisting only of normal recurring adjustments) have
been included in the amounts stated below to present fairly the unaudited
quarterly results when read in conjunction with the audited financial statements
of the Company and notes thereto. The operating results for any quarter are not
necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------
FISCAL
1995 FISCAL 1996 FISCAL 1997
-------- --------------------------------------------- --------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1996 1996 1996 1996 1997 1997
-------- -------- -------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue.................... $ 1,533 $ 2,333 $4,496 $ 5,180 $6,853 $8,655 $
Cost of revenue................ 1,911 2,950 3,571 3,719 4,426 5,294
-------- -------- -------- --------- -------- -------- --------
Gross profit................... (378) (617) 925 1,461 2,427 3,361
Research and development
expenses..................... -- -- 58 226 396 311
Selling, general and
administrative expenses...... 607 921 1,449 1,932 1,978 2,301
Interest expense (income)...... 34 -- (86) (288) (122) (149)
-------- -------- -------- --------- -------- -------- --------
Income (loss) from continuing
operations before income
taxes........................ (1,019) (1,538) (496) (409) 175 898
Provision (benefit) for income
taxes........................ (175) (436) (140) (116) 49 382
-------- -------- -------- --------- -------- -------- --------
Income (loss) from continuing
operations................... $ (844) $(1,102) $ (356) $ (293) $ 126 $ 516 $
======== ======== ======== ======== ======== ======== ========

PERCENTAGE OF TOTAL NET REVENUE
---------------------------------------------------------------------------------
Net revenue.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% %
Cost of revenue................ 124.7 126.4 79.4 71.8 64.6 61.2
-------- -------- -------- --------- -------- -------- --------
Gross profit................... (24.7) (26.4) 20.6 28.2 35.4 38.8
Research and development
expenses..................... -- -- 1.3 4.4 5.8 3.5
Selling, general and
administrative expenses...... 39.6 39.5 32.2 37.3 28.9 26.6
Interest expense (income)...... 2.2 -- (1.9) (5.6) (1.8) (1.7)
-------- -------- -------- --------- -------- -------- --------
Income (loss) from continuing
operations before income
taxes........................ (66.5) (65.9) (11.0) (7.9) 2.5 10.4
Provision (benefit) for income
taxes........................ (11.4) (18.7) (3.1) (2.2) 0.7 4.4
-------- -------- -------- --------- -------- -------- --------
Income (loss) from continuing
operations................... (55.1)% (47.2)% (7.9)% (5.7)% 1.8% 6.0% %
======== ======== ======== ======== ======== ======== ========
</TABLE>

37
<PAGE> 39

LIQUIDITY AND CAPITAL RESOURCES

From its acquisition by SAIC in March 1995 until December 1996, the Company
participated in SAIC's centralized cash management system, whereby cash received
from operations was transferred to SAIC's centralized cash accounts and cash
disbursements were funded from such centralized cash accounts. Accordingly, cash
requirements for operating purposes and for capital expenditures were met from
this source. Beginning in 1997, the Company implemented its own cash management
system.

At March 31, 1997, the Company's cumulative net obligations to SAIC of
$148,000 were classified under current liabilities on the balance sheet as Due
to Parent. The intercompany activity primarily comprises corporate tax payments
made by SAIC on behalf of the Company in accordance with the tax sharing
arrangements between the Company and SAIC and salaries and benefits paid by SAIC
on behalf of the Company. Effective in the second quarter of 1997, corporate
taxes are paid to SAIC on a quarterly basis, with all other intercompany
balances between SAIC and the Company paid on a monthly basis.

At March 31, 1997, the Company had unrestricted cash and cash equivalents
totaling $12.5 million. Pursuant to the terms of the September 14, 1995
amendment to the Cooperative Agreement, the Company is required to set aside 30%
of collected registration and renewal fees. The Company reflects NSF's set aside
funds along with the appropriate percentage of net accounts receivable as
restricted assets and has recorded an equivalent, related current liability. At
March 31, 1997, the restricted assets totaled $23.8 million. See Notes 2 and 3
to the Financial Statements.

Revenue from the Company's two-year initial registration fee is effectively
taxable in full in the year of registration, while for financial reporting
purposes, the revenue is deferred and recognized ratably over the 24-month
period. Thus, the provision (benefit) for income taxes based on book income
(loss) from operations is significantly different from the required tax payments
based on taxable income. Due to this accelerated revenue recognition for tax
purposes, the Company's resultant tax liability is funded in advance of the
corresponding financial reporting revenue. At March 31, 1997, the Company had
$14.2 million of deferred tax assets primarily due to this revenue timing
difference. See "Relationship with SAIC -- Corporate Services Agreement."

The Company believes that the net proceeds from the sale of Class A Common
Stock offered hereby, together with its current cash balances, will be
sufficient to meet its working capital and capital expenditure requirements for
at least the next 12 months. Although operating activities may provide cash in
certain periods, to the extent that the Company experiences growth in the
future, the Company anticipates that its operating and investing activities may
use cash. Consequently, any such growth may require the Company to obtain
additional equity or debt financing. The sale of additional equity or
convertible debt securities will result in additional dilution to the Company's
stockholders. In addition, although there are no present understandings,
commitments or agreements with respect to any acquisitions of other businesses,
products or technologies, the Company from time to time evaluates potential
acquisitions of other businesses, products and technologies and may in the
future require additional equity or debt financings to consummate such potential
acquisitions.

Capital expenditures for continuing operations were $1.9 million and $1.3
million for the year ended December 31, 1996 and the three months ended March
31, 1997, respectively. These expenditures were primarily for computer
equipment. Commencing in August 1996, the Company adopted a program of leasing
most of its computer equipment under noncancellable 24- and 36-month leases to
allow the Company to maintain the latest technology within its operating
infrastructure. The Company is currently reviewing its 1997 capital expenditure
plans and anticipates expenditures of approximately $5 million to $6 million for
the balance of 1997. The Company expects that a majority of these expenditures
will be financed under lease agreements ranging from 24 to 36 months.

38
<PAGE> 40

BUSINESS

The following discussion contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in the forward-looking statements as a result of
certain factors including, but not limited to, those discussed in "Risk Factors"
and elsewhere in the Prospectus.

Network Solutions is the leading Internet domain name registration service
provider worldwide. The Company currently acts as the exclusive registrar for
second level domain names within the .com, .org, .net, .edu and .gov TLDs. By
registering Internet domain names, the Company enables businesses, other
organizations and individuals to establish a unique Internet presence from which
to communicate and conduct commerce. Net registrations within the TLDs
maintained by the Company increased by 233% from approximately 246,000 domain
names registered at March 31, 1996 to approximately 818,000 domain names
registered at March 31, 1997. The Company believes that commercial enterprises
and individual Internet users worldwide are increasingly recognizing the .com
TLD as a desirable address for commercial presence on the Internet. Net
registrations in the .com TLD increased from approximately 217,000 at March 31,
1996 to approximately 721,000 at March 31, 1997, representing 88% of the
Company's total net registrations at March 31, 1997. With over 10 million
businesses and over 750,000 active trademarks and service marks in the United
States alone, the Company believes that the potential for continued growth of
domain name registrations by commercial entities and services related to those
registrations is substantial. Net revenue from Internet domain name registration
subscriptions accounted for 76.5% of the Company's net revenue for the three
months ended March 31, 1997.

The Company also provides Intranet consulting services to large companies
that desire to establish or enhance their Internet presence, or "re-engineer"
legacy network infrastructures to accommodate the integration of both Internet
connectivity and Intranet network technology into their information technology
base. The Company's Intranet services include: (i) Intranet development and
re-engineering; (ii) network and systems security; and (iii) Intranet-enabled
business solutions. According to Zona Research, Inc., the market for Intranet
services in the year 1999 will exceed $14 billion, up from approximately $3
billion in 1996. Net revenue from Intranet services accounted for 23.5% of the
Company's net revenue for the three months ended March 31, 1997.

The Company also intends to develop a portfolio of Internet-enabling
products and services, which may include directory and distribution services,
that allows the Company to build upon its position in the registration process
and makes proper use of the customer data that it collects.

INDUSTRY BACKGROUND

The Internet is a global network of millions of interconnected computers
and computer networks that allow businesses, other organizations and individuals
to communicate. Historically, the Internet had been used by a limited number of
academic institutions, defense contractors and government agencies to facilitate
remote access to host computers and transmit electronic mail. Recently, however,
use of the Internet has increasingly become dominated by a broad range of
commercial organizations and individuals who utilize the Internet to communicate
electronically, to distribute and retrieve information and to conduct commerce.
Advances in technology, low-cost Internet access and an increasing corporate
reliance on distributed information environments have fueled the rapid growth of
the Internet. According to estimates published by the International Data
Corporation, the number of World Wide Web users will be approximately 163
million by the end of 2000, compared to approximately 35 million at the end of
1996.

The Internet has been and continues to be loosely administered by a number
of government agencies that were involved in the creation of its infrastructure
(initially ARPA and, more recently, the NSF) and a number of nonprofit groups
formed to address specific Internet governance issues. As no single organization
has formal authority over all aspects of the Internet, it continues to operate
under a system of mutual collaboration and cooperation. With the
commercialization of the Internet, the role of many of these entities in future
Internet administration has become less clear and private parties

39
<PAGE> 41

have begun to assume a larger role in the enhancement and maintenance of the
Internet's infrastructure. The NSF, for example, has completed a two-year phased
withdrawal of its funding for the Internet "backbone" and has transferred this
responsibility to a group of private telecommunications carriers that are
commercially funded.

The Company believes that in order to support the demands placed on this
evolving and rapidly growing medium of commerce and information exchange, a wide
range of products and services will need to be developed and enhanced,
including: (i) domain name registration services; (ii) Intranet services; and
(iii) Internet-enabling products and services.

Domain Name Registration Services. All communication on the Internet
requires an electronic address. Currently, the Internet functions through the
establishment of a unique Internet identity (a "domain name") for an electronic
address and the proliferation of such domain name in all of the global Internet
root servers.

An Internet domain name is made up of a top-level domain ("TLD"), such as
.com or .net, and additional domain levels consisting of at least one additional
domain level, referred to as a second level domain name. For example, in the
domain name "companyX.com," "companyX" is the second level domain name. With the
increased commercialization of the Internet, second level domain names are being
utilized not only by large corporations but also increasingly by other users,
including small businesses, organizations and individuals. Particularly within
the .com TLD, users are also registering domain names to establish Internet
identities for other purposes such as trademarks, products and events. The most
common TLDs include .com, used primarily by commercial entities, .org for
nonprofit organizations, .net for network service providers, .edu for
universities and .gov for United States governmental entities, as well as
country code TLDs represented by "." followed by two letter country codes (e.g.,
.us for the United States, .uk for the United Kingdom and .de for Germany).

Because the Internet is not bound by geography or lines of business,
coordination and administrative services are required for the registration,
allocation and use of TLDs and for the effective operation of the Internet.
Initially, in the United States, registration of domain names was primarily
performed by government or nonprofit agencies. In 1993, the NSF entered into the
Cooperative Agreement with the Company for the performance of these functions
for the .com, .org, .net, .edu and .gov TLDs. The Cooperative Agreement by its
terms expires in March 1998, but may be terminated at any time by the NSF at its
discretion or by mutual agreement. See "Risk Factors -- Uncertain Status of the
Cooperative Agreement," "-- Recommendations and Proposals to Increase
Competition in Registration Services" and "-- Relationship with the NSF; Recent
Developments in the Internet Community."

Intranet Services. Many enterprises are adopting "Intranets" that employ
Internet data formats and communications protocols. Intranets enhance user
productivity and connectivity allowing users controlled access to internal
information while also accessing and exchanging information on the Internet. As
more businesses, organizations and individuals establish an Internet presence
and begin to deploy Intranets, there will be an increasing demand for Intranet
development and re-engineering services, network and systems security services
and Intranet-enabled business solutions. In addition, the Company believes that
Intranets are becoming increasingly sophisticated and are allowing users
increased capabilities and improved access to information. As a result,
corporations are increasingly seeking experienced networking firms to enable all
of these services. According to Zona Research, Inc., the market for Intranet
services in the year 1999 will exceed $14 billion, up from approximately $3
billion in 1996.

Internet-Enabling Products and Services. The proliferation of Internet
users provides businesses, other organizations and individuals with new means by
which to conduct business. To facilitate business-to-business and
business-to-consumer transactions, Internet users are seeking important enabling
products and services, such as transaction security services, electronic payment
mechanisms and directory and information services. The Company believes there
will be opportunities for entities which can facilitate, develop and distribute
such products and services and make them more readily accessible and easy to
use.

40
<PAGE> 42

THE NSI SOLUTION

Network Solutions is the leading Internet domain name registration service
provider worldwide. The Company currently acts as the exclusive registrar of
second level domain names within the .com, .org, .net, .edu and .gov TLDs
pursuant to the Cooperative Agreement with the NSF. In this capacity, the
Company enables the efficient operation of the Internet by supplying each of the
Internet root servers located around the world with an identical copy of the
file for all second level domain names in these TLDs. By registering Internet
domain names, the Company enables businesses, other organizations and
individuals to establish a unique Internet presence from which to communicate
and conduct commerce. The Company believes that it has been at the forefront of
the development, administration and coordination of standards, policies and
functions needed to facilitate the registration process, including dissemination
of domain name database information to root servers throughout the world and
administration of a domain name dispute policy.

The Company is working to expand its domain name registration business and
to continue to improve the registration process by: (i) increasing the brand
recognition of the .com TLD; (ii) expanding its relationships with Internet
access providers by offering enhanced registration services to their customers;
(iii) stimulating demand for domain name registrations in targeted customer
segments; (iv) working with major platform providers to embed the registration
function into server software applications; (v) facilitating ease of use of and
access to its registration service; and (vi) establishing international
alliances and developing multilingual capability. The Company intends to develop
a portfolio of Internet enabling products and services, which may include
directory and distribution services, that allows the Company to build upon its
position in the registration process and makes proper use of the customer data
that it collects.

The Company also provides Intranet consulting and network design and
implementation services to large companies that desire to establish or enhance
their Internet presence or "re-engineer" legacy network infrastructures to
accommodate the integration of both Internet connectivity and Intranet network
technology into their information technology base. The Company's Intranet
services have evolved from the Company's Internet pioneering efforts that date
back to 1979 and presently include: (i) Intranet development and re-engineering;
(ii) network and systems security; and (iii) Intranet-enabled business
solutions.

THE NSI STRATEGY

The Company's goal is to maintain its position as the leader in Internet
domain name registration services and to build on this position to be a leading
provider of Intranet services and Internet enabling products and services. The
Company's strategy includes the following key elements:

Maintain Position as a Leading Provider of Registration Services. The
Company intends to maintain and enhance its position as a leader in domain name
registration by promoting the .com TLD as the accepted and preferred Internet
address for commercial presence on the Internet worldwide. The Company also
intends to develop and implement standards, policies and functions designed to
enhance the ease, speed and security of the registration process by adding new
capabilities to facilitate the registration process and providing quality
customer service and support.

Establish and Expand Marketing Relationships. The Company intends to
establish and expand relationships with companies worldwide to promote its
services, penetrate new customer bases and integrate third party products and
services. The Company has established, and is seeking to further pursue
relationships with, Internet access providers to enhance its ability to offer
second level domain names and pursue its Intranet services opportunities.

Maintain Active Role in Establishment of Future Internet Standards and
Policies. The Internet currently operates under a system of mutual
collaboration and cooperation and has historically been administered by
governmental and nonprofit organizations. The Company intends to continue to
cooperate with these organizations and maintain an active role in the global
Internet community to ensure that the Internet continues to flourish and that
the Company remains at the forefront of continuing change in the Internet. The
Company believes that its expertise in the Internet and its

41
<PAGE> 43

participation in the Internet community should enable it to facilitate the
proliferation of Internet usage worldwide and provide it with a competitive
advantage in the development of its service offerings.

Build and Strengthen Intranet Services Business. The Company intends to
further develop its existing in-depth knowledge of and experience in Internet
technologies to develop a leading Intranet services business. The Company
believes that delivering dependable, high-quality Intranet solutions is critical
to strengthening its relationships with existing clients, gaining repeat
business and generating new business from referrals. Further, the Company
intends to utilize its relationship with SAIC in this area by continuing to work
with SAIC on a subcontract basis and seeking referrals to SAIC's customers and
strategic partners.

Provide Complementary Enabling Products and Services. The Company intends
to develop a portfolio of Internet enabling products and services that build on
its registration activities and the customer data that the Company collects.
These enabling products and services could include directory and other services
to be developed by the Company and distribution of third party product and
service offerings through on-line enrollment for such products and services
embedded within the Company's domain name registration home page.

Leverage Technology Leadership. The Company has assembled management and
engineering teams with extensive experience in the information technology
industry and specifically the Internet and intends to leverage this experience
in the development of enabling technologies to support the continued enhancement
of infrastructure flexibility and scalability, customer ease of use and
embeddedness in access sources. The Company is committed to integrating
state-of-the-art technology in its service offerings and believes that service
quality and reliability should be a significant differentiating factor in its
market.

Pursue Strategic Acquisitions. The Company intends to identify and, where
appropriate, pursue acquisition opportunities which would provide businesses,
products, services or technologies complementary to the Company's current
business, although it is not currently contemplating any such acquisitions.

The Company's strategy involves substantial risk. There can be no assurance
that the Company will be successful in implementing its strategy or that its
strategy, even if implemented, will lead to successful achievement of the
Company's objectives. If the Company is unable to implement its strategy
effectively, the Company's business, financial condition and results of
operations would be materially and adversely affected.

NSI SERVICES

Registration Services. Registration services is the Company's core
business. The Company registers second level domain names in the .com, .org,
.net, .edu and .gov TLDs, enabling registrants to establish a unique identity on
the Internet. The Company's largest source of customers are Internet access
providers, which request domain names on behalf of their subscribers.

Prior to September 14, 1995, the Company was reimbursed by the NSF for
providing registration services under a cost reimbursement plus fixed-fee
contract. On September 14, 1995, the NSF amended the Cooperative Agreement to
authorize the Company to begin charging customers a subscription fee of $50 per
year for each second level domain name registered. The Company's registration
services customers in the .com, .org and .net TLDs are invoiced for a two-year
subscription fee of $100 for initial registrations and $50 per year for renewals
of initial registrations. Under the terms of the amendment to the Cooperative
Agreement, 30% of the subscription fees collected are required to be set aside
to be disbursed in a manner approved by the NSF for the enhancement of the
intellectual infrastructure of the Internet. See "-- Relationship with the NSF;
Recent Developments in the Internet Community."

The Company believes that high quality customer support is vital to client
satisfaction. The registration subscription fee provides the customer with
access to a registry help desk and an on-line processing facility and account
information updates. The Company's help desk and on-line processing

42
<PAGE> 44

facility are factors in the success of the Company's registration business
because they are the front line to the customer and provide initial and ongoing
customer service and support. This facility currently processes over 40,000
telephone calls and over 300,000 electronic transactions monthly. At the end of
1996, the Company entered into arrangements to outsource certain back office
operations, which the Company believes has improved customer service and account
handling and expanded the Company's capacity to service larger volumes of
registrants. See "-- Operations."

The Company has been registering domain names pursuant to the Cooperative
Agreement since 1993 and has made significant investments in its registration
services business. The Company believes that it currently possesses the
following competitive advantages in the domain name registration business:

- - Brand Recognition of the .com TLD. The Company believes that the .com TLD,
of which the Company is currently the exclusive registrar, has perceived
value to commercial users on the Internet. Further, the Company believes
that there is an emerging trend among commercial entities outside of the
United States to establish an Internet presence within the .com TLD, rather
than within or in addition to a country code TLD.

- - Large, Established Customer Base. The Company currently maintains in excess
of one million unique domain name registrations. As a result, the Company
believes it has the infrastructure required to realize significant scale
efficiencies throughout the registration process and believes that it has
established credibility in the Internet community. In addition, this large
customer base allows the Company to benefit from its policy which requires
that customers prepay for two years for rights to a unique domain name
registration. As customers invest in their web sites for advertising,
branding and other business-critical activities, the Company believes they
will be increasingly inclined to renew at the end of the initial two-year
subscription period.

- - Strategic Agreements with Internet Access Providers. The Company has
entered into agreements to provide specialized services to certain Internet
access providers who register a significant number of second-level domain
names with the Company on behalf of such providers' customers. This program
provides the Premier Partner with customized registration services and
provides the Company with a multi-year registration stream from the Premier
Partner. To date, the Company has entered into agreements with 26 Internet
access providers, including: MCI, Inc., America Online, Incorporated
(PrimeHost Division), TABNet and Rapidsite, Inc.

- - Established Technical Infrastructure. The Company believes that the
technical requirements to build and to operate a competitive domain name
registry are significant. Substantial portions of the Company's software is
custom-developed and proprietary. The Company's internal software includes
an automated registration capability which currently processes in excess of
90% of all new registration requests without human intervention. See
"-- Operations."

- - Experience in the Administration of Domain Name Dispute Policy. The
Company's staff is experienced in the establishment and administration of
the Company's domain name dispute policy, which is an integral part of the
maintenance and administration of the Company's domain name registration
business. As of June 25, 1997, the Company had received over 2,500 written
objections to the registration and use of certain domain names. Of these,
approximately 1,200 were disputes in which the Company's domain name dispute
policy was involved. Although 26 of these objections have resulted in
litigation involving the Company, as of June 25, 1997, no damages have been
awarded against the Company to any plaintiff. The Company expends
considerable management and legal resources in the development, refinement
and administration of its domain name dispute policy.

- - Skilled Technical Personnel. The Company believes that significant
engineering talent is required to create a registration services capability
and that knowledge of DNS structures, Internet security, data routing and
routing protocols is critical to creating and enhancing registration service
capabilities. The Company developed RWhois, a standard open protocol, that
is used for the registration services business. The Company's engineering
staff has significant expertise in the

43
<PAGE> 45

RWhois protocol. The Company believes that engineers skilled in protocol
development are difficult to identify, hire and retain and thus its staff of
engineers represents a valuable resource.

The Company believes that these competitive advantages are significant and that
existing and additional competing registries will need similar capabilities.

In addition, the Company is working to expand its domain name registration
business and to continue to improve the registration process by:

- - Increasing the Brand Recognition of the .com TLD Worldwide. The Company
believes that it can continue to grow its Internet registration business by
promoting global brand recognition of the .com TLD. The Company has begun
and intends to continue to promote the use of the .com TLD and to establish
.com as the most recognized domain for individuals and organizations
conducting business on the Internet.

- - Expanding Relationships With Internet Access Providers. The Company intends
to build upon its current relationships with certain Internet access
providers that have agreed to participate in its Premier Domain Registration
Service program and intends to pursue relationships with additional Internet
access providers. Through these relationships, the Company believes it will
be able to deliver enhanced registration services and identify additional
opportunities to expand its registration services business.

- - Stimulating Demand for Domain Name Registrations in Targeted Customer
Segments. The Company is seeking to expand the number of registrations in
targeted customer segments both domestically and internationally. The
Company believes that customer segments such as small business users,
individuals, holders of trademarks, service marks and product marks and
event sponsors could offer significant potential for growth if the Company
actively markets a portfolio of registration services to these segments.

- - Working with Major Platform Providers to Embed the Registration
Function. The Company is seeking to expand its domain name registration
business through agreements with major platform providers to embed an
automated registration function through a "point-and-click" interface
directly into the server initialization procedures. For example, in December
1996, the Company entered into an agreement with Microsoft Corporation
("Microsoft") to provide a "point-and-click" interface intended to allow
users to automatically register a domain name with the Company upon
initialization of the server.

- - Facilitating Ease of Use and Access to Registration Services. The Company
has undertaken a number of initiatives that are intended to make the
registration process easier, more streamlined and more accessible. The
Company believes that ease of use is becoming increasingly important as the
Internet is being more widely adopted by users who are less technically
sophisticated. The Company is currently in the process of simplifying the
registration template accessed by customers to effect registration of a
domain name. To facilitate payment of registration renewal fees, the Company
intends to implement electronic payment mechanisms that will allow the user
to pay for the domain name directly from the user's host machine.

- - Establishing International Alliances and Developing Multilingual
Capability. The Company intends to establish strategic alliances with
international registries to build a foundation for its international
operations. As these entities add Internet service to their offerings for
their customers, the Company intends to offer "ease of use" solutions for
entities worldwide for registration in the .com, .org and .net TLDs. The
Company also intends to establish a multilingual call center capability to
further assist with international registrations.

Intranet Services. The Company provides consulting and network systems
integration services for clients utilizing Internet technologies for internal
networks (i.e., Intranets). The Company's network systems engineers have
extensive knowledge of and experience in such areas as local area network
("LAN")/wide area network ("WAN") Internet protocols, router technology,
switching technology, remote access technology, virtual private network
technology, network security technology, network management technology, network
components, IP addressing strategy, domain name architec-

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ture, efficient IP address space usage, Web applications development, UNIX
systems (highly modular and flexible computer systems) and network operating
systems. By leveraging this knowledge and experience, the Company is able to
provide solutions to clients' complex network needs.

As part of its Intranet services offering, the Company provides Intranet
development and re-engineering; network and systems security; and
Intranet-enabled business solutions.

- - Intranet Development and Re-engineering. The Company offers a full line of
services to help develop, optimize, and integrate Intranet solutions in a
manner tailored to individual clients. Some of the more significant services
include Intranet business workflow and service level analysis; IP address
space engineering; domain name system ("DNS") and dynamic host configuration
protocol ("DHCP") architecture engineering; routing and switching
architecture engineering; Extranet (IP networks through which companies run
Web applications for external use by their customers) architecture
engineering; virtual private network architecture engineering; electronic
messaging architecture engineering; network capacity and performance
management; and new technology integration. The Company also provides
planning and analysis to implement disaster recovery and contingencies for
network system failures.

- - Network and Systems Security. The Company provides a full range of security
consulting services, including security architecture assessment, planning
and implementation. The security architecture establishes the access and
protection controls that will permit internal and remote users to access
computer systems, databases and applications on the network, while
protecting against unauthorized or inadvertent access to information or
misuse of systems services. The Company's methods to secure the backbone,
LAN-to-WAN access, remote access and facilities can supplement or replace
existing systems security measures. The Company maintains resident expertise
in emerging network protocols, encryption and key technologies, firewalls,
packet filters, proxy services, secure remote access strategies and secure
Intranet servers.

- - Intranet-Enabled Business Solutions. The Company offers Intranet- and
Extranet-enabled solutions for client business applications and services. In
this regard, the Company leverages Internet technologies to deliver
enterprise-wide solutions and develop business automation systems that can
be accessed by any client system, are quickly adaptable, and are easily
maintained. Such solutions may include: implementation of Extranets to
support clients' electronic commerce applications; planning and
implementation of clients' Internet presence and commerce capabilities;
re-engineering of legacy applications for Intranet-based delivery; and
hosting of private and public Intranet servers.

The Company also maintains an Intranet Solutions Center which provides
outsourcing services for remote network and security systems monitoring, network
performance management and management of the development and hosting of clients'
total Web presence.

NationsBanc is currently the Company's largest Intranet services client,
accounting for 47.6% of the Company's Intranet services business net revenue and
11.2% of the Company's total net revenue in the three months ended March 31,
1997. NationsBanc originally contracted with the Company in 1993 and the Company
currently provides network design and engineering services as well as a variety
of project specific services for NationsBanc. The Company's current contract
with NationsBanc is a three-year contract commencing January 1, 1997 and is a
requirements contract under which the Company's services are ordered by task
orders issued by NationsBanc.

The Company sells and markets its Intranet services business primarily to
large companies that desire to establish or enhance their Internet presence. The
Company's Intranet services are generally provided to customers on a time and
expense basis. The Company also performs a limited number of engagements on a
fixed-price basis. Many of the Company's recent Intranet services clients have
been developed through direct contact or referrals from its parent company,
SAIC. The Company intends to continue to leverage its relationship with SAIC to
access SAIC's major customers and strategic partners. The Company has recently
begun to provide Intranet services on a limited basis in the Latin American
market through Informatica, Negocios y Tecnologia S.A. ("INTESA"), SAIC's joint
venture

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with Petroleos de Venezuela, S.A., the Venezuela National Oil Company. As part
of this joint venture, the Company is currently subject to a noncompetition
arrangement pursuant to which the Company has agreed to provide, with certain
limited exceptions, Intranet services in the Latin American market solely
through INTESA. See "Risk Factors -- Limited Service Offerings to Date; Reliance
on Domain Name Registration Services and Intranet Services for Substantially All
Revenue."

MARKETING AND DISTRIBUTION RELATIONSHIPS

The Company intends to establish and expand relationships with companies
worldwide to promote its services, penetrate new customer bases and integrate
third party products and services.

Strategic Agreements with Internet Access Providers. The Company has
developed a service offering which provides specialized services to Internet
access providers who register a significant number of second-level domain names
per month on behalf of their customers. The Company's Premier Domain
Registration Service offering provides a Premier Partner with personalized
account management, customized billing and financial reports, priority
registration with 24-hour customer support, private e-mail boxes and other
customized features. To date, the Company has entered into agreements with 26
Internet access providers, including: MCI, Inc., America Online, Incorporated
(PrimeHost Division), TABNet and Rapidsite, Inc.

Server Software Applications. The Company has entered into an agreement
with Microsoft to provide a "point-and-click" interface for an automated
registration function. This interface is designed to facilitate the ease of the
registration process for users of the server software and to allow for the
Company to have a preferred provider position on the registration wizard screen
that appears during the server initialization process. The Company is currently
in discussions with certain other server platform providers pursuant to which
such a "point-and-click" interface will be embedded in their server software.

Internet Enabling Products and Services. The Company has entered into
several agreements designed to allow the Company to build upon its strategy of
becoming an Internet business center where a business or individual can have
access to companies which provide the enabling products and services to conduct
business on the Internet.

The Company has entered into an agreement with VeriSign, Inc. ("VeriSign")
pursuant to which the Company will provide its customers with direct access to
VeriSign's server security certificates through the Company's domain name
registration process. The Company will receive a portion of VeriSign's
subscription fees for providing such access to VeriSign subscribers. The Company
has also entered into an agreement with First Virtual Holdings Corporation
("First Virtual") pursuant to which the Company implemented First Virtual's
VirtualPIN as a form of payment for the Company's customers. Under the
agreement, users may register for First Virtual VirtualPINs through the
registration process for which the Company receives a portion of the fee,
assuming certain targets are met. Several other initiatives are being pursued,
all focusing on utilizing the registration process to provide access to Internet
enabling products and services.

OPERATIONS

To register a domain name within the .com, .org, .net, .edu and .gov TLDs,
the Company's customer or its Internet access provider completes a registration
template which is submitted to the Company via e-mail. Once the customer is
registered, the Company loads the domain name into the root servers located
around the United States and in Europe. The Company believes that the technical
requirements to build and to operate a competitive domain name registry are
significant. Substantial portions of the Company's in-house registration
software have been custom-developed and are proprietary. The Company's in-house
registration software includes an automated registration capability which
currently processes in excess of 90% of all new registration requests without
human intervention. The Company maintains a help desk and on-line processing
facility which provides initial and ongoing customer service and support. This
facility currently processes over 40,000 telephone calls and over 300,000
electronic transactions monthly.

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The Company's registration services are supported by six T1 (high speed
data communications line) links connected to four ISPs, with additional T1 links
on order. By connecting to four different providers, the Company seeks to ensure
constant access to the Internet. The Company currently uses an average of fifty
percent of the bandwidth provided by the T1s and believes its current network
and the anticipated increased capacity should sustain continued growth for the
foreseeable future.

The Company leases its computer equipment which allows the Company to
maintain the latest technology within its operating infrastructure. The Company
has approximately 100 UNIX workstations running a variety of applications to
evenly distribute operations. Additionally, the Company utilizes several large
network file servers to support its directory and registration services. These
servers provide a mirrored file system for enhanced reliability and back-up
coverage.

On June 16, 1997, the Company opened a 31,000 square foot facility to
support its Internet business operations. This leased facility is designed to
meet current registration services customer support needs as well as to provide
expansion capability for future business. It includes: (i) a call center; (ii) a
training center equipped for both computer and telephone training, including a
simulated operations environment; and (iii) a new computer room with expanded
systems and telecommunications services. The Company believes that this new
facility with the accompanying system enhancements should provide the
environment and tools that are essential for quality customer support.

Since November 1996, the Company has been outsourcing certain back office
functions, including invoicing, check processing and credit card payment
processing. The Company is not outsourcing its core proprietary automated
registration process and associated security system. These outsourcing efforts,
in conjunction with new invoicing procedures implemented in 1997, have improved
customer service and account handling and expanded the Company's capacity to
service larger volumes of registrants.

OTHER PRODUCTS AND SERVICES DEVELOPMENT

The Company's products and services development activities in areas other
than registration services and Intranet services are focused primarily on the
development of Internet-enabling products and services, including a possible
directory service based on the RWhois protocol (an enhanced server version of
the Whois protocol) developed by the Company. The Company's current directory
service technology, which is made available free of charge, employs a look-up
method called "Whois," a widely accepted Internet protocol and the interface to
the Company's global registry database. Whois allows a user to perform simple
queries for second level domain names and to retrieve additional information
about a customer, including the customer's name, location and points of contact.
The Company's Whois server currently receives more than 15 million queries per
month. The Company intends to develop a portfolio of Internet-enabling products
and services that allows the Company to build upon its position in the
registration process and makes proper use of the customer data that it collects.

There were no research and development expenses in 1995, in large part
because any such expenditures were generally reimbursable under the NSF
contract. In 1996, research and development expenses were $680,000 or 3.6% of
net revenue. For the three months ended March 31, 1997, research and development
expenses were $311,000 or 3.5% of net revenues. The Company believes that
significant and continuing investments in products and services development will
be required to maintain its position as the leader in the domain name
registration business and to achieve its strategy of leveraging its registration
services business to offer and distribute other enabling services. The Company's
future financial performance will be dependent upon its ability to develop and
commercialize in a timely manner new services that can be offered in conjunction
with the Company's current domain name registration services and that meet the
changing requirements of its customers.

The successful development and commercialization of new products and
services involves many risks, including the identification of new Internet and
Intranet service opportunities, the successful completion of the development
process, and the identification, retention and hiring of appropriate

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research, development and technical personnel. There can be no assurance that
the Company can successfully identify new products and service opportunities and
develop and timely bring to market such new products and services, or that
products and services or technologies developed by others will not render the
Company's products and services or technologies noncompetitive or obsolete.

RELATIONSHIP WITH THE NSF; RECENT DEVELOPMENTS IN THE INTERNET COMMUNITY

In 1993, the Company entered into the Cooperative Agreement with the NSF,
which had been funding the Defense Information Systems Agency, to act as the
registrar for second level domain names within the .com, .org, .net, .edu and
.gov TLDs. Under the Cooperative Agreement, the Company was given the
responsibility for ensuring the quality, timeliness and effective management of
registration services to non-military Internet users and networks. The
registration services to be provided by the Company under the Cooperative
Agreement included domain name registration, domain name server registration,
network number assignment and autonomous system number assignment and IP address
mapping and allocation worldwide. During the term of the Cooperative Agreement,
the Company is required to file periodic reports regarding its status and
proposed budget and goals. At the conclusion of the Cooperative Agreement, the
Company will be required to submit a final report describing all work performed
and problems encountered.

Originally, the Cooperative Agreement was a cost reimbursement plus
fixed-fee contract but expressly contemplated that possible future changes under
the Cooperative Agreement could include the imposition of a user-based fee
structure. In 1995, in response to the rapidly growing volume of registrations
from commercial entities (primarily in the .com TLD), the NSF and the Company
mutually agreed to move from a cost reimbursement plus fixed-fee contract to a
subscription fee based contract. Effective September 14, 1995, the NSF and the
Company amended the Cooperative Agreement to authorize the Company to begin
charging customers a subscription fee of $50 per year for each second level
domain name registered. The Company's registration services customers in the
.com, .org and .net TLDs are invoiced for a two-year subscription fee of $100
for initial registrations and $50 per year payable for renewals of initial
registrations. Under the terms of the amendment to the Cooperative Agreement,
70% of the subscription fees collected are retained by the Company and 30% are
required to be set aside to be disbursed in a manner approved by the NSF for the
enhancement of the intellectual infrastructure of the Internet.

With the commercialization of the Internet, the role, if any, that the NSF
will play in the future of the Internet and the legal authority underlying any
such continuing role are at present unclear. Further, the Cooperative Agreement
by its terms expires in March 1998 and may not be recompeted, although the NSF
may, at its option, extend the Cooperative Agreement to September 1998. The
Cooperative Agreement is subject to review by the NSF and may be terminated by
the NSF at any time at its discretion or by mutual agreement. If the Cooperative
Agreement (or the Company's status as the exclusive registrar for domain names
in the .com TLD) is terminated, the Company's business, financial condition and
results of operations could be materially and adversely affected. The NSF has
stated that the Cooperative Agreement will not be re-awarded to the Company or
awarded to any other entity. However, if the Cooperative Agreement is awarded to
another entity, the Company's business, financial condition and results of
operations would be materially and adversely affected. Withdrawal of the NSF's
sponsorship of the Company's activities could create a public perception that
the Company lacks authority to continue in its role as registrar or to charge
fees for its domain name registration services. The impact, if any, of any such
public perception is unknown but could materially and adversely affect the
Company's business, financial condition and results of operations.

The Cooperative Agreement does not prohibit the establishment of competing
registries by entities other than the Company or the NSF. No single organization
or entity (including the NSF) currently has formal authority over all aspects of
the Internet and the Internet currently operates under a system of mutual
cooperation. Various governmental, technical and Internet groups are currently
discussing how the award and administration of future contracts for registration
services in the .com TLD, other existing TLDs and new TLDs may take place, and
are considering whether and how to enable other parties to enter the domain name
registration business. The Company is also an

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active participant in this process. A consensus regarding such issues could be
reached and implemented in the near future and prior to the expiration of the
Cooperative Agreement. For example, some members of the Internet community have
discussed various concepts of adding new TLDs which could result in significant
competition for domain name registrations, including competition on the price
charged by the Company for domain name registrations. In February 1997, the IAHC
issued its recommendation designed to increase competition in domain name
registrations in which it proposed the creation of additional registries,
additional TLDs and the possible sharing of new and existing TLDs. In April
1997, the IAHC issued an MOU seeking support for its recommendations. This MOU
has been signed by a number of organizations in the Internet community. In April
1997, the Company issued its own recommendations to increase competition in
domain name registration. The Company's recommendations focus on creating
additional TLDs as well as on the future administration and technical operation
of the Internet. Other groups or entities may also make other proposals
concerning these and other issues. Implementation of competing registries,
additional TLDs, the sharing of the Company's TLDs or other recommendations or
proposals of these groups could have a material adverse effect on the Company's
business, financial condition and results of operations. See "-- Government
Regulation and Legal Uncertainties" and "Risk Factors -- Uncertain Status of the
Cooperative Agreement" and "-- Recommendations and Proposals to Increase
Competition in Registration Services."

The Company has recently received authorization from the NSF to shift the
allocation and administration of IP addresses to a not-for-profit organization.
In support of this initiative, the Company has incorporated a not-for-profit
organization named the American Registry for Internet Numbers (the "ARIN") to
administer IP addresses for North and South America and parts of Africa. The
Company anticipates that the responsibility for the allocation and
administration of IP addresses will be transferred to ARIN by the fourth quarter
of 1997. The Company has agreed with the NSF to provide financial support to
ARIN through the end of the first quarter of 1998. The Company believes that the
amount of such support will not be material to the Company's business, financial
condition or results of operations.

COMPETITION

The Company currently is the exclusive registrar for second level domain
names within the .com, .org, .net, .edu and .gov TLDs. Multiple registries do
not currently register names in the same TLD, but this may change in the future.
The Company currently faces competition in the domain name registration business
from registries for country codes, third level domain name providers such as
Internet access providers and registries of TLDs other than those TLDs currently
being registered by the Company. A number of entities have already begun to
offer competing registration services using other TLDs. Future competition in
the Company's domain name registration business could come from many different
companies, including, but not limited to, major telecommunications firms, cable
companies and Internet access providers. Such entities have core capabilities to
deliver registration services, such as help desks, billing services and network
management, along with strong name recognition and Internet industry experience.
Other companies with some or all of these capabilities may also enter the
registration business. Also emerging are a growing contingent of domain name
resellers. The Company's position as the leading registrar of domain names could
be materially and adversely affected by the emergence of any of the foregoing
competitors and potential competitors, many of which have significantly greater
financial, technical, marketing and personnel resources than the Company. In
addition, the Company's revenue and subscription fees could be reduced due to
increasing competition. For example, if other entities are allowed to share the
registration of domain names, these entities may bundle domain name
registrations with other products or services, effectively providing such
registration services for free. If operational and administrative arrangements
and technology permitting multiple competitors to register domain names in the
same TLDs are developed or if competition occurs within the Company's existing
TLDs, the Company's business, financial condition and results of operations
would be materially and adversely affected.

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Companies with Internet expertise are current or potential competitors for
the Company's Intranet consulting services. These companies include systems
integrators and consulting firms, such as Andersen Consulting, IBM Global
Services and International Network Services. The Company also competes with
certain companies that have developed products that automate the management of
IP addresses and name maps throughout enterprise-wide Intranets, and with
companies with internally-developed systems integration efforts. A number of
these competitors and potential competitors have greater financial, marketing,
distribution, name recognition and other resources than the Company. There can
be no assurance that the Company will be able to successfully compete in the
Intranet services area. Failure by the Company to successfully compete in the
Intranet services area could have a material adverse effect on the Company's
business, financial condition and results of operations.

In developing and distributing future products and services for the
Internet-enabling services markets, the Company faces intense competition and
expects to have multiple competitors for each of the products or services, if
any, which it develops. Many of the Company's potential competitors have longer
operating histories and significantly greater financial, technical and marketing
resources and name recognition than the Company. Furthermore, the industry in
which the Company intends to compete is characterized by rapid changes and
frequent product and service introductions. To the extent a competitor
introduces a competitive product or service prior to introduction of the same or
similar product or service by the Company, market acceptance of the competitor's
product or service may adversely affect the Company's competitive position. See
"Risk Factors -- Competition in Intranet Services and Internet Enabling
Businesses."

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES

The Internet historically has been loosely administered by a number of
government agencies which were involved in the creation of its infrastructure,
initially ARPA and, more recently, the NSF. No single organization or entity
(including the NSF) currently has formal authority over all aspects of the
Internet and it currently operates under a system of mutual cooperation. Since
the original role of the Internet was to link computers at governmental and
academic institutions to facilitate communication and research, the Internet was
historically administered by entities which were involved in sponsoring research
rather than by any of the traditional federal or state regulatory agencies. With
the commercialization and internationalization of the Internet, the role of
these entities in Internet administration has become less clear and private
parties have begun to assume a larger role in the enhancement and maintenance of
the Internet's infrastructure. The NSF, for example, has completed a two-year
phased withdrawal of its funding for the Internet "backbone" and has transferred
this responsibility to a group of private telecommunications carriers which are
commercially funded. This lack of regulation and the legal uncertainties arising
from it pose a number of risks to the Company and to the commercial Internet
industry in general. The effective operation of the Internet is dependent on the
continued mutual cooperation and consensus among an increasing number of
entities, many of which have widely divergent interests. For example, the IP
addresses allocated by ISPs to their customers are originally allocated by the
IANA. Thus, the effective operation of the Internet is dependent on such
continued allocation of IP addresses by IANA. Continuing to achieve consensus
may become difficult or impossible and may become extremely time-consuming and
costly. Achieving consensus may be made more difficult because of the lack of
leadership by any one entity. This lack of regulation creates great uncertainty
as to the legality of any action, making business planning and operations
difficult. Conversely, the lack of regulation could theoretically result in
individuals and entities taking harmful or disruptive actions with respect to
the Internet with impunity. There is a risk that a failure to achieve consensus
among the various groups which are now informally administering the Internet
could result in the disruption of Internet operations, the inability of any user
to communicate with another user or delay infrastructure improvements necessary
to the maintenance and expansion of the Internet. The role, if any, that the NSF
will play in the future of the Internet and the legal authority underlying any
such continuing role are at present unclear. Withdrawal of the NSF's sponsorship
of the Company's activities or the various entities participating in the
administration of the Internet could create a public perception that the Company
lacks authority to continue in its

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role as registrar or to charge fees for its domain name registration services.
The impact, if any, of this public perception is unknown but could materially
and adversely affect the Company's business, financial condition and results of
operations. See "-- Relationship with the NSF; Recent Developments in the
Internet Community" and "Risk Factors -- Uncertain Status of the Cooperative
Agreement; Recommendations and Proposals to Increase Competition in Registration
Services."

The current lack of any centralized Internet management could also cause
the U.S. federal or other governments to intervene with uncertain results. The
U.S. government has formed an interagency task force ("ITF") consisting of
various federal agencies to study the issues surrounding domain name
registration and governance of the Internet. The ITF is expected to solicit
broad public input to these and other issues. This process is expected to be
completed in early 1998. The outcome of this activity could have a material
adverse effect on the Company's business, financial condition and results of
operations.

In the United States, apart from its obligations under the Cooperative
Agreement, the Company is not currently subject to direct regulation other than
federal and state regulation applicable to businesses generally. However,
changes in the regulatory environment relating to the telecommunications and
media industry could result in the Company being subject to direct regulation,
in which case the Company's business, financial condition and results of
operations could be materially and adversely affected. The Company is aware of
certain industry requests of the FCC to review the impact of Internet usage on
the U.S. telecommunications service providers, in particular, the generally
lower cost structure for data transmission versus voice. FCC regulatory review
and rulemaking could result in new regulation of the Internet industry, changes
in current rules governing telecommunications or both. In addition, as the
Internet becomes more widespread internationally, there is an increased
likelihood of international regulation. The Company cannot predict whether or to
what extent any such new rulemaking or regulation will occur and what impact, if
any, it would have on the Company's business, financial condition and results of
operations.

Costs incurred or decisions rendered as a result of government
investigations or lawsuits relating to any of the foregoing could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors -- Government Regulation and Legal
Uncertainties."

LITIGATION

As of June 30, 1997, the Company had received approximately 2,500 written
objections to the registration and use of certain domain names. Of these,
approximately 1,200 were disputes in which the Company's domain name dispute
policy was involved. As of June 30, 1997, the Company had been named as a
defendant in 26 lawsuits. As of such date, the Company has been dismissed as a
party from 21 of the 26 lawsuits and no damages have been awarded against the
Company to any plaintiff. The lawsuits have generally involved domain name
disputes between trademark owners and domain name holders. The Company's domain
name dispute policy seeks to take a neutral position regarding these competing
claims and is designed to address claims that a domain name registered by the
Company infringes a third party's federal trademark. The Company is drawn into
such disputes, in part, as a result of claims by trademark owners that the
Company is legally required, upon request by a trademark owner, to terminate the
right it granted to an alleged trademark infringer to register the domain name
in question. Further, trademark owners have also alleged that the Company should
be required to monitor future domain name registrations and reject registrations
of domain names which are identical or similar to their federally registered
trademark. The holders of the domain name

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registrations in dispute, have, in turn, questioned the Company's right, absent
a court order, to take any action which suspends their registration or use of
the domain names in question. Such litigation has resulted in, and any future
litigation can be expected to result in, substantial legal and other expenses to
the Company and a diversion of the efforts of the Company's personnel.

Currently, domain name registration requests are allocated by the Company
on a first-come, first-serve basis. The Company's domain name dispute policy is
triggered when the Company is presented with a certified copy of a federal
trademark certificate, proof that the trademark owner gave prior notice to the
domain name registrant and an allegation of legal harm to the trademark owner.
This policy provides for a detailed set of procedures designed to facilitate the
resolution of such disputes between the parties. The policy also provides for
the Company to be indemnified for any damages arising in connection with any
litigation arising out of a dispute between claimants regarding the registration
of a domain name. The Company bears its own costs and expenses associated with
any litigation.

On June 27, 1997, SAIC received a CID from the DOJ issued in connection
with an investigation to determine whether there is, has been, or may be a
violation of antitrust laws under the Sherman Act relating to Internet
registration products and services. The CID seeks documents and information from
SAIC and the Company relating to their Internet registration business. Neither
SAIC nor the Company is aware of the scope or nature of the investigation. The
Company cannot predict whether a civil action will ultimately be filed by the
DOJ or by private litigants as a result of the DOJ investigation or, if filed,
what such action would entail. The Company is unable to predict the form of
relief that might be sought in such an action or that might be awarded by a
court or entered as a result of any settlement between the Company and the DOJ
or private litigants. Any such relief could have a material adverse effect on
the Company's business, financial condition and results of operations.

On March 20, 1997, PG Media filed a lawsuit against the Company in the
United States District Court, Southern District of New York alleging that the
Company had restricted access to the Internet by not adding TLDs in violation of
the Sherman Act. The Company has answered the complaint, but no motions are
pending and no schedule has yet been set by the court for these proceedings. In
addition, the Company recently received written direction from the NSF not to
take any action to create additional TLDs or to add any new TLDs to the Internet
root servers until further guidance is provided by the NSF. Although the Company
believes that it has meritorious defenses and intends to vigorously defend
itself against such claims, a successful claim under the plaintiff's theory
could have a material adverse effect on the Company's business, financial
condition and results of operations.

INTELLECTUAL PROPERTY RIGHTS

The Company's principal intellectual property consists of, and its success
is dependent upon, the Company's proprietary software utilized in its
registration services business and certain methodologies and technical expertise
it utilizes in both the design and planned implementation of its current and
future registration service and proposed enabling services businesses. Some of
the software and protocols used by the Company in its registration service and
proposed directory service businesses are in the public domain or are otherwise
available to the Company's competitors. In addition, in-depth technical
knowledge and unique processes are critical to the Company's Intranet services
business, in which a full range of consulting and systems integration services
are offered in order to transition organizations from private, legacy networks
to more scalable and efficient Intranets. The Company has no patents or
registered copyrights but has several trademarks and service marks, including
the Company's logo.

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The Company relies upon a combination of nondisclosure and other
contractual arrangements with its employees and third parties and trade secret
laws to protect its proprietary rights and limit the distribution of its
proprietary information. There can be no assurance that the steps taken by the
Company in this regard will be adequate to deter misappropriation of proprietary
information or that the Company will be able to detect unauthorized use of its
proprietary information and take appropriate steps to enforce its intellectual
property rights. Furthermore, even if these steps are successful, there can be
no assurance that others will not develop technologies that are similar or
superior to the Company's proprietary technology. Although the Company believes
that its services do not infringe on the intellectual property rights of others
and that it has all rights necessary to utilize the intellectual property
employed in its business, the Company is subject to the risk of claims alleging
infringement of third party intellectual property rights. Any such claims could
require the Company to spend significant sums in litigation, pay damages and
develop non-infringing intellectual property or acquire licenses to the
intellectual property which is the subject of asserted infringement. Failure by
the Company to adequately protect its proprietary rights, or litigation relating
to intellectual property rights, could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Risk
Factors -- Intellectual Property Rights."

EMPLOYEES

As of June 30, 1997, the Company had approximately 220 full-time employees.
None of the Company's employees are covered by collective bargaining agreements.
The Company believes that its relations with its employees are good.

FACILITIES

The Company's principal executive office is located in Herndon, Virginia,
in a 45,000 square foot facility subleased from SAIC under a sublease expiring
in November 2002. The Company also leases an additional 31,000 square feet in a
facility in Herndon, Virginia under a lease expiring in July 2002 and subleases
a 10,000 square foot facility from SAIC under a sublease expiring in October
1999. Additionally, the Company leases approximately 10,000 square feet in a
facility in Charlotte, North Carolina, with portions of the sublease expiring in
August 1998 and July 2002. The Company believes that its current facilities will
be adequate for the next 12 months and that any additional facilities will be
available in the future as needed on commercially reasonable terms.

53
<PAGE> 55

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Executive officers and directors of the Company and their ages as of June
30, 1997 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- -------------------------------------------------
<S> <C> <C>
Gabriel A. Battista.................. 52 Chief Executive Officer and Director
Michael A. Daniels................... 51 Chairman of the Board
Robert J. Korzeniewski............... 40 Chief Financial Officer
Raymond S. Corson.................... 51 Senior Vice President, Business Development
David H. Holtzman.................... 40 Senior Vice President, Engineering
Donald N. Telage..................... 52 Senior Vice President, Internet Relations and
Special Programs and Director
A. Scott Williamson.................. 39 Vice President, Engineering
Michael G. Voslow.................... 37 Treasurer
Russell L. Helbert................... 40 Controller
J. Robert Beyster.................... 72 Director
Craig I. Fields...................... 50 Director
John E. Glancy....................... 51 Director
William A. Roper, Jr................. 51 Director
Stratton D. Sclavos.................. 35 Director
</TABLE>

- ------------------------------

(1) Member of Compensation Committee.

(2) Member of Audit Committee.

Gabriel A. Battista has served as Chief Executive Officer of the Company
since October 1996 and as a director of the Company since November 1996. From
September 1995 to October 1996, Mr. Battista served as President and Chief
Executive Officer of Cable & Wireless, Inc., a telecommunications company and
U.S. subsidiary of Cable & Wireless, P.L.C. From 1991 to 1995, Mr. Battista
served as President and Chief Operating Officer of Cable & Wireless, Inc. and
from 1987 to 1991, he served as the Chief Operating Officer of National
Telephone Services, a long distance operator service company. Mr. Battista also
serves as a director of Axent Technologies, Inc. and Systems & Computer
Technology Corporation. Mr. Battista received a BSEE from Villanova University,
an MSEE from Drexel University and an MBA from Temple University.

Michael A. Daniels has served as Chairman of the Board of the Company since
May 1995. Since 1986, Mr. Daniels has served in various positions with SAIC and
has served as a Sector Vice President and Sector Manager for the Technology
Applications Sector of SAIC since 1993. Prior thereto, Mr. Daniels served as a
Group Senior Vice President of SAIC from 1991 to 1993. Mr. Daniels received a
B.S. and an M.A. from Northwestern University and received a J.D. from the
University of Missouri School of Law.

Robert J. Korzeniewski has been Chief Financial Officer of the Company
since March 1996. Since 1987, Mr. Korzeniewski has held a variety of senior
financial positions with SAIC and has served as a Corporate Vice President for
Administration of SAIC since 1989. Prior to SAIC, Mr. Korzeniewski was the
Corporate Controller of Halifax Corporation, a publicly traded technology
services company. Mr. Korzeniewski is a Certified Public Accountant and received
a B.S. in Business Administration from Salem State College.

Raymond S. Corson has served as Senior Vice President, Business
Development, of the Company since July 1996. Mr. Corson has also served as a
Vice President of SAIC since 1995. Since 1987, Mr. Corson served in various
positions with the Company, including serving as Vice President of Marketing
from March 1995 to July 1996, Vice President of Operations from January 1994 to

54
<PAGE> 56

March 1995 and Vice President of Network Support Services from July 1989 to
January 1994. Prior to joining the Company, Mr. Corson served as Department
Manager of Command, Control, and Intelligence in Unisys' Defense Systems. Mr.
Corson attended Virginia Polytechnic Institute and State University from 1963
through 1966, majoring in Economics.

David H. Holtzman has served as Senior Vice President for Product
Development and Technology of the Company since February 1997. From September
1995 until January 1997, he served as Chief Scientist, IBM Internet Information
Technology (InfoMarket) group. Prior to this, he served as a Senior Associate at
Booz-Allen & Hamilton. Mr. Holtzman has a B.A. in Philosophy from the University
of Pittsburgh and a B.S. in Computer Science from the University of Maryland.

Donald N. Telage has served as Senior Vice President of Internet Relations
and Special Programs since February 1997 and as a director since May 1995. Dr.
Telage also served as President and Chief Operating Officer of the Company from
May 1995 to February 1997. Since 1986, Dr. Telage has served in various
positions with SAIC and has served as a Group Senior Vice President of SAIC
since 1993. Prior thereto, Dr. Telage served as a Corporate Vice President of
SAIC from 1992 to 1993. Dr. Telage received his B.A. in Psychology from the
University of Connecticut and received an M.A. and a Ph.D. in Mathematics from
Clark University.

A. Scott Williamson rejoined the Company as Vice President, Directory
Services, in March 1996 and has served as Vice President, Engineering, of the
Company since November 1996. Mr. Williamson has also served as a Vice President
of SAIC since 1996. Prior to rejoining the Company, Mr. Williamson served as
Thomson Technology Internet Lab's Principal Researcher for the Thomson
Corporation, a publishing company, from January 1995 to March 1996. Mr.
Williamson originally joined the Company in 1985 and served in a variety of
positions, including serving as a program manager from January 1992 to December
1994. Mr. Williamson received an A.A. from Northern Virginia Community College.

Michael G. Voslow has served as Treasurer of the Company since January
1997. From January 1995 to January 1997, Mr. Voslow was Vice President and
Corporate Controller for MAXM Systems Corporation ("MAXM"), a worldwide provider
of computer software and professional services. Prior to joining MAXM, Mr.
Voslow was a Senior Manager at Price Waterhouse where he served from August 1983
to January 1995. Mr. Voslow is a Certified Public Accountant and received a B.S.
in Business Administration from Miami University (Ohio) and an M.B.A. in Finance
from Duke University.

Russell L. Helbert has served as Controller of the Company since December
1990 and as Manager of Finance for the Company since August 1985. Mr. Helbert
has also served as an Assistant Vice President for Administration of SAIC since
1995. Prior to joining the Company, Mr. Helbert was a Division Controller with
Browning-Ferris, Industries, a waste management services company. Mr. Helbert
received his B.A. in Business Administration from the University of Buffalo.

J. Robert Beyster has served as a director of the Company since November
1996. Dr. Beyster is the Chief Executive Officer and Chairman of the Board of
SAIC, a company he founded in 1969. Dr. Beyster is a Fellow of the American
Nuclear Society and a Fellow of the American Physical Society. Dr. Beyster is
also the founder, President and a member of the Board of Trustees of the
Foundation for Enterprise Development, a non-profit organization that promotes
employee ownership. Dr. Beyster received his B.S.E. in Engineering and Physics
and an M.S. and Ph.D. in Nuclear Physics from the University of Michigan.

Craig I. Fields has served as a director of the Company since January 1997.
Dr. Fields has served as a consultant to SAIC since 1994. Prior thereto, Dr.
Fields served as Vice Chairman of Alliance Gaming Corporation, a diversified
entertainment company, from 1994 to 1997. From 1990 until 1994, Dr. Fields
served as Chairman and Chief Executive Officer of the Microelectronics and
Computer Technology Corporation, a research and development consortium. In
addition, Dr. Fields serves as a director of ENSCO International Incorporated,
Projectavision, Inc., Perot Systems Corporation, Muzak Incorporated, Intertech
and Firearms Training Systems, Inc. Dr. Fields received a B.S. from the
Massachusetts Institute of Technology and a Ph.D. from the Rockefeller
University.

55
<PAGE> 57

John E. Glancy has served as a director of the Company since July 1996. Dr.
Glancy has held a number of senior positions with SAIC since February 1980. Dr.
Glancy has served as a Corporate Executive Vice President of SAIC since January
1994 and as a director of SAIC since July 1994. From April 1991 until January
1994, Dr. Glancy served as a Sector Vice President of SAIC. Dr. Glancy received
a B.S. in Physics from the University of Pittsburgh, an M.S. degree in Nuclear
Engineering from Cornell University and a Ph.D. in Applied Physics from Cornell
University.

William A. Roper, Jr. has served as a director of the Company since July
1996. Since April 1990, Mr. Roper has served as Senior Vice President and Chief
Financial Officer of SAIC. Mr. Roper received a B.A. in Mathematics from the
University of Mississippi.

Stratton D. Sclavos has served as a director of the Company since January
1997. Mr. Sclavos has served as the President and Chief Executive Officer of
VeriSign, Inc. since July 1995. From 1994 until July 1995, Mr. Sclavos served as
Vice President of Worldwide Marketing and Sales for Taligent, Inc., a joint
venture of Apple Computer, Inc., IBM Corporation and The Hewlett-Packard
Company, Inc. From 1992 until 1993, Mr. Sclavos served as Vice President of
Worldwide Sales and Business Development for GO Corporation, a mobile computing
company. From 1988 until 1993, Mr. Sclavos served in various executive positions
with MIPS Computers Systems. Mr. Sclavos received a B.S. in Electrical and
Computer Engineering from the University of California, Davis.

The Company currently has authorized eight (8) directors. All directors are
elected to hold office until the next annual meeting of stockholders of the
Company and until their successors have been elected. Officers are elected at
the first board of directors meeting following the stockholders' meeting at
which the directors are elected and serve at the discretion of the Board of
Directors. There are no family relationships among any of the directors or
executive officers of the Company.

COMPENSATION OF DIRECTORS

The Company's non-employee directors ("Outside Directors") currently
receive no cash fees as part of their compensation. All directors are reimbursed
for expenses incurred in connection with attending Board and committee meetings.
The Company's 1996 Stock Incentive Plan provides that the Board of Directors may
determine to allow an Outside Director to elect to receive his or her annual
retainer payments and meeting fees from the Company in the form of cash, NSOs,
Stock Units or a combination thereof. The number of NSOs to be granted to
Outside Directors in lieu of annual retainers and meeting fees that would
otherwise be paid in cash will be calculated in a manner determined by the Board
of Directors. The number of Stock Units to be granted to Outside Directors will
be calculated by dividing the amount of the annual retainer or the meeting fee
that would otherwise be paid in cash by the arithmetic mean of the fair market
values of one share of Common Stock on the 10 consecutive trading days ending
with the date such retainer or fee is payable. In January 1997, Craig I. Fields
and Stratton D. Sclavos each received NSOs to purchase 30,750 shares of the
Company's Class A Common Stock with exercise prices of $14.00 per share (which
was equal to 100% of the fair market value on the date of grant). All such stock
options become exercisable one year after the date of grant and vest as to 30%,
30%, 20% and 20% on the first, second, third and fourth year anniversaries of
the date of grant, respectively.

56
<PAGE> 58

EXECUTIVE COMPENSATION

The following table summarizes all compensation earned by or paid to the
Company's current and former Chief Executive Officer and to each of the
Company's four most highly compensated executive officers other than the Chief
Executive Officer whose total annual salary and bonus exceeded $100,000 for
services rendered in all capacities to the Company and SAIC during the fiscal
year ended December 31, 1996 (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION RESTRICTED SECURITY
---------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) AWARDS ($)(1) OPTIONS (#)(2) COMPENSATION ($)
- ---------------------------------------- ---------- --------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Gabriel A. Battista(3).................. 60,577 37,500 -- 461,250 --
Chief Executive Officer
Donald N. Telage........................ 165,719 35,010(4) 29,984(5) 153,750 13,209(6)
Senior Vice President, Internet
Relations and Special Programs
Robert J. Korzeniewski.................. 120,731 20,011 19,989(7) 115,300 9,954(6)
Chief Financial Officer
Raymond S. Corson....................... 118,519 7,524 7,476(8) 30,750 9,815(6)
Senior Vice President,
Business Development
Emmit J. McHenry(9)..................... 17,523 -- -- -- 875,011(10)
</TABLE>

- ------------------------------

(1) The amount reported represents the market value on the date of grant
(calculated by multiplying the Formula Price of SAIC's Class A Common Stock
on the date of grant by the number of shares awarded), without giving
effect to the diminution in value attributable to the restriction on such
stock. As of December 31, 1996, the aggregate restricted stock holding of
SAIC Class A Common Stock for the Named Executive Officers were as follows:
Gabriel A. Battista -- none; Donald N. Telage -- 1,930 shares, with a
market value as of such date of $44,062; Robert J. Korzeniewski -- 261
shares, with a market value as of such date of $5,959; Raymond S. Corson
-- 220 shares, with a market value as of such date of $5,023; Emmit J.
McHenry -- none; and all other employees -- 571,260 shares, with a market
value as of such date of $13,041,866. Dividends are payable on such
restricted stock if and when declared. However, SAIC has never declared or
paid a cash dividend on its capital stock and no cash dividends on its
capital stock are contemplated in the foreseeable future.

(2) Represents options to acquire shares of the Company's Class A Common Stock.

(3) Gabriel A. Battista joined the Company in October 1996. Mr. Battista's
annual salary for 1996 would have been $350,000.

(4) Includes the award of 193 shares of SAIC Class A Common Stock which had a
market value on the date of grant (calculated by multiplying the Formula
Price of the SAIC Class A Common Stock on the date of grant by the number
of shares awarded) of $5,010.

(5) Represents 1,155 shares of SAIC Class A Common Stock which vest as to 20%,
20%, 20% and 40% on the first, second, third and fourth year anniversaries
of the date of grant, respectively.

(6) Represents amounts contributed by SAIC for the Named Executive Officers
under SAIC's Cash or Deferred Arrangement, SAIC's Profit Sharing Plan and
SAIC's Employee Stock Ownership Plan.

(7) Represents 770 shares of SAIC Class A Common Stock which vest as to 20%,
20%, 20% and 40% on the first, second, third and fourth year anniversaries
of the date of grant, respectively.

(8) Represents 288 shares of SAIC Class A Common Stock which vest as to 20%,
20%, 20% and 40% on the first, second, third and fourth year anniversaries
of the date of grant, respectively.

(9) Emmit J. McHenry served as Chief Executive Officer of the Company until
January 1996.

(10) Represents amounts paid to Emmit J. McHenry in connection with the
settlement of an earnout, covenant not to compete and other agreements.

57
<PAGE> 59

STOCK OPTION GRANTS

The following table summarizes options to acquire shares of the Company's
Class A Common Stock granted during the Company's fiscal year ended December 31,
1996 to the Company's Named Executive Officers. The amounts shown as potential
realizable values on the options identified in the table are based on assumed
annualized rates of appreciation in the price of the Company's Class A Common
Stock of five percent and ten percent over the term of the options, as set forth
in the rules of the Securities and Exchange Commission. Actual gains, if any, on
stock option exercises are dependent upon the future performance of the
Company's Class A Common Stock. There can be no assurance that the potential
realizable values reflected in this table will be achieved. No stock
appreciation rights were granted during the Company's 1996 fiscal year.

NSI OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENTAGE OF ANNUAL RATES OF STOCK
UNDERLYING TOTAL OPTIONS PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM($)(5)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME (#)(1) 1996(2) ($/SHARE)(3) DATE(4) 5% 10%
- ---------------------------------- ---------- ------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gabriel A. Battista............... 461,250 37.6 11.25 10/14/01 1,433,642 3,167,975
Chief Executive Officer
Donald N. Telage.................. 153,750 12.5 14.00 11/24/01 594,696 1,314,123
Senior Vice President, Internet
Relations and Special Programs
Robert J. Korzeniewski............ 115,300 9.4 14.00 11/24/01 445,974 985,485
Chief Financial Officer
Raymond S. Corson................. 30,750 2.5 14.00 11/24/01 118,939 262,825
Senior Vice President,
Business Development
Emmit J. McHenry(6)............... -- -- -- -- -- --
</TABLE>

- ------------------------------
(1) The stock options become exercisable one year after the date of grant and
vest as to 30%, 30%, 20% and 20% on the first, second, third and fourth year
anniversaries of the date of grant, respectively. Under the terms of the
Company's 1996 Stock Incentive Plan (the "Stock Plan"), the committee
designated by the Board of Directors to administer the Stock Plan retains
the discretion, subject to certain limitations within the Stock Plan, to
modify, extend or renew outstanding options and to reprice outstanding
options. Options may be repriced by canceling outstanding options and
reissuing new options with an exercise price equal to the fair market value
on the date of reissue, which may be lower than the original exercise price
of such canceled options.

(2) Based on options to purchase an aggregate of 1,225,725 shares of Class A
Common Stock granted to NSI employees in 1996, including the Named Executive
Officers.

(3) The exercise price on the date of grant was equal to 100% of the fair market
value on the date of grant. The exercise price may be paid in cash, check,
by delivery of already-owned shares of the Company's Class A Common Stock
subject to certain conditions, or pursuant to a cashless exercise procedure
under which the optionee provides irrevocable instructions to a brokerage
firm to sell the purchased shares and to remit to the Company, out of the
sale proceeds, an amount equal to the aggregate exercise price plus all
applicable withholding taxes.

(4) The options have a term of 5 years, subject to earlier termination in
certain events related to termination of employment.

(5) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price. There can be no
assurance that any of the values reflected in the table will be achieved.

(6) Emmit J. McHenry served as Chief Executive Officer of the Company until
January 1996.

58
<PAGE> 60

The following table summarizes options to acquire shares of SAIC Class A
Common Stock granted during the Company's fiscal year ended December 31, 1996 to
the Company's Named Executive Officers. The amounts shown as potential
realizable values on the options identified in the table are based on assumed
annualized rates of appreciation in the price of SAIC Class A Common Stock of
five percent and ten percent over the term of the options, as set forth in the
rules of the Securities and Exchange Commission. Actual gains, if any, on stock
option exercises are dependent upon the future performance of SAIC Class A
Common Stock. There can be no assurance that the potential realizable values
reflected in this table will be achieved. No SAIC stock appreciation rights were
granted during the Company's 1996 fiscal year.

SAIC OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF PERCENTAGE OF PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM($)(5)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED (#)(1) FISCAL YEAR(2) ($/SHARE)(3) DATE(4) 5% 10%
- --------------------------------- -------------- -------------- ------------ ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Gabriel A. Battista.............. -- -- -- -- -- --
Chief Executive Officer
Donald N. Telage................. 7,000 * 19.33 3/28/01 37,384 82,608
Senior Vice President,
Internet Relations and Special
Programs
Robert J. Korzeniewski........... 5,100 * 19.33 3/28/01 27,237 60,186
Chief Financial Officer
Raymond S. Corson................ 810 * 19.33 2/08/01 4,326 9,559
Senior Vice President, 1,000 * 19.33 3/28/01 5,341 11,801
Business Development
Emmit J. McHenry(6).............. -- -- -- -- -- --
</TABLE>

- ------------------------------
* Less than 1% of the total options granted to employees in 1996.

(1) Although the following grants of options were made during 1996, such grants
relate to the individual's service during 1995. These non-qualified stock
options become exercisable one year after the date of grant and vest as to
20%, 20%, 20% and 40% on the first, second, third and fourth year
anniversaries of the date of grant, respectively. Under the terms of SAIC's
1995 Stock Option Plan (the "Stock Plan"), the committee designated by the
Board of Directors to administer the Stock Plan retains the discretion,
subject to certain limitations within the Stock Plan, to modify, extend or
renew outstanding options and to reprice outstanding options. Options may be
repriced by canceling outstanding options and reissuing new options with an
exercise price equal to the fair market value on the date of reissue, which
may be lower than the original exercise price of such canceled options.

(2) Based on options to purchase an aggregate of 3,581,132 shares granted to
employees, consultants and directors of SAIC and its subsidiaries in 1996,
including the Company's Named Executive Officers.

(3) The exercise price on the date of grant was equal to 100% of the fair market
value on the date of grant.

(4) The options have a term of 5 years, subject to earlier termination in
certain events related to termination of employment.

(5) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future price of the SAIC Class A Common Stock.
There can be no assurance that any of the values reflected in the table will
be achieved.

(6) Emmit J. McHenry served as Chief Executive Officer of the Company until
January 1996.

59
<PAGE> 61

The following table summarizes the value realized on the exercise of
options to acquire SAIC Class A Common Stock during the fiscal year ended
December 31, 1996. No options to acquire shares of the Company's Common Stock
were exercised during the Company's 1996 fiscal year. The following table also
presents the number and value of unexercised options to acquire SAIC Class A
Common Stock and unexercised options to acquire the Company's Common Stock as of
December 31, 1996 for the Company's Named Executive Officers.

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

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996 (#) DECEMBER 31, 1996 ($)
SHARES ACQUIRED VALUE ---------------------------- ------------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- --------------- ------------ ------------ ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Gabriel A. --(N) --(N) --(N) 461,250(N) --(N) 1,268,438(N)(2)
Battista............. --(S) --(S) --(S) --(S) --(S) --(S)
Chief Executive
Officer
Donald N. Telage..... --(N) --(N) --(N) 153,750(N) --(N) --(N)(2)
Senior Vice 6,100(S) 60,771(S)(1) 4,580(S) 14,970(S) 40,887(S)(3) 89,138(S)(3)
President,
Internet Relations
and Special Programs
Robert J. --(N) --(N) --(N) 115,300(N) --(N) --(N)(2)
Korzeniewski......... --(S) --(S) 9,000(S) 14,100(S) 91,310(S)(3) 90,530(S)(3)
Chief Financial
Officer
Raymond S. Corson.... --(N) --(N) --(N) 30,750(N) --(N) --(N)(2)
Senior Vice --(S) --(S) 200(S) 2,610(S) 1,284(S)(3) 11,471(S)(3)
President,
Business Development
Emmit J. McHenry(4).. --(N) --(N) --(N) --(N) --(N) --(N)(2)
--(S) --(S) 2,000(S) 8,000(S) 12,840(S)(3) 51,360(S)(3)
</TABLE>

- ------------------------------
(N) Options to acquire the Company's Class A Common Stock.

(S) Options to acquire SAIC's Class A Common Stock.

(1) Calculated by multiplying the difference between the Formula Price of
SAIC's Class A Common Stock underlying the option as of the date of
exercise and the exercise price of the option by the number of shares of
SAIC's Class A Common Stock acquired on exercise of the option.

(2) Based on the fair market value of the Company's Class A Common Stock as of
such date less the exercise price of such options.

(3) Based on the Formula Price of SAIC's Class A Common Stock as of such date
less the exercise price of such options.

(4) Emmit J. McHenry served as Chief Executive Officer of the Company until
January 1996.

1996 STOCK INCENTIVE PLAN

The 1996 Stock Incentive Plan (the "Incentive Plan") of the Company was
adopted by the Board of Directors and approved by the Company's stockholder on
September 18, 1996. The Incentive Plan provides for awards in the form of
restricted shares, stock units, options (including incentive stock options
("ISOs") and nonstatutory stock options ("NSOs")) or stock appreciation rights
("SARs"). Employees, Outside Directors, consultants and advisors of the Company
are eligible for the grant of restricted shares, stock units, SARs and NSOs.
Only employees are eligible for the grant of ISOs. The Outside Directors may
elect to receive any director fees in NSOs, stock units or a combination
thereof. As of June 30, 1997, a total of 2,556,250 shares of Common Stock has
been reserved for issuance under the Incentive Plan. The Incentive Plan will be
amended to reflect two classes of Common Stock.

The Incentive Plan will be administered by a Compensation Committee and a
Non-Insider Option Committee. The Compensation Committee will consist of at
least two directors who are "non-employee directors," as defined in Rule 16b-3.
The Board of Directors may amend the Incentive Plan as desired without further
action by the Company's stockholders except as required by applicable law.

60
<PAGE> 62

The Incentive Plan will continue in effect until terminated by the Board or,
with respect to ISOs, for a term of 10 years from its original adoption date,
whichever is earlier.

The consideration for each award under the Incentive Plan will be
established by the Compensation Committee, but in no event will the option price
for ISOs be less than 100% of the fair market value of the stock on the date of
grant. Awards will have such terms and be exercisable in such manner and at such
times as the Compensation Committee may determine. However, each ISO must expire
within a period of not more than ten (10) years from the date of grant.

The Incentive Plan provides that, in the event of a merger or
reorganization of the Company, outstanding options, SARs, restricted shares and
stock units shall be subject to the terms of the agreement of merger or
reorganization.

As of June 30, 1997, a total of 100,900 ISOs and 1,395,825 NSOs have been
granted under the Incentive Plan. Such options have exercise prices ranging from
$11.25 to $14.00 per share and a weighted average per share exercise price of
$13.15 and were held by 71 persons. None of such options has been exercised.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

The Company does not currently have any employment contracts in effect with
any of the Named Executive Officers other than Gabriel A. Battista, the
Company's Chief Executive Officer.

The Company and Mr. Battista are parties to a letter agreement dated
September 24, 1996 governing his employment with the Company. The agreement sets
forth Mr. Battista's compensation level and eligibility for bonuses, benefits
and option grants under the 1996 Stock Incentive Plan. Pursuant to the
agreement, if Mr. Battista's employment is terminated for other than cause or
non-performance, Mr. Battista will be eligible to receive, if terminated during
his first year of employment, his first year base salary and an additional
$150,000 in bonus, and, if terminated during his second year of employment, his
first year base salary and an amount equal to the bonus awarded to him for his
first year of employment. If Mr. Battista resigns during this initial two-year
period, he will not receive any separation compensation. Mr. Battista's
employment under the letter agreement is voluntary and may be terminated by the
Company or Mr. Battista at any time with or without cause or notice.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company has adopted provisions in its Certificate of Incorporation that
limit the liability of its directors for monetary damages for breach of their
fiduciary duty as directors, except for liability that cannot be eliminated
under the Delaware General Corporation Law (the "Delaware Law"). The Delaware
Law provides that directors of a company will not be personally liable for
monetary damages for breach of their fiduciary duty as directors, except for
liability (i) for any breach of their duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful payment
of dividend or unlawful stock repurchase or redemption, as provided in section
174 of the Delaware Law, or (iv) for any transaction from which the director
derived an improper personal benefit. Any amendment or repeal of these
provisions requires the approval of the holders of shares representing at least
66-2/3% of the shares of the Company entitled to vote in the election of
directors, voting as one class. The effect of these provisions will be to
eliminate the rights of the Company and its stockholders (through stockholders'
derivative suits on behalf of the Company) to recover monetary damages against a
director for breach of fiduciary duty as a director (including breaches
resulting from grossly negligent behavior), except in the situations described
above.

The Company's Certificate of Incorporation and Bylaws also provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by the Delaware Law. The Company intends to enter into separate
indemnification agreements with its directors that could require the Company,
among other things, to indemnify them against certain liabilities that may arise
by reason of their status or service as directors and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified. The Company believes that the limitation of

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<PAGE> 63

liability provision in its Restated Certificate of Incorporation and the
indemnification agreements will facilitate the Company's ability to continue to
attract and retain qualified individuals to serve as directors and officers of
the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER INFORMATION

Compensation information with respect to the Named Executive Officers for
1996 reflects compensation earned while the Company was a wholly-owned
subsidiary of SAIC. During 1996, the Company had no Compensation Committee.
Executive compensation levels during 1996 were established by SAIC. The Company
intends to establish a Compensation Committee for fiscal 1997 which will consist
of persons, of whom are independent directors of the Company and
of whom are officers of the Company.

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RELATIONSHIP WITH SAIC AND CERTAIN TRANSACTIONS

The Company was acquired by SAIC, an employee-owned, diversified
professional and technical services company, on March 10, 1995. The Company is
currently a wholly-owned subsidiary of SAIC. Upon completion of the offering,
SAIC will own 100% of the Company's outstanding Class B Common Stock (
shares), which will represent approximately % of the outstanding Common
Stock of the Company (approximately % if the Underwriters' over-allotment
option is exercised in full) and approximately % of the combined voting
power of the Company's outstanding Common Stock (approximately % if the
Underwriters' over-allotment option is exercised in full) and thus will continue
to have the ability to elect all of the directors of the Company and otherwise
exercise a controlling influence over the business and affairs of the Company.

Prior to the acquisition of the Company by SAIC, the Company's business
included commercial and government contracts awarded to the Company on a
competitive basis, including government contracts that were awarded to the
Company based partially upon the Company's then minority-owned status. The
contracts which had been awarded to the Company based on the Company's then
minority-owned status were transferred into a separately-owned entity prior to
acquisition of the Company by SAIC. In November 1995, SAIC adopted a plan to
transfer the Company's remaining government-based business to SAIC in order to
enable the Company to focus on the growth of its commercial business, which
includes registration services and Intranet services. Such transfer was
effective as of February 1996. The operating results of both the minority-based
government contracts business, and the remaining government-based business are
reflected as discontinued operations in the Company's financial statements for
all periods presented.

For as long as SAIC continues to own shares of Common Stock representing
more than 50% of the voting power of the Common Stock of the Company, SAIC will
be able, among other things, to determine the outcome of any corporate action
requiring approval of holders of Common Stock representing a majority of the
voting power of the Common Stock, including the election of the entire Board of
Directors of the Company, without the consent of the other stockholders of the
Company. In addition, through its control of the Board of Directors and
ownership of Common Stock, SAIC will be able to control certain decisions,
including decisions with respect to the Company's dividend policy, the Company's
access to capital (including borrowing from third party lenders and the issuance
of additional equity securities), mergers or other business combinations
involving the Company, the acquisition or disposition of assets by the Company
and any change in control of the Company.

SAIC has advised the Company that its current intent is to continue to hold
all of its outstanding shares of Class B Common Stock. Further, pursuant to the
Underwriting Agreement, SAIC has agreed, subject to certain exceptions, not to
sell or otherwise dispose of any shares of Common Stock (or any security
convertible into or exchangeable or exercisable for Common Stock) owned by it
for a period of 180 days following the date of this Prospectus without the prior
written consent of Hambrecht & Quist LLC. However, after such 180 day period,
there can be no assurance concerning the period of time during which time SAIC
will maintain its ownership of Class B Common Stock. Beneficial ownership of at
least 80% of the total voting power and value of the outstanding Common Stock is
required in order for SAIC to continue to include the Company in its
consolidated group for federal income tax purposes, and ownership of at least
80% of the total voting power and 80% of each class of nonvoting capital stock
is required in order for SAIC to be able to effect a tax-free spin-off of the
Company under the Code. See "Description of Capital Stock -- Common
Stock -- Conversion Rights."

The Company's Amended and Restated Certificate of Incorporation contains
provisions relating to competition by SAIC with the Company, potential conflicts
of interest that may arise between the Company and SAIC, the allocation of
business opportunities that may be suitable for either SAIC or the Company and
the approval of transactions between the Company and SAIC. The Company's Amended
and Restated Certificate of Incorporation also limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the Delaware General
Corporations Law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.

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<PAGE> 65

The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent permitted by Delaware law, including in
circumstances in which indemnification is otherwise discretionary under Delaware
law. The Company has also entered into indemnification agreements with its
officers and directors containing provisions that may require the Company, among
other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified, and to obtain directors' and
officers' insurance if available on reasonable terms.

The Company's relationship with SAIC will also be governed by the following
agreements to be entered into prior to completion of the offering: corporate
services agreement, noncompetition agreement, registration rights agreement and
tax sharing agreement, the material terms of which are summarized below. Because
the Company is a wholly-owned subsidiary of SAIC, none of these arrangements
will result from arm's length negotiations and, therefore, the prices charged to
the Company for services provided thereunder may be higher or lower than prices
that may be charged by third parties.

The descriptions of agreements set forth below are intended to be summaries
and, while material terms of the agreements are set forth herein, the
descriptions are qualified in their entirety by reference to the relevant
agreements filed as exhibits to the Registration Statement of which this
Prospectus forms a part.

CORPORATE SERVICES AGREEMENT

Prior to the completion of the offering, the Company and SAIC will enter
into a corporate services agreement (the "Corporate Services Agreement")
pursuant to which SAIC will provide to the Company from time to time, upon
request of the Company, certain routine and ordinary corporate services,
including financial, insurance, accounting, employee benefits, payroll, tax and
legal services. SAIC will also provide strategic corporate planning services as
described in the Corporate Services Agreement. For these services, the Company
is assessed a fee equal to 2.5% of the Company's annual net revenues. With
respect to matters covered by the Corporate Services Agreement, the relationship
between SAIC and the Company is intended to continue in a manner generally
consistent with past practices. The Company believes that the charges under the
Corporate Services Agreement are reasonable. The initial term of this agreement
will be one year. Thereafter, the Corporate Services Agreement will be
automatically renewed for successive one-year terms until terminated and may be
terminated by either party upon 180 days' prior written notice.

NONCOMPETITION AGREEMENT

Prior to the completion of the offering, the Company and SAIC will enter
into a noncompetition agreement (the "Noncompetition Agreement") pursuant to
which SAIC agrees that it will not compete with the Company in the domain name
registration business within the .com, .org, .net, .edu and .gov TLDs for a
period of five years.

REGISTRATION RIGHTS AGREEMENT

Prior to the completion of the offering, the Company and SAIC will execute
a Registration Rights Agreement pursuant to which SAIC may, on not more than two
occasions, demand registration under the Securities Act of some or all of the
shares of Class A Common Stock to be owned by SAIC upon conversion of the Class
B Common Stock owned by SAIC or any other shares of Class A Common Stock
acquired by SAIC, subject to its agreement not to sell any shares prior to the
expiration of 180 days from the date of this Prospectus. The first such
registration will be at the Company's expense and the second such registration
will be at SAIC's expense. The Company may postpone such a demand under certain
circumstances. In addition, SAIC may request the Company to include shares of
the Class A Common Stock held by SAIC in any registration proposed by the
Company of such Class A Common Stock under the Securities Act. See "Description
of Capital Stock -- Registration Rights."

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TAX SHARING AGREEMENT

The taxable income and losses of the Company will be included in the
consolidated federal income tax returns filed by SAIC's consolidated group for
so long as SAIC maintains beneficial ownership of at least 80% of the total
voting power and value of the outstanding Common Stock of the Company. Prior to
the completion of the offering, the Company and SAIC plan to enter into a tax
sharing agreement (the "Tax Sharing Agreement") which will require the Company
to pay SAIC an amount in respect of federal income taxes generally equal to the
amount of the federal income taxes that the Company generally would be required
to pay if the Company were to file its own federal income tax return and was
never part of SAIC's consolidated group. Effectively, this will result in the
Company's annual income tax payable/receivable being computed as if the Company
filed a separate tax return.

Further, pursuant to the terms of the Tax Sharing Agreement, upon
deconsolidation, the Company's ability to recognize a benefit for tax losses it
incurs is subject to SAIC's approval. SAIC may choose to contest, compromise or
settle any adjustment or deficiency proposed by the relevant taxing authority in
a manner that may be beneficial to SAIC and detrimental to the Company.

In general, the Company will be included in SAIC's consolidated group for
federal income tax purposes for so long as SAIC beneficially owns at least 80%
of the total voting power and value of the outstanding Common Stock. Each member
of a consolidated group is jointly and severally liable for the federal income
tax liability of each other member of the consolidated group. Accordingly,
although the Tax Sharing Agreement allocates tax liabilities between the Company
and SAIC, during the period in which the Company is included in SAIC's
consolidated group, the Company could be liable in the event that any federal
tax liability is incurred, but not discharged, by any other member of SAIC's
consolidated group. See "Risk Factors -- Control by SAIC," "-- Control of Tax
Matters; Tax and ERISA Liability" and "-- Potential Conflicts of Interest."

The Company believes that the foregoing transactions were in its best
interests. It is the Company's current policy that all transactions by the
Company with officers, directors, five percent
stockholders and their affiliates will be entered into (or amended) only if such
transactions are approved by a majority of the disinterested independent
directors, are on terms no less favorable to the Company than could be obtained
from unaffiliated parties and are reasonably expected to benefit the Company.

RELATED PARTY TRANSACTIONS

In fiscal 1996, the Company provided the following services under
subcontracts to SAIC: (i) telecommunications design and support services to
Kaiser Permanente for which the Company received $155,000; (ii) engineering and
network services to Banco de Credito for which the Company received $864,000;
(iii) engineering support to KUB/Malaysia for which the Company received
$107,000; (iv) engineering services to the Center for Information Processing for
which the Company received $103,000 and (v) other subcontracts for which the
Company received $276,000.

In addition, in fiscal 1996, SAIC provided database, applications and
installation services to UUNET Technologies, Inc. under a subcontract to the
Company for which SAIC received $133,000 and on other subcontracts to the
Company for which SAIC received $95,000.

The Company currently subleases from SAIC facilities in Herndon, Virginia
and Charlotte, North Carolina. In fiscal 1996, the Company made lease payments
of $737,000 to SAIC.

For information concerning indemnification of directors and officers, see
"Management -- Limitation of Liability and Indemnification Matters."

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PRINCIPAL STOCKHOLDERS

OWNERSHIP OF THE COMPANY'S COMMON STOCK

As of the date of this Prospectus, no shares of Class A Common Stock are
outstanding. Upon completion of this offering, the only shares of Class A Common
Stock that will be outstanding are those that will be issued in the offering
(including any shares issued if the Underwriters' over-allotment option is
exercised) and those issued under the Company's stock incentive plans. See
"Management -- Executive Compensation." The only stockholder of the Company is
SAIC. The address of SAIC is 10260 Campus Point Drive, San Diego, California
92121. Upon completion of the offering, SAIC will own 100% of the Company's
outstanding Class B Common Stock (12,500,000 shares), which will represent
approximately % of the outstanding Common Stock of the Company
(approximately % if the Underwriters' over-allotment option is exercised
in full). Under Delaware law, SAIC is able, acting alone, to elect the entire
Board of Directors of the Company and to control the vote on all matters
submitted to a vote of the Company's stockholders, including extraordinary
corporate transactions. Currently, five of the Company's eight directors are
also directors and/or officers of SAIC.

OWNERSHIP OF SAIC CLASS A COMMON STOCK

The following table sets forth, at May 31, 1997, the ownership of SAIC
Class A Common Stock held by the Company's directors, the Named Executive
Officers, and all directors and executive officers as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OF
SAIC CLASS A COMMON SHARES
BENEFICIAL OWNER STOCK(1)(2) OUTSTANDING(3)
- -------------------------------------------- -------------------- ---------------
<S> <C> <C>
Gabriel A. Battista......................... 0 0.0%
J. Robert Beyster........................... 779,586 1.6%(4)
Raymond S. Corson........................... 6,280 *
Michael A. Daniels.......................... 52,263 *
Craig I. Fields............................. 2,000 *
John E. Glancy.............................. 137,465 *
Robert J. Korzeniewski...................... 29,725 *
Emmit J. McHenry............................ 30,428 *
William A. Roper, Jr........................ 43,191 *
Stratton D. Sclavos......................... 0 0.0%
Donald N. Telage............................ 38,079 *
State Street Bank and Trust Company......... 24,183,729(5) 48.7%(6)
One Enterprise Drive
North Quincy, MA 02171
All directors and executive officers
as a group (14 persons)................... 1,091,044 2.4%(7)
</TABLE>

- ---------------

* Less than 1% of the outstanding shares of SAIC's Class A Common Stock and
less than 1% of the voting power of SAIC's Class A Common Stock and Class B
Common Stock on a combined basis.

(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. Except as indicated by footnote, and subject to community
property laws where applicable, to the best of the Company's knowledge, the
persons named in the table above have sole voting and investment power with
respect to all shares of SAIC Class A Common Stock shown as
beneficially-owned by them. Options to purchase shares of SAIC Class A
Common Stock that are exercisable within 60 days of May 31, 1997 are deemed
to be beneficially-owned by the person holding such options for the purpose
of computing the percentage ownership of such person, but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person.

(2) The beneficial ownership depicted in the table includes: (i) shares held for
the account of the individual by the Trustee of SAIC's Employee Stock
Ownership Plan, Profit Sharing Plan and Cash or Deferred Arrangement, as
follows: J.R. Beyster (1,005 shares), Raymond S. Corson (2,852 shares),
Michael A. Daniels (5,057 shares), John E. Glancy (26,676 shares), Robert J.
Korzeniewski (5,580 shares), Emmit J. McHenry (97 shares), William A. Roper,
Jr. (4,126 shares), Donald N. Telage (4,303 shares), and all executive
officers and directors as a group (49,790 shares); (ii) shares subject to
options which are exercisable within 60 days of May 31, 1997, as follows:
Raymond S. Corson (762 shares), Michael A. Daniels (12,800 shares), Craig I.
Fields (2,000 shares), John E. Glancy (13,800 shares), Robert J.
Korzeniewski (12,120 shares), Emmit J. McHenry (4,000 shares), William A.
Roper, Jr. (5,800 shares), Donald N. Telage (8,850 shares), and all
executive officers and directors as a group (56,632 shares); (iii) shares
held by spouses, minor children or other relatives sharing a household with
the individuals, as follows: John E. Glancy (2,870 shares) and all executive
officers and directors as a group (2,870 shares); and (iv) shares held by
certain trusts established by the individual, as follows: J.R. Beyster
(778,581 shares) and all executive officers and directors as a group
(778,581 shares).

(3) Applicable percentage of beneficial ownership is based on 49,614,025 shares
of SAIC Class A Common Stock outstanding as of May 31, 1996.

(4) Represents 1.5% of the voting power of SAIC's Class A Common Stock and Class
B Common Stock on a combined basis.

(5) As Trustee of certain retirement and stock benefit plans of SAIC and its
subsidiaries.

(6) Represents 47.2% of the voting power of SAIC's Class A Common Stock and
Class B Common Stock on a combined basis.

(7) Represents 2.1% of the voting power of SAIC's Class A Common Stock and Class
B Common Stock on a combined basis.

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DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

The authorized capital stock of the Company consists of 100 million shares
of Class A Common Stock, par value $0.001 per share, 40 million shares of Class
B Common Stock, par value $0.001 per share, and 10 million shares of Preferred
Stock, par value $0.001 per share. None of the Class A Common Stock and
Preferred Stock are outstanding as of the date hereof. Of the 100 million shares
of Class A Common Stock authorized, are being offered hereby ( shares
if the Underwriters' over-allotment option is exercised in full), shares
will be reserved for issuance upon conversion of Class B Common Stock into Class
A Common Stock and shares have been reserved for issuance pursuant to
certain employee benefits plans. See "Management -- Executive Compensation." Of
the 40 million shares of Class B Common Stock authorized, 12,500,000 shares, or
100% of the outstanding shares, are held by SAIC. The following summary
description of the capital stock of the Company is qualified in its entirety by
reference to the form of Certificate of Incorporation of the Company and the
Bylaws of the Company, a copy of each of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.

COMMON STOCK

Voting Rights. The holders of Class A Common Stock and Class B Common
Stock generally have identical rights except that holders of Class A Common
Stock are entitled to one vote per share while holders of Class B Common Stock
are entitled to ten votes per share on all matters to be voted on by
stockholders. The holders of Common Stock are not entitled to cumulative voting
rights. Generally, all matters to be voted on by stockholders must be approved
by a majority (or, in the case of election of directors, by a plurality) of the
votes entitled to be cast by all shares of Class A Common Stock and Class B
Common Stock present in person or represented by proxy, voting together as a
single class, subject to any voting rights granted to holders of any Preferred
Stock. In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of shares of Common Stock would be
entitled to share ratably in all assets remaining after payment of liabilities
subject to prior distribution rights and payment of any distributions owing to
holders of shares of Preferred Stock then outstanding, if any. Holders of the
shares of Common Stock have no preemptive rights, and the shares of Common Stock
are not subject to further calls or assessment by the Company. There are no
redemption or sinking fund provisions applicable to the shares of Common Stock.

Holders of Class A Common Stock and Class B Common Stock will share in an
equal amount per share in any dividend declared by the Board of Directors,
subject to any preferential rights of any outstanding Preferred Stock. Dividends
consisting of shares of Class A Common Stock and Class B Common Stock may be
paid only as follows: (i) shares of Class A Common Stock may be paid only to
holders of Class A Common Stock and shares of Class B Common Stock may be paid
only to holders of Class B Common Stock and (ii) shares shall be paid
proportionally with respect to each outstanding share of Class A Common Stock
and Class B Common Stock.

Conversion Rights. While SAIC does not have a current intention of
effecting a Tax-Free Spin-Off (as hereinafter defined), SAIC will continually
evaluate its ownership of the Company and there can be no assurances whether
SAIC will effect a Tax-Free Spin-Off in the future. Each outstanding share of
Class B Common Stock is convertible at the holder's option into one share of
Class A Common Stock at any time prior to a Tax-Free Spin-Off. Additionally,
each share of Class B Common Stock shall automatically convert into one share of
Class A Common Stock if at any time prior to a Tax-Free Spin-Off the number of
outstanding shares of Class B Common Stock owned by SAIC or any of its
subsidiaries (or a Class B Transferee or any of its subsidiaries) represents
less than 30% of the economic ownership represented by the aggregate number of
shares of Common Stock then outstanding. If a Tax-Free Spin-Off occurs, shares
of Class B Common Stock shall not be convertible into shares of Class A Common
Stock at the option of the holder thereof.

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<PAGE> 69

Except as provided below, any shares of Class B Common Stock transferred to
a person other than SAIC or any of its subsidiaries shall automatically convert
to shares of Class A Common Stock upon such disposition. Prior to a Tax-Free
Spin-Off, shares of Class B Common Stock representing more than a 50% economic
interest in the Company transferred in a single transaction to one unrelated
person (a "Class B Transferee") or among such Class B Transferee and its
subsidiaries shall not automatically convert to shares of Class A Common Stock
upon such disposition. Any shares of Class B Common Stock retained by SAIC
following any such transfer of shares of Class B Common Stock to a Class B
Transferee shall automatically convert into shares of Class A Common Stock upon
such transfer. Shares of Class B Common Stock transferred to stockholders of
SAIC or of a Class B Transferee in a transaction intended to be on a tax-free
basis (a "Tax-Free Spin-Off") under the Internal Revenue Code of 1986 shall not
convert to shares of Class A Common Stock upon the occurrence of such Tax-Free
Spin-Off.

Following a Tax-Free Spin-Off, shares of Class B Common Stock shall be
transferred as Class B Common Stock; provided, however, that shares of Class B
Common Stock shall automatically convert into shares of Class A Common Stock on
the fifth anniversary of the Tax-Free Spin-Off, unless prior to such Tax-Free
Spin-Off, SAIC, or the Class B Transferee, as the case may be, delivers to the
Company written advice of counsel reasonably satisfactory to the Company to the
effect that (i) such conversion could adversely affect the ability of SAIC or
the Class B Transferee, as the case may be, to obtain a favorable ruling from
the Internal Revenue Service that the distribution would be a Tax-Free Spin-Off
or (ii) the Internal Revenue Service has adopted a general non-ruling policy on
tax-free spinoffs and that such conversion could adversely affect the status of
the transaction as a Tax-Free Spin-Off. If such written advice is received,
approval of such conversion shall be submitted to a vote of the holders of the
Common Stock as soon as practicable after the fifth anniversary of the Tax-Free
Spin-Off, unless SAIC or the Class B Transferee, as the case may be, delivers to
the Company written advice of counsel reasonably satisfactory to the Company
prior to such anniversary that such vote could adversely affect the status of
the distribution as a Tax-Free Spin-Off, including the ability to obtain a
favorable ruling from the Internal Revenue Service. If such written advice is
delivered, such vote shall not be held. Approval of such conversion will require
the affirmative vote of the holders of a majority of the shares of both Class A
Common Stock and Class B Common Stock present and voting, voting together as a
single class, with each share entitled to one vote for such purpose. No
assurance can be given that such conversion would be consummated. The foregoing
requirements are intended to ensure that tax-free treatment of a Tax-Free
Spin-Off is preserved should the Internal Revenue Service challenge such
automatic conversion as violating the 80% vote requirement currently required by
the Code for a Tax-Free Spin-Off.

PREFERRED STOCK

There are currently no shares of Preferred Stock outstanding. Under the
Company's Amended and Restated Certificate of Incorporation, the Board of
Directors has the authority, without further action by the stockholders, to
issue from time to time up to 10,000,000 shares of the Preferred Stock in one or
more series and to fix the number of shares, designations, preferences, powers,
and relative, participating, optional or other special rights and the
qualifications or restrictions thereof. The preferences, powers, rights and
restrictions of different series of Preferred Stock may differ with respect to
dividend rates, amounts payable on liquidation, voting rights, conversion
rights, redemption provisions, sinking fund provisions, and purchase funds and
other matters. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could decrease the amount of earnings and assets available for
distribution to holders of Common Stock or affect adversely the rights and
powers, including voting rights, of the holders of Common Stock, and may have
the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present plan to issue any shares of Preferred Stock.

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REGISTRATION RIGHTS

Pursuant to an agreement between the Company and SAIC, which holds
12,500,000 shares of Class B Common Stock, SAIC is entitled to certain rights
with respect to the registration under the Securities Act of the shares of Class
A Common Stock issuable upon conversion of the Class B Common Stock owned by
SAIC. If the Company proposes to register any of its securities under the
Securities Act, either for its own account or for the account of other security
holders, SAIC is entitled to notice of the registration and is entitled to
include, at the Company's expense, such shares therein, provided, among other
conditions, that the underwriters have the right to limit the number of such
shares included in the registration. In addition, SAIC may require the Company
on not more than two occasions, to file a registration statement under the
Securities Act with respect to its shares of Class A Common Stock, and the
Company is required to use its best efforts to effect the registration, subject
to certain conditions and limitations. The first such registration will be at
the Company's expense and the second such registration will be at SAIC's
expense. Further, SAIC may require the Company at its expense to register their
shares of Class A Common Stock on Form S-3 when such form becomes available to
the Company, subject to certain conditions and limitations.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

Certificate of Incorporation. The Company's Amended and Restated
Certificate of Incorporation provides that the Company's Bylaws may be repealed
or amended only by a two-thirds vote of the Board of Directors or a two-thirds
stockholder vote. In addition, those provisions of the Amended and Restated
Certificate of Incorporation may only be amended or repealed by the holders of
at least two-thirds of the voting power of all the then-outstanding shares of
stock entitled to vote generally for the election of directors voting together
as a single class. The provisions described above, together with the ability of
the Board of Directors to issue Preferred Stock as described under "Description
of Capital Stock -- Preferred Stock," may have the effect of deterring a hostile
takeover or delaying a change in control or management of the Company. See "Risk
Factors -- Effect of Certain Charter Provisions; Anti-takeover Effects of
Certificate of Incorporation and Delaware Law."

Delaware Takeover Statute. Section 203 of the Delaware General Corporation
Law ("Section 203"), subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the board of
directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder;
(ii) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially-owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or

69
<PAGE> 71

person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person. As permitted by Section 203, the Company
has elected not to be governed by the provisions of Section 203.

CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS

The Company's Amended and Restated Certificate of Incorporation provides
that any person purchasing or acquiring an interest in shares of capital stock
of the Company is deemed to have consented to the following provisions relating
to intercompany agreements and to transactions with interested parties and
corporate opportunities. The corporate charter of SAIC does not include
comparable provisions relating to intercompany agreements, transactions with
interested parties or corporate opportunities.

Transactions with Interested Parties. The Company's Amended and Restated
Certificate of Incorporation provides that no contract, agreement, arrangement
or transaction (or any amendment, modification or termination thereof) between
the Company and SAIC or any Related Entity (as such terms are defined below) or
between the Company and any director or officer of the Company, SAIC or any
Related Entity shall be void or voidable solely for the reason that SAIC, a
Related Entity or any one or more of the officers or directors of the Company,
SAIC or any Related Entity are parties thereto, or solely because any such
directors or officers are present at, participate in or vote with respect to the
authorization of such contract, agreement, arrangement or transaction (or any
amendment, modification or termination thereof). Further, the Company's Amended
and Restated Certificate of Incorporation provides that neither SAIC nor any
officer or director thereof or of any Related Entity shall be presumed liable to
the Company or its stockholders for breach of any fiduciary duty or duty of
loyalty or failure to act in (or not opposed to) the best interests of the
Company or the derivation of any improper personal benefit by reason of the fact
that SAIC or an officer or director thereof or of such Related Entity in good
faith takes any action or exercises any rights or gives or withholds any consent
in connection with any agreement or contract between SAIC or such Related Entity
and the Company. No vote cast or other action taken by any person who is an
officer, director or other representative of SAIC or such Related Entity, which
vote is cast or action is taken by such person in his capacity as a director of
the Company, shall constitute an action of or the exercise of a right by or a
consent of SAIC, such subsidiary or Related Entity for the purpose of any such
agreement or contract. For purposes of the foregoing, the "Company" and "SAIC"
include all corporations and other entities in which the Company or SAIC, as the
case may be, owns fifty percent or more of the outstanding voting stock, and
"Related Entity" means one or more corporations or other entities in which one
or more of the directors of the Company have a direct or indirect financial
interest.

Competition by SAIC with the Company; Corporate Opportunities. The
Company's Amended and Restated Certificate of Incorporation provides that except
as SAIC may otherwise agree in writing: (i) neither SAIC nor any subsidiary of
SAIC (other than the Company) shall have a duty to refrain from engaging
directly or indirectly in the same or similar business activities or lines of
business as the Company; and (ii) neither SAIC nor any subsidiary (other than
the Company), officer or director thereof will be presumed liable to the Company
or to its stockholders for breach of any fiduciary duty by reason of any such
activities or of such person's participation therein.

The Company's Amended and Restated Certificate of Incorporation also
provides that if SAIC or any subsidiary of SAIC (other than the Company)
acquires knowledge of a potential transaction or matter which may be a corporate
opportunity both for SAIC or such subsidiary and for the Company, SAIC shall be
entitled to offer such corporate opportunity to the Company or SAIC as SAIC
deems appropriate under the circumstances in its sole discretion and shall not
be presumed liable to the Company or its stockholders for breach of fiduciary
duty as a stockholder of the Company or controlling person of a stockholder by
reason of the fact that SAIC or such subsidiary pursues or acquires such
opportunity for itself, directs such corporate opportunity to another person, or
does not communicate information regarding such corporate opportunity to the
Company.

70
<PAGE> 72

Further, the Company's Amended and Restated Certificate of Incorporation
provides that in the event that a director, officer or employee of the Company
who is also a director, officer or employee of SAIC acquires knowledge of a
potential transaction or matter that may be a corporate opportunity both for the
Company and SAIC (whether such potential transaction or matter is proposed by a
third party or is conceived by such director, officer or employee of the
Company), such director, officer or employee shall be entitled to offer such
corporate opportunity to the Company or SAIC as such director, officer or
employee deems appropriate under the circumstances in his or her sole
discretion, and no such director, officer or employee shall be presumed liable
to the Company or its stockholders for breach of any fiduciary duty or duty of
loyalty or failure to act in (or not opposed to) the best interests of the
Company or the derivation of any improper personal benefit by reason of the fact
that (i) such director, officer or employee offered such corporate opportunity
to SAIC (rather than the Company) or did not communicate information regarding
such corporate opportunity to the Company or (ii) SAIC pursues or acquires such
corporate opportunity for itself or directs such corporate opportunity to
another person or does not communicate information regarding such corporate
opportunity to the Company.

The enforceability of the provisions discussed above under Delaware
corporate law has not been established and, due to the absence of relevant
judicial authority, counsel to the Company is not able to deliver an opinion as
to the enforceability of such provisions. These provisions of the Company's
Amended and Restated Certificate of Incorporation eliminate certain rights that
might have been available to stockholders under Delaware law had such provisions
not been included in the Amended and Restated Certificate of Incorporation,
although the enforceability of such provisions has not been established.

At the time of the consummation of the offering, certain of the directors
of the Company will also be directors and/or officers of SAIC.

The foregoing provisions of the Company's Amended and Restated Certificate
of Incorporation shall expire on the date that SAIC ceases to own beneficially
Common Stock representing at least 20% of the number of outstanding shares of
Common Stock and no person who is a director or officer of the Company is also a
director or officer of SAIC or its subsidiaries.

Actions Under Intercompany Agreements. The Company's Amended and Restated
Certificate of Incorporation will also limit the liability of SAIC and its
subsidiaries for certain breaches of their fiduciary duties in connection with
action that may be taken or not taken in good faith under the intercompany
agreements. See "Relationship with SAIC and Certain Transactions."

Advance Notice Provision. The Company's Amended and Restated Bylaws
provide for an advance notice procedure for the nomination, other than by or at
the direction of the Board of Directors, of candidates for election as directors
as well as for other stockholder proposals to be considered at annual meetings
of stockholders. In general, notice of intent to nominate a director or raise
matters at such meetings will have to be received by the Company not less than
120 days prior to any meeting of the stockholders called for the election of
directors, and must contain certain information concerning the person to be
nominated or the matters to be brought before the meeting and concerning the
stockholder submitting the proposal.

NASDAQ NATIONAL MARKET LISTING

Prior to the date of this Prospectus, there has been no established public
trading market for the Class A Common Stock. The Company has applied to have the
Class A Common Stock approved for quotation on the Nasdaq National Market under
the symbol NSOL.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Class A Common Stock is
.

71
<PAGE> 73

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering there has been no public market for the Common Stock
of the Company, and no predictions can be made regarding the effect, if any,
that market sales of shares or the availability of shares for sale will have on
the market price prevailing from time to time. As described below, only a
limited number of shares will be available for sale shortly after this offering
due to certain contractual and legal restrictions on resale. Nevertheless, sales
of substantial amounts of Common Stock of the Company in the public market after
the restrictions lapse could adversely affect the prevailing market price.

Upon completion of this offering, the Company will have shares of
Class A Common Stock outstanding (assuming no exercise of the Underwriters'
over-allotment option). In addition, as of June 30, 1997, the Company had
granted stock options to certain employees and directors for the purchase of an
aggregate of 1,496,725 shares of Class A Common Stock. The shares of Class
A Common Stock being sold hereby will be freely tradable (other than by an
"affiliate" of the Company as such term is defined in Rule 144 of the Securities
Act) without restriction or registration under the Securities Act. All remaining
shares were issued and sold by the Company in a private transaction ("Restricted
Shares") and are eligible for public sale if registered under the Securities Act
or sold in accordance with Rule 701 thereunder.

SAIC, which owns 12,500,000 shares of Class B Common Stock and certain
Restricted Persons have agreed they will not sell any shares of Common Stock
owned by them without the prior written consent of the Representatives of the
Underwriters for a period of 180 days from the effective date of the
Registration Statement of which this Prospectus is a part (the "Lockup Period").
Following the expiration of the Lockup Period, SAIC and such Restricted Persons
may sell such shares only pursuant to the requirements of Rule 144 or pursuant
to an effective registration statement under the Securities Act. Furthermore,
the shares held by SAIC and such Restricted Persons are "restricted securities"
within the meaning of Rule 144. Following the expiration of the Lockup Period,
approximately 12,500,000 shares of Class B Common Stock held by SAIC and
shares of Class A Common Stock held by such Restricted Persons will be eligible
for sale in the public market subject to compliance with Rule 144. See
"Underwriting."

Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by its employees,
directors, officers, consultants or advisers prior to the closing of this
offering, pursuant to written compensatory benefit plans or written contracts
relating to the compensation of such persons. In addition, the Commission has
indicated that Rule 701 will apply to stock options granted by the Company
before this offering, along with the shares acquired upon exercise of such
options. Securities issued in reliance on Rule 701 are deemed to be Restricted
Shares and, beginning 90 days after the date of this Prospectus (unless subject
to the contractual restrictions described above), may be sold by persons other
than affiliates subject only to the manner of sale provisions of Rule 144 and by
affiliates under Rule 144 without compliance with its one-year minimum holding
period requirements.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an affiliate of the Company, or a holder of
Restricted Shares who owns beneficially shares that were not acquired from the
Company or an affiliate of the Company within the previous year, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares of Common Stock
(approximately shares immediately after this offering, assuming no exercise
of the Underwriters' over-allotment option) or the average weekly trading volume
of Class A Common Stock during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Sales under Rule 144 are
subject to certain requirements relating to manner of sale, notice and
availability of current public information about the Company. However, a person
(or persons whose shares are aggregated) who is not deemed to have been an
affiliate of the Company at any time during the 90 days immediately preceding
the sale

72
<PAGE> 74

and who owns beneficially Restricted Shares is entitled to sell such shares
under Rule 144(k) without regard to the limitations described above, provided
that at least two years have elapsed since the later of the date the shares were
acquired from the Company or from an affiliate of the Company. The foregoing is
a summary of Rule 144 and is not intended to be a complete description of it.

The Company intends to file a registration statement on Form S-8 under the
Securities Act covering approximately 2,556,250 shares of Class A Common Stock
reserved for issuance under the 1996 Stock Incentive Plan. Such registration
statement is expected to be filed soon after the date of this Prospectus and
will automatically become effective upon filing. Accordingly, shares registered
under such registration statements will be available for sale in the open
market, unless such shares are subject to vesting restrictions with the Company
or the contractual restrictions described above.

In addition, after this offering and the Lockup Period, SAIC will be
entitled to certain rights to cause the Company to register the sale of its
shares of Common Stock under the Securities Act. Registration of such shares
under the Securities Act would result in such shares becoming freely tradable
without restriction under the Securities Act (except for shares purchased by
affiliates of the Company) immediately upon the effectiveness of such
registration. See "Description of Capital Stock -- Registration Rights."

73
<PAGE> 75

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC,
J.P. Morgan Securities Inc. and PaineWebber Incorporated have severally agreed
to purchase from the Company the following respective numbers of shares of Class
A Common Stock:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
--------------------------------------------------------------- ---------
<S> <C>
Hambrecht & Quist LLC..........................................
J.P. Morgan Securities Inc. ...................................
PaineWebber Incorporated.......................................
---------
Total..........................................................
==========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligations is such that
they are committed to purchase all shares of Class A Common Stock offered hereby
if any of such shares are purchased.

The Underwriters propose to offer the shares of Class A Common Stock
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per share to
certain other dealers. After the initial public offering of the shares, the
offering price and other selling terms may by changed by the Representatives of
the Underwriters.

The Company has granted to the Underwriters an option, exercisable no later
than 30 calendar days after the date of this Prospectus, to purchase up to an
aggregate of additional shares of Class A Common Stock at the initial
public offering price, less the underwriting discount, set forth on the cover
page of this Prospectus. To the extent that the Underwriters exercise this
option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage thereof which the number of shares of Class A
Common Stock to be purchased by it shown in the above table bears to the total
number of shares of Class A Common Stock offered hereby. The Company will be
obligated, pursuant to the option, to sell shares to the Underwriters to the
extent the option is exercised. The Underwriters may exercise such option only
to cover over-allotments made in connection with the sale of shares of Class A
Common Stock offered hereby.

The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.

The Company, SAIC and certain Restricted Persons have agreed, with certain
exceptions, that they will not, without the prior written consent of Hambrecht &
Quist LLC, offer, sell or otherwise dispose of any Common Stock, options or
warrants to acquire shares of Common Stock or securities exchangeable for or
convertible into shares of Common Stock during the 180-day period following the
date of this Prospectus.

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales of Class A Common Stock offered hereby to any accounts
over which they exercise discretionary authority.

74
<PAGE> 76

Prior to the offering, there has been no public market for the Class A
Common Stock. The initial public offering price for the Class A Common Stock
will be determined by negotiation among the Company and the Representatives.
Among the factors considered in determining the initial public offering price
are prevailing market conditions, revenues and earnings of the Company, market
valuations of other companies engaged in activities similar to those of the
Company, estimates of the business potential and prospects of the Company, the
present state of the Company's business operations, the Company's management and
other factors deemed relevant. The estimated initial public offering price range
set forth on the cover of this preliminary prospectus is subject to change as a
result of market conditions and other factors.

Certain persons participating in this offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may be effected on the
Nasdaq National Market, in the over-the-counter market, or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.

The Underwriters have reserved up to 5% of the shares of Class A Common
Stock offered hereby for sale at the initial public offering price to certain
officers, directors and other persons designated by the Company. The number of
shares available for sale to the general public will be reduced to the extent
such persons purchase such reserved shares. Any reserved shares not so purchased
on the effectiveness of the offering will be offered by the Underwriters to the
general public on the same basis as the other shares offered hereby.

LEGAL MATTERS

Certain legal matters with respect to the validity of the Class A Common
Stock offered hereby are being passed upon for the Company by Pillsbury Madison
& Sutro LLP, Menlo Park, California and Washington D.C. Certain legal matters in
connection with the offering will be passed upon for the Underwriters by Simpson
Thacher & Bartlett (a partnership which includes professional corporations), New
York, New York.

EXPERTS

The financial statements as of December 31, 1995 and 1996 and for the year
ended December 31, 1994, the periods from January 1, 1995 to March 10, 1995 and
from March 11, 1995 to December 31, 1995 and for the year ended December 31,
1996 included in this Prospectus have been so included in reliance on the
reports of Price Waterhouse LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act and the rules
and regulations promulgated thereunder, with respect to the Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto. For further information with respect to
the Company and the Common Stock offered hereby, reference is hereby made to
such Registration Statement and the

75
<PAGE> 77

exhibits and schedules thereto. Statements contained in this Prospectus
regarding the contents of any contract or other document are not necessarily
complete; with respect to each such contract or document filed as an exhibit to
the Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. A copy of the Registration
Statement, including the exhibits and schedules, thereto, may be inspected
without charge at the principal office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission at
Seven World Trade Center, New York, New York 10048 and 500 West Madison Street,
Chicago, Illinois 60661. Copies of such material may also be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549 upon payment of the fees prescribed by the Commission. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's web site is
http://www.sec.gov.

The Company is not currently subject to the informational requirements of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering of the Company's Common Stock, the Company will become
subject to the informational requirements of the Exchange Act.

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent certified public
accountants and quarterly reports containing unaudited financial information for
the first three quarters of each fiscal year.

76
<PAGE> 78

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Accountants................................................. F-2, F-3
Statements of Financial Position as of
December 31, 1995 and 1996 and March 31, 1997 (Unaudited)....................... F-4
Statements of Operations for the Year Ended December 31, 1994, for the Periods
from January 1, 1995 to March 10, 1995 and March 11, 1995 to December 31, 1995,
for the Year Ended December 31, 1996, and for the Three Months Ended March 31,
1996 and 1997 (Unaudited)....................................................... F-5
Statements of Changes in Stockholder's Equity for the Year Ended December 31,
1994, for the Periods from January 1, 1995 to March 10, 1995 and March 11, 1995
to December 31, 1995, for the Year Ended December 31, 1996, and for the Three
Months Ended March 31, 1997 (Unaudited)......................................... F-6
Statements of Cash Flows for the Year Ended December 31, 1994, for the Periods
from January 1, 1995 to March 10, 1995 and March 11, 1995 to December 31, 1995,
for the Year Ended December 31, 1996, and for the Three Months Ended March 31,
1996 and 1997 (Unaudited)....................................................... F-7
Notes to Financial Statements..................................................... F-8
</TABLE>

F-1
<PAGE> 79

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholder of Network Solutions, Inc.

In our opinion, the accompanying statements of financial position and the
related statements of operations, of changes in stockholder's equity and of cash
flows present fairly, in all material respects, the financial position of
Network Solutions, Inc. (a wholly-owned subsidiary of Science Applications
International Corporation) at December 31, 1996 and 1995, and the results of its
operations and cash flows for the year ended December 31, 1996 and for the
period from March 11, 1995 to December 31, 1995 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As discussed in Note 1 to the financial statements, on March 10, 1995
Science Applications International Corporation acquired the outstanding stock of
the Company. The financial statements for the periods subsequent to March 10,
1995 have been prepared on the basis of accounting arising from this
acquisition. The financial statements for the period from January 1, 1995 to
March 10, 1995 and for the year ended December 31, 1994 are presented on the
Company's previous basis of accounting.

PRICE WATERHOUSE LLP

Falls Church, VA
March 17, 1997, except as to Note 13
which is as of June 26, 1997

F-2
<PAGE> 80

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholder of Network Solutions, Inc.

In our opinion, the accompanying statements of operations, of changes in
stockholder's equity and of cash flows present fairly, in all material respects,
the results of operations and cash flows for Network Solutions, Inc.
("Predecessor") for the period from January 1, 1995 to March 10, 1995 and for
the year ended December 31, 1994 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP

Falls Church, VA
March 17, 1997, except as to Note 13
which is as of June 26, 1997

F-3
<PAGE> 81

NETWORK SOLUTIONS, INC.

STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
MARCH 31,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 5,000 $15,540,000 $12,483,000
Accounts receivable, net............................ 4,040,000 12,587,000 9,608,000
Prepaids and other assets........................... 11,000 936,000 1,316,000
Restricted assets................................... 1,408,000 17,453,000 23,813,000
Deferred tax asset.................................. 1,310,000 10,087,000 9,720,000
----------- ----------- -----------
Total current assets.................................. 6,774,000 56,603,000 56,940,000
Furniture and equipment, net.......................... 1,067,000 2,266,000 3,380,000
Deferred tax asset.................................... 911,000 4,968,000 4,431,000
Goodwill, net......................................... 2,996,000 2,281,000 2,099,000
----------- ----------- -----------
Total Assets.......................................... $11,748,000 $66,118,000 $66,850,000
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued liabilities............ $ 1,355,000 $ 2,581,000 $ 2,898,000
Deferred revenue, net............................... 1,993,000 19,912,000 25,345,000
Net liabilities of discontinued operations.......... 208,000 -- --
Due to parent....................................... 2,369,000 15,295,000 148,000
Internet fund liability............................. 1,408,000 17,453,000 23,813,000
Current portion of capital lease obligations........ -- -- 99,000
----------- ----------- -----------
Total current liabilities............................. 7,333,000 55,241,000 52,303,000
Long-term deferred revenue, net....................... 1,353,000 9,440,000 11,555,000
Capital lease obligations............................. -- -- 1,039,000
----------- ----------- -----------
Total liabilities..................................... 8,686,000 64,681,000 64,897,000
Stockholder's equity:
Preferred stock, $.001 par value, authorized
10,000,000 shares; none issued and outstanding... -- -- --
Class A Common stock, $.001 par value; authorized
100,000,000 shares; none issued and
outstanding...................................... -- -- --
Class B Common stock, $.001 par value, authorized
40,000,000 shares; 12,500,000 issued and
outstanding...................................... 12,000 12,000 12,000
Additional paid-in capital.......................... 4,468,000 4,468,000 4,468,000
Accumulated deficit................................. (1,418,000) (3,043,000) (2,527,000)
----------- ----------- -----------
Total stockholder's equity............................ 3,062,000 1,437,000 1,953,000
Commitments and contingencies.........................
----------- ----------- -----------
Total Liabilities and Stockholder's Equity............ $11,748,000 $66,118,000 $66,850,000
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE> 82

NETWORK SOLUTIONS, INC.

STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

PREDECESSOR COMPANY COMPANY
-------------------------------- ------------------------------- -------------------------
YEAR ENDED JANUARY 1, 1995 MARCH 11, 1995 YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, TO MARCH 10, TO DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1995 1996 1996 1997
------------ ---------------- --------------- ------------ ----------- ----------
(UNAUDITED)

<S> <C> <C> <C> <C> <C> <C>
Net revenue................. $ 5,029,000 $ 1,177,000 $ 5,309,000 $18,862,000 $ 2,333,000 $8,655,000
Cost of revenue............. 3,073,000 884,000 4,820,000 14,666,000 2,950,000 5,294,000
----------- ------------ ----------- ----------- ----------- ----------
Gross profit (loss)......... 1,956,000 293,000 489,000 4,196,000 (617,000) 3,361,000
Research and development
expenses.................. -- -- -- 680,000 -- 311,000
Selling, general and
administrative expenses... 1,544,000 280,000 2,114,000 6,280,000 921,000 2,301,000
Interest expense (income)
(includes related party
interest expense of
$52,000 for the period
March 11, 1995 to December
31, 1995 and interest
income of $496,000 for
1996)..................... 109,000 9,000 52,000 (496,000) -- (149,000)
----------- ------------ ----------- ----------- ----------- ----------
Income (loss) from
continuing operations
before income taxes....... 303,000 4,000 (1,677,000) (2,268,000) (1,538,000) 898,000
Provision (benefit) for
income taxes.............. 114,000 48,000 (287,000) (643,000) (436,000) 382,000
----------- ------------ ----------- ----------- ----------- ----------
Income (loss) from
continuing operations..... 189,000 (44,000) (1,390,000) (1,625,000) (1,102,000) 516,000
Loss from discontinued
operations, net of income
taxes..................... (1,169,000) (1,375,000) (28,000) -- -- --
----------- ------------ ----------- ----------- ----------- ----------
Net income (loss)........... $ (980,000) $ (1,419,000) $(1,418,000) $(1,625,000) $(1,102,000) $ 516,000
=========== ============ =========== =========== =========== ==========
Unaudited pro forma net
income (loss) per share... $ $ $
=========== =========== ==========
Unaudited pro forma shares
used in computing income
(loss) per share..........
=========== =========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE> 83

NETWORK SOLUTIONS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL RETAINED TOTAL
-------------------- ------------------ PAID-IN EARNINGS STOCKHOLDER'S
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
---------- ------- ------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR
Balance, December 31, 1993................. 1,159,000 $12,000 115,000 $(673,000) $1,275,000 $ 607,000 $ 1,221,000
Purchase of treasury stock............... -- -- 7,000 (25,000) -- -- (25,000)
Issuance of treasury stock............... -- -- (12,000) 70,000 (34,000) -- 36,000
Net loss for the year ended December 31,
1994................................... -- -- -- -- -- (980,000) (980,000)
---------- ------- ------- --------- ---------- ----------- -----------
Balance, December 31, 1994................. 1,159,000 12,000 110,000 (628,000) 1,241,000 (373,000) 252,000
Purchase of treasury stock............... -- -- 7,000 (30,000) -- -- (30,000)
Net loss for the period from January 1 to
March 10, 1995......................... -- -- -- -- -- (1,419,000) (1,419,000)
---------- ------- ------- --------- ---------- ----------- -----------
Balance, March 10, 1995.................... 1,159,000 $12,000 117,000 $(658,000) $1,241,000 $(1,792,000) $(1,197,000)
========== ======= ======= ========= ========== =========== ===========
COMPANY
Purchase of outstanding common shares by
SAIC on March 10, 1995................... 12,500,000 $12,000 $4,468,000 $ -- $ 4,480,000
Net loss for the period from March 11 to
December 31, 1995........................ -- -- -- (1,418,000) (1,418,000)
---------- ------- ---------- ----------- -----------
Balance, December 31, 1995................. 12,500,000 12,000 4,468,000 (1,418,000) 3,062,000
Net loss for the year ended December 31,
1996................................... -- -- -- (1,625,000) (1,625,000)
---------- ------- ---------- ----------- -----------
Balance, December 31, 1996................. 12,500,000 12,000 4,468,000 (3,043,000) 1,437,000
Net income for the three months ended March
31, 1997................................. -- -- -- 516,000 516,000
---------- ------- ---------- ----------- -----------
Balance, March 31, 1997 (Unaudited)........ 12,500,000 $12,000 $4,468,000 $(2,527,000) $ 1,953,000
========== ======= ========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE> 84

NETWORK SOLUTIONS, INC.

STATEMENTS OF CASH FLOWS

PREDECESSOR COMPANY COMPANY
-------------------------------- ------------------------------- ----------------------------
YEAR ENDED JANUARY 1, 1995 MARCH 11, 1995 YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, TO MARCH 10, TO DECEMBER 31, DECEMBER 31, MARCH 31,
1994 1995 1995 1996 1996 1997
------------ ---------------- --------------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)............ $ (980,000) $ (1,419,000) $(1,418,000) $(1,625,000) $ (1,102,000) $ 516,000
Adjustments to reconcile net
loss to net cash provided
by (used in) operating
activities:
Net loss from discontinued
operations............... 1,169,000 1,376,000 28,000 -- -- --
Depreciation and
amortization............. 338,000 68,000 765,000 1,417,000 235,000 365,000
Provision for uncollectible
accounts receivable...... -- -- 124,000 3,597,000 387,000 2,163,000
Deferred income taxes...... -- -- (2,221,000) (12,834,000) (2,135,000) 904,000
Change in operating assets
and liabilities:
Decrease (increase) in
accounts receivable.... 322,000 (161,000) (3,385,000) (12,144,000) (3,123,000) 816,000
Decrease (increase) in
prepaid and other
assets................. 22,000 (36,000) 45,000 (925,000) 6,000 (380,000)
(Increase) decrease in
deposits............... -- (49,000) 1,053,000 -- -- --
Increase (decrease) in
accounts payable and
accrued liabilities.... 219,000 233,000 282,000 1,226,000 (313,000) 317,000
(Decrease) increase in
other liabilities...... (7,000) 8,000 (89,000) -- -- --
Increase (decrease) in
deferred revenue....... 64,000 (30,000) 3,239,000 26,006,000 4,852,000 7,548,000
----------- ------------ ----------- ----------- ------------ ------------
Net cash provided by
(used in) operating
activities........... 1,147,000 (10,000) (1,577,000) 4,718,000 (1,193,000) 12,249,000
----------- ------------ ----------- ----------- ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of furniture and
equipment................ (266,000) (134,000) (518,000) (1,901,000) (897,000) (159,000)
Net investment in net
assets of discontinued
operations............... (759,000) 331,000 563,000 (208,000) (208,000) --
----------- ------------ ----------- ----------- ------------ ------------
Net cash (used in)
provided by investing
activities........... (1,025,000) 197,000 45,000 (2,109,000) (1,105,000) (159,000)
----------- ------------ ----------- ----------- ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from bank
borrowings............... 173,000 -- -- -- -- --
Repayment of bank
borrowings............... (170,000) (293,000) (834,000) -- -- --
Net transactions with
SAIC..................... -- -- 2,371,000 12,926,000 2,306,000 (15,147,000)
Issuance of treasury
stock.................... 36,000 -- -- -- -- --
Purchase of treasury
stock.................... (25,000) (30,000) -- -- -- --
----------- ------------ ----------- ----------- ------------ ------------
Net cash provided by
(used in) financing
activities........... 14,000 (323,000) 1,537,000 12,926,000 2,306,000 (15,147,000)
----------- ------------ ----------- ----------- ------------ ------------
Net increase (decrease)
in cash and cash
equivalents.......... 136,000 (136,000) 5,000 15,535,000 8,000 (3,057,000)
Cash and cash equivalents,
beginning of period........ -- 136,000 -- 5,000 5,000 15,540,000
----------- ------------ ----------- ----------- ------------ ------------
Cash and cash equivalents,
end of period.............. $ 136,000 $ -- $ 5,000 $15,540,000 $ 13,000 $ 12,483,000
=========== ============ =========== =========== ============ ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-7
<PAGE> 85

NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION

Network Solutions, Inc. (the "Company") was incorporated in the District of
Columbia in 1979 and was reincorporated in Delaware in 1996. The Company
currently acts as the exclusive registrar of Internet domain names within the
.com, .org, .net, .edu and .gov top level domains ("TLDs") pursuant to a
Cooperative Agreement with the National Science Foundation ("NSF") (Note 2). The
Company also provides Intranet consulting and network design and implementation
services to large companies that desire to establish or enhance their Internet
presence or to "re-engineer" legacy network infrastructures to accommodate the
integration of both Internet connectivity and Intranet network technology into
their information technology base.

The Company was acquired by Science Applications International Corporation
("SAIC") on March 10, 1995 (the "acquisition"). The Company currently is a
wholly-owned subsidiary of SAIC. Prior to the acquisition of the Company by
SAIC, the Company's business included government contracts awarded to the
Company based in part upon its then minority ownership status. These contracts
were transferred into a separately-owned entity prior to the SAIC acquisition.
Accordingly, the business acquired by SAIC consisted of remaining government
contracts awarded to the Company and commercial contracts. Subsequent to the
SAIC acquisition, the commercial and remaining government-related activities of
the Company have continued to be accounted for as separate divisions.

In November 1995, SAIC adopted a plan to transfer the Company's remaining
government-based business to SAIC in order to focus on the growth of the
Company's commercial business, which business includes Internet registration
services and Intranet services. Such transfer was substantially completed as of
February 1996. The activities of both the minority-based government business,
which was transferred into a separate entity prior to the acquisition of the
Company by SAIC, and the remaining government-based business, which was
transferred to SAIC, are reflected as discontinued operations in the financial
statements of the Company for all periods presented (Note 11). The commercial
operations, as defined, are reflected as continuing operations in the financial
statements of the Company for all periods presented.

Under the terms of the acquisition agreement, Network Solutions, Inc. was
acquired by SAIC on March 10, 1995 in a stock-for-stock transaction accounted
for as a purchase. The fair market value of the SAIC stock exchanged for the
outstanding stock of NSI was approximately $3.9 million. The acquisition
agreement provided for certain purchase adjustments and related additional stock
issuance payments of approximately $600,000. After reflecting certain purchase
accounting adjustments, the net assets included on the opening balance sheet
were as follows:

<TABLE>
<S> <C>
Current assets.......................................................... $ 929,000
Furniture and equipment................................................. 734,000
Goodwill................................................................ 3,576,000
Other non-current assets................................................ 1,047,000
----------
6,286,000
Current liabilities..................................................... 1,625,000
Net liabilities of discontinued operations.............................. 181,000
----------
Net assets acquired at March 11, 1995.............................. $4,480,000
==========
</TABLE>

The excess of the purchase price over the estimated fair value of net
assets acquired has been reflected as goodwill and is being amortized over five
years.

F-8
<PAGE> 86

NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)
The financial statements for periods subsequent to March 10, 1995 are
presented on the new basis of accounting arising from the acquisition. The
financial statements for the period from January 1, 1995 to March 10, 1995 and
for the year ended December 31, 1994 are presented on the Company's previous
basis of accounting. Subsequent to the acquisition, the results of continuing
and discontinued operations include allocations by SAIC of: (i) costs for
administrative functions and services performed on behalf of the continuing and
discontinued operations of the Company by centralized staff groups within SAIC,
(ii) SAIC's general corporate expenses, (iii) pension and other retirement
benefit costs, and (iv) cost of capital (Notes 5, 9 and 10). Only costs directly
attributable to the Company's government-based business that will not be
incurred by the Company subsequent to the transfer of this business to SAIC have
been included in discontinued operations.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NSF COOPERATIVE AGREEMENT

In January 1993, the Company entered into the Cooperative Agreement with
the NSF under which the Company provides Internet registration services for five
TLDs. The Cooperative Agreement is subject to review by the NSF on an annual
basis in March of each year but may be terminated by the NSF at any time at its
discretion or by mutual agreement. The agreement expires in March 1998. The
Company intends to continue to function as a registrar of Internet domain names.

The original terms of the Cooperative Agreement provided for a cost
reimbursement plus fixed-fee contract (with a fee of 8%). Effective September
14, 1995, the NSF and the Company amended the Cooperative Agreement to authorize
the Company to begin charging a subscription fee of $50 per year to the
end-users for each second level domain name in the .com, .org, .net, .edu and
.gov TLDs. The Company's registrants pay a subscription fee of $100 for two
years for initial registrations and $50 per year payable in advance for renewals
of initial registrations. Under the terms of the amendment to the Cooperative
Agreement, 30% of such registration or renewal fees collected by the Company are
required to be set aside to be reinvested for the enhancement of the
intellectual infrastructure of the Internet and, as such, are not recognized as
net revenue by the Company. The Company has reflected the cash funds that have
been set aside, together with an allocation of net accounts receivable expected
to be set aside upon collection of the cash (Note 3), as restricted assets and
has also recorded a corresponding liability. The Company maintains the cash
received relating to the set aside funds in a separate interest-bearing account.
Restricted cash at December 31, 1996 and 1995 was approximately $13,049,000 and
$122,000, respectively. These funds, plus any interest earned, will be disbursed
in a manner approved by the NSF. As of December 31, 1996, none of these funds
have been disbursed. Future receipts and disbursements of these funds will not
have an effect on the Company's business, net financial position, or results of
operations. For purposes of the Statement of Cash Flows, amounts relating to
Restricted Assets and the Internet Fund Liability have been excluded in their
entirety.

REVENUE RECOGNITION

Prior to September 14, 1995, net revenue was recognized under the
Cooperative Agreement on the basis of direct costs plus allowable indirect costs
and the earned portion of the fee. Since September 14, 1995, fees for Internet
registration services provided by the Company have been recognized on a
straight-line basis over the life of the registration term. The Company records
revenue net of an estimated provision for uncollectible accounts receivable
(Note 3).

F-9
<PAGE> 87

NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Substantially all of the Company's Intranet services revenue is derived
from professional services which are generally provided to clients on a "time
and expense" basis. Professional services revenue is recognized as services are
performed. The Company performs a limited number of fixed-price projects under
which revenue is recognized using the percentage-of-completion method, based
upon costs incurred in comparison to total anticipated costs. The Company also
derives revenue from remote monitoring and hosting services; however, such
revenue has not been significant to date. Remote monitoring and hosting revenue
is recognized ratably over the term of the contract.

Certain aspects of a number of the Company's contracts are subject to
audits at the customer's discretion. Management believes that the results of any
such audits will not have a material effect on NSI's financial position or
results of operations.

DEFERRED REVENUE

Deferred revenue primarily represents the unearned portion of revenue
related to the unexpired term of Internet registration fees, net of an estimate
for uncollectible accounts receivable (Note 3).

CASH AND CASH EQUIVALENTS

The Company's policy is to include short-term investments with original
maturities of ninety days or less within cash and cash equivalents.

FINANCIAL INSTRUMENTS

The recorded value of the Company's financial instruments, which include
accounts receivable and accounts payable, approximates market value. Net revenue
from two customers approximated 63% and 22% in 1994, 45% and 21% for the period
from January 1, 1995 to March 10, 1995, 40% and 21% for the period from March
11, 1995 to December 31, 1995, and 20% and 0% for the year ended December 31,
1996. One of these customers was the National Science Foundation, whose impact
on the above percentage of revenues was reflective of activity prior to the
September 14, 1995 amendment of the Cooperative Agreement. Concentration of
credit risk with respect to registration receivables is limited due to the wide
variety and number of customers, as well as their dispersion across geographic
areas. The Company has no derivative financial instruments.

FURNITURE AND EQUIPMENT

Furniture and equipment are stated at cost. Depreciation on furniture,
office and computer equipment is calculated principally using a
declining-balance method over the useful lives of three to seven years.
Leasehold improvements are amortized using the straight-line method over the
shorter of the lease term or the estimated lives of the assets, generally six
years.

GOODWILL

Goodwill represents the excess of the purchase cost over the fair value of
net assets acquired in the acquisition and is amortized over five years using
the straight-line method. The Company periodically reviews goodwill to assess
recoverability, and impairments are recognized in the results of operations, as
appropriate. The measurement of possible impairment is based primarily on the
ability to recover the balance of the goodwill from expected future operating
cash flows on an undiscounted basis. Amortization expense for the period from
March 11, 1995 to December 31, 1995 of $580,000 and $715,000 for the year ended
December 31, 1996 was included in general and administrative expenses.

F-10
<PAGE> 88

NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SOFTWARE DEVELOPMENT COSTS

Research and development costs are expensed as incurred. In accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86 "Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed", the
Company has not capitalized software development costs incurred as of December
31, 1996. Research and development costs incurred for all periods presented
prior to December 31, 1995 were reimbursed to the Company by direct charges to
contracts and are included in cost of revenue for those periods.

INCOME TAXES

Deferred taxes are accounted for under SFAS No. 109 "Accounting for Income
Taxes", which is an asset and liability method of accounting for income taxes.
The liability method requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between carrying amounts and tax bases of assets and liabilities. A valuation
allowance is recorded if it is "more likely than not" that some portion of or
all of a deferred tax asset will not be realized. Additionally, under the
liability method, changes in tax rates and laws will be reflected in income in
the period such changes are enacted. For federal income tax purposes, the
Company's results will be included in SAIC's consolidated tax return.

For periods subsequent to the acquisition, income taxes are determined as
if the Company was a separate taxpayer. Income taxes currently payable have been
charged by the Company to the due to parent account in the period that the
liability arose. Income taxes currently receivable have been charged to the due
to parent account in the period that a refund could have been recognized by the
Company had the Company been a separate taxpayer.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make reasonable estimates
and assumptions, based upon all known facts and circumstances that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements. Actual results could
differ from those estimates. Estimates requiring relatively greater levels of
judgment include the allowance for uncollectible accounts receivable, the
assessment of the need for a tax valuation allowance and the amortization period
for goodwill.

EARNINGS PER SHARE

Net income (loss) per share of common stock is calculated by dividing the
net income (loss) by the number of shares issued to SAIC in connection with the
reincorporation of the Company in Delaware, and common stock equivalent shares
from common stock options granted within one year of the initial public
offering. Common stock equivalent shares are calculated using the treasury stock
method. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common stock and common stock equivalent shares issued by the Company at
prices below the public offering price during the twelve month period prior to
the proposed offering date have been included in the calculation as if they were
outstanding since March 10, 1995 regardless of whether they are dilutive.

Earnings per share amounts will be presented once the initial offering
price is known.

F-11
<PAGE> 89

NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK BASED COMPENSATION

The Company accounts for its stock option and employee stock purchase plans
in accordance with the provisions of Accounting Principles Board Opinion ("APB")
No. 25, "Accounting for Stock Issued to Employees". No compensation cost has
been recognized by the Company for its employee stock plans. SFAS No. 123,
"Accounting for Stock-Based Compensation", provides an alternative accounting
method to APB No. 25 and requires additional pro forma disclosures (Note 10).
The Company expects to continue to account for its employee stock plans in
accordance with the provisions of APB No. 25.

INTERIM FINANCIAL INFORMATION (UNAUDITED)

Interim financial information for the three months ended March 31, 1996 and
1997 included herein is unaudited. However, in the opinion of the Company, the
interim financial information includes all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the results
for the interim periods. The results of operations for the three months ended
March 31, 1997 are not necessarily indicative of the results to be expected for
the full year ending December 31, 1997.

NOTE 3 -- RECEIVABLES

Receivables consist of the following amounts as of December 31:

<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Billed...................................................... $6,060,000 $27,430,000
Unbilled.................................................... 1,384,000 5,000,000
---------- -----------
Total accounts receivable before allowances............ 7,444,000 32,430,000
Less -- Allowance for doubtful accounts..................... (2,118,000) (15,439,000)
-- Accounts receivable allocable to 30% NSF set-aside
(Note 2)............................................ (1,286,000) (4,404,000)
---------- -----------
Accounts receivable, net.................................... $4,040,000 $12,587,000
========== ===========
</TABLE>

Unbilled receivables consist of costs which have been incurred on time and
expense contracts and Internet domain name registration fees which have not yet
been billed. Under the Cooperative Agreement, thirty percent of collected
registration fees is required to be set aside for disbursement at the direction
of the NSF.

In accounting for registration subscriptions, the Company records accounts
receivable and deferred revenue. An allowance for estimated uncollectible
accounts is recorded against both accounts receivable and deferred revenue.
Registration fee revenue is recognized on a straight-line basis over the
subscription period. The allowance offsetting deferred revenue is ratably
reduced as the underlying revenue is recognized. At such time, a corresponding
provision for uncollectible accounts receivable is recorded.

The provision for uncollectible accounts receivable was $124,000 and
$3,597,000 for the period from March 11, 1995 to December 31, 1995 and for the
year ended December 31, 1996, respectively. There was no provision necessary for
the year ended December 31, 1994 and for the period from January 1, 1995 to
March 10, 1995. The Company's allowance for uncollectible accounts receivable is
associated solely with its registration business. The Company believes it has
been necessary to establish its provision for uncollectible accounts receivable
principally due to the large number of individuals and corporations that have
registered multiple domain names with the apparent intention

F-12
<PAGE> 90

NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3 -- RECEIVABLES (CONTINUED)

of reselling such names at a profit. The Company's experience has been that, in
contrast to other subscribers, such resellers have a higher tendency of default
on their subscription fees.

NOTE 4 -- FURNITURE AND EQUIPMENT

Furniture and equipment consist of the following amounts as of December 31:

<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Furniture and office equipment............................. $ 782,000 $ 879,000
Computer equipment......................................... 2,248,000 4,033,000
Leasehold improvements..................................... 214,000 234,000
---------- ----------
Furniture and equipment, at cost...................... 3,244,000 5,146,000
Less accumulated depreciation and amortization............. (2,177,000) (2,880,000)
---------- ----------
Furniture and equipment, net.......................... $ 1,067,000 $ 2,266,000
========== ==========
</TABLE>

NOTE 5 -- DEBT

Interest expense reflected in continuing operations for the year ended
December 31, 1994 and the period January 1, 1995 to March 10, 1995 was $109,000
and $9,000, respectively. Interest expense reflected in discontinued operations
for the year ended December 31, 1994 and for the period from January 1, 1995 to
March 10, 1995 was $495,000 and $51,000, respectively. Interest charges prior to
the acquisition have been reflected in continuing and discontinued operations
based on the debt balances associated with each of the continuing and
discontinued operations for each of the periods. In addition, interest expense
of $52,000 and $164,000 for the period from March 11, 1995 to December 31, 1995
was allocated by SAIC to the Company's continuing operations and discontinued
operations, respectively, based upon SAIC's cost of capital calculation. For the
year ended December 31, 1996, interest revenue of $496,000 was allocated by SAIC
based upon the cost of capital calculation. The SAIC cost of capital formula
provides for charges and credits to the Company based upon management of certain
assets, including accounts receivable and fixed assets. Such amounts are not
necessarily indicative of the cost that would have been incurred if the Company
had been operated as a separate entity.

Effective January 1, 1997, the Company will no longer be subject to SAIC's
cost of capital calculation in connection with the Company fulfilling its own
treasury function. Interest paid for the year ended December 31, 1994, for the
periods from January 1, 1995 to March 10, 1995 and March 11,

F-13
<PAGE> 91

NETWORK SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 5 -- DEBT (CONTINUED)

1995 to December 31, 1995 and for the year ended December 31, 1996 was $74,000,
$0, $103,000 and $0, respectively.

NOTE 6 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following amounts as
of December 31:

<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Accounts payable............................................. $ 80,000 $1,054,000
Accrued expenses............................................. 565,000 1,412,000
Accrued payroll.............................................. 710,000 115,000
---------- ----------
Total accounts payable and accrued expenses.................. $1,355,000 $2,581,000
========== ==========
</TABLE>

NOTE 7 -- PROVISION FOR INCOME TAXES

The results of the Company subsequent to its acquisition by SAIC were
included in SAIC's consolidated tax returns. The tax expense allocation
methodology is set forth in Note 2.

The provision for (benefit) from income taxes charged to continuing
operations consists of the following:
<TABLE>
<CAPTION>
FOR THE PERIOD
1995
YEAR ENDED --------------------------- YEAR ENDED
DECEMBER 31, JANUARY 1 TO MARCH 11 TO DECEMBER 31,
1994 MARCH 10 DECEMBER 31 1996
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Current:
Federal...................... $ 95,000 $ 40,000 $ 1,521,000 $ 10,171,000
State........................ 19,000 8,000 311,000 2,020,000
-------- -------- ----------- ------------
Total current
provision............. 114,000 48,000 1,832,000 12,191,000
-------- -------- ----------- ------------
Deferred:
Federal...................... (1,759,000) (10,716,000)
State........................ (360,000) (2,118,000)
----------- ------------
Total deferred
benefit............... (2,119,000) (12,834,000)
----------- ------------
Provision for (benefit) from
income taxes.................... $114,000 $ 48,000 $ (287,000) $ (643,000)
======== ======== =========== ============
</TABLE>

Deferred tax assets are comprised of the following temporary differences as
of December 31:

<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Deferred revenue............................................ $2,082,000 $13,846,000
Accrued vacation pay........................................ 87,000 118,000
Provision for bad debts..................................... 48,000 1,091,000
Other....................................................... 4,000 --
---------- -----------
Total deferred tax asset.................................... $2,221,000 $15,055,000
========== ===========
</TABLE>

F-14
<PAGE> 92

Tax valuation allowances were provided through March 10, 1995 against the
net deferred tax assets of both continuing operations and discontinued
operations. In connection with the acquisition purchase accounting, a
determination was made that tax valuation allowances were no longer required.

A reconciliation of the provision for income taxes to the amount computed
by applying the statutory federal income tax rate to income (loss) before income
taxes is provided below. The statutory federal income tax rate used was 34% for
all periods presented through December 31, 1995 and 35% for the year ended
December 31, 1996.
<TABLE>
<CAPTION>
FOR THE PERIOD 1995 YEAR ENDED
YEAR ENDED --------------------------- DECEMBER
DECEMBER 31, JANUARY 1 TO MARCH 11 TO 31,
1994 MARCH 10 DECEMBER 31 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Federal tax at statutory rate............... $103,000 $ 1,000 $(570,000) $(794,000)
State income taxes, net of Federal tax
benefit................................... 13,000 -- (68,000) (96,000)
Nondeductible goodwill amortization......... 348,000 281,000
Other....................................... 4,000 1,000 3,000 (34,000)
Valuation allowance......................... (6,000) 46,000 -- --
-------- ------- --------- ---------
Provision for (benefit) from income taxes... $114,000 $48,000 $(287,000) $(643,000)
======== ======= ========= =========
</TABLE>

The Company paid taxes of $212,000 and $119,000 for the year ended December
31, 1994 and for the period from January 1, 1995 to March 10, 1995,
respectively.

NOTE 8 -- COMMITMENTS AND CONTINGENCIES

COMMITMENTS

Future minimum lease payments under noncancelable operating leases,
primarily for facilities, are:

<TABLE>
<CAPTION>
OPERATING
YEARS ENDING DECEMBER 31: LEASES
------------------------------------------------------------------------ ----------
<S> <C>
1997............................................................... $1,874,000
1998............................................................... 1,959,000
1999............................................................... 1,832,000
2000............................................................... 1,007,000
2001............................................................... 946,000
Thereafter......................................................... 869,000
----------
Total future minimum lease payments..................................... $8,487,000
==========
</TABLE>

In December 1992, the Company entered into a lease agreement for the
Company's headquarters in Herndon, Virginia that extended the lease term through
2002. Subsequent to the acquisition, SAIC re-negotiated the lease with the
landlord whereby SAIC has posted a $1,000,000 letter of credit. The Company does
not enter directly into any leases; all leases are entered into by SAIC and then
SAIC subleases the related assets to the Company under identical terms of the
head lease. Lease expense related to the continuing operations based upon space
utilized for the year ended December 31, 1994, for the periods from January 1,
1995 to March 10, 1995 and March 11, 1995 to December 31, 1995 and for the year
ended December 31,1996 was $194,000, $36,000, $342,000, and $924,000,
respectively. Lease expense incurred by the discontinued operations for the year
ended December 31, 1994 and for the periods from January 1, 1995 to March 10,
1995 and March 11, 1995 to December 31, 1995 was $1,079,000, $208,000 and
$328,000, respectively. Subsequent to March 10, 1995, the Company generated
rental income in 1995 of $135,000 and $187,000 for the year ended December 31,
1996, from two subleases, which was recorded on the same basis as rent expense.

F-15
<PAGE> 93

NOTE 8 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)

CONTINGENCIES

The Company is involved as plaintiff and defendant in litigation and
administrative proceedings primarily arising in the normal course of its
business. In the opinion of management, the Company's recovery, if any, or the
Company's liability, if any, under any pending litigation or administrative
proceeding will not materially affect its financial condition, results of
operations or cash flow.

As it relates to registration services, the applicability to the Company of
existing laws governing issues such as intellectual property ownership is
uncertain. Courts have indicated that, under certain circumstances, Internet
service providers could be held responsible for the failure to prevent the
distribution of material that infringes on others' copyrights and other
intellectual property. As further discussed below, there exists the likelihood
that the Company will become involved in future actions regarding disputes over
domain names. The future interpretation by the courts relating to the obligation
of domain name registration providers to prevent trademark infringement and
other legal issues is uncertain. Costs incurred or decisions rendered as a
result of any future government inquiry or other proceedings relating to any of
the foregoing could have a material adverse effect on the Company's business,
financial position and results of operations.

The Company has been named as a defendant in a number of lawsuits which
have generally involved domain name disputes between trademark owners and domain
name holders. Through March 17, 1997, no damages have been awarded to the
plaintiffs in any of the domain name lawsuits. The Company's domain name dispute
policy seeks to take a neutral position between these competing claims and is
designed to address claims that a domain name registered by the Company
infringes a third party's trademark. The Company is drawn into such disputes, in
part, as a result of claims by trademark owners that the Company is legally
required to, upon being requested to do so by a trademark holder, terminate the
right it granted to an alleged trademark infringer to register the domain name
in question. Further, trademark owners have also alleged that the Company should
be required to monitor future domain name registrations and reject registrations
of domain names which are identical or similar to their registered trademark.
The holders of the domain names registrations in dispute have, in turn,
questioned the Company's right to, absent a court order, take any action which
restricts or terminates their registration of the domain names in question. The
Company intends to vigorously defend itself in all such matters. In the opinion
of the management, the outcome of the existing lawsuits will not materially
affect the Company's financial condition, results of operations or cash flow.
However, such litigation has resulted in, and any future litigation can be
expected to result in, substantial legal and other expenses to the Company and a
diversion of the efforts of the Company's personnel.

See Note 14 "Subsequent Events" (Unaudited).

NOTE 9 -- TRANSACTIONS WITH SAIC

The financial statements as of and for the period from March 11, 1995 to
December 31, 1995 and for the year ended December 31, 1996 include significant
transactions with other SAIC business units involving functions and services
(such as cash management, tax administration, accounting, legal, data processing
and employee benefit plans) that were provided to the Company by centralized
SAIC organizations. The costs of these functions and services have been directly
charged and/or allocated to the Company using methods that management believes
are reasonable; primarily a percentage of budgeted administrative and overhead
costs. Such charges and allocations are not necessarily indicative of the costs
that would have been incurred if the Company had been a separate entity. During
August 1996, SAIC began charging the Company for corporate services provided by
SAIC at a rate equal to two-and-one half percent of annual net revenue. The
arrangement may be terminated by either party upon 180 days prior written
notice. Amounts charged and allocated to the Company for these functions and
services for the period from March 11, 1995 to December 31, 1995 and for the
year ended December 31, 1996 were $516,000 and $1,196,000, respectively, and are
principally included in

F-16
<PAGE> 94

NOTE 9 -- TRANSACTIONS WITH SAIC (CONTINUED)

Selling, General and Administrative expenses. Additionally, certain interest
charges/credits are allocated by SAIC to the Company (Note 5).

Sales as a subcontractor to SAIC for the period from March 11, 1995 to
December 31, 1995 and for the year ended December 31, 1996 were $509,000 and
$1,505,000, respectively. Due to Parent represents the cumulative net activity
of all transactions between the Company and SAIC.

NOTE 10 -- EMPLOYEE BENEFIT PLANS

SAIC BENEFIT PLANS

Employees of the Company participate in various SAIC benefit plans, subject
to the applicable eligibility requirements. SAIC charges the Company directly
for the costs of such employee benefit plans. Charges related to the
administration of the SAIC benefit plans in which employees of the Company
participate are included within SAIC general corporate allocations (Notes 1 and
9).

In 1995, SAIC merged two of its profit sharing retirement plans into one
principal Profit Sharing Retirement Plan in which eligible employees
participate. Participants' interests vest 25% per year in the third through
sixth year of service. Participants also become fully vested upon reaching age
59 1/2, permanent disability or death.

SAIC has an Employee Stock Ownership Plan (the "Plan") in which eligible
employees participate. Cash contributions to the Plan are based upon amounts
determined annually by the SAIC Board of Directors and are allocated to
participants' accounts based on their annual compensation. The vesting
requirements for the Plan are the same as for the Profit Sharing Retirement
Plan.

SAIC has one principal Cash or Deferred Arrangement ("CODA") which allows
eligible participants to defer a portion of their income through contributions.
Such deferrals are fully vested, are not taxable to the participant until
distributed from the CODA upon termination, retirement, permanent disability or
death and may be matched by SAIC.

SAIC has a Bonus Compensation Plan which provides for bonuses to reward
outstanding performance. Bonuses are paid in the form of cash, fully vested
shares of SAIC Class A common stock or vesting shares of SAIC Class A common
stock. Awards of vesting shares of SAIC Class A common stock vest at the rate of
20%, 20%, 20% and 40% after one, two, three and four years, respectively. During
the period from March 11, 1995 to December 31, 1995 and during the year ended
December 31, 1996 a total of 24,450 and 53,040 SAIC options were granted to the
Company's employees, respectively, with exercise prices ranging from $15.72 to
$17.79 and $19.33 to $22.83 per share, respectively, with a weighted average
price of $16.17 and $20.51, respectively.

In 1995, SAIC adopted the Stock Compensation Plan and the Management Stock
Compensation Plan, together referred to as the "Stock Compensation Plans." The
Stock Compensation Plans provide for awards of share units to eligible
employees, which share units generally correspond to shares of SAIC Class A
common stock which are held in trust for the benefit of participants.
Participants' interests in these share units vest on a seven year schedule at
the rate of one-third at the end of each of the fifth, sixth and seventh years
following the date of the award.

SAIC also has an Employee Stock Purchase Plan which allows eligible
employees to purchase shares of SAIC's Class A common stock, with SAIC currently
contributing 5% of the existing fair market value.

PRE-ACQUISITION BENEFIT PLANS

Prior to the acquisition, the Company had a plan (the "401(k) Plan")
covering substantially all employees which provided for employee savings under
Internal Revenue Code Section 401(k). Eligible employees under the 401(k) Plan
contributed from one percent to ten percent of gross pay to

F-17
<PAGE> 95

NOTE 10 -- EMPLOYEE BENEFIT PLANS (CONTINUED)

PRE-ACQUISITION BENEFIT PLANS (CONTINUED)

their plan savings account. The Company matched employee contributions to the
401(k) Plan, up to six percent of base salary. Contributions to the 401(k) Plan
for the year ended December 31, 1994 and for the period from January 1, 1995 to
March 10, 1995 were not significant. At the time of SAIC's acquisition of the
Company, all contributions to the 401(k) Plan ceased and the 401(k) Plan was
subsequently terminated.

1996 STOCK INCENTIVE PLAN

The 1996 Stock Incentive Plan (the "Incentive Plan") of the Company was
adopted by the Board of Directors on September 18, 1996. The Incentive Plan
provides for awards in the form of restricted shares, stock units, options
(including incentive stock options ("ISOs") and nonstatutory stock options
("NSOs")) or stock appreciation rights ("SARs"). Employees, outside directors,
consultants and advisors of the Company are eligible for the grant of restricted
shares, stock units, SARs and NSOs. Only employees are eligible for the grant of
ISOs. A total of 2,306,250 shares of Common Stock has been initially reserved
for issuance under the Incentive Plan. Such number of shares may be increased by
up to 2% of the total number of common shares of the Company outstanding at the
end of the most recent calendar year, subject to a cumulative increase of
1,000,000 common shares.

Consideration for each award under the Incentive Plan will be established
by the Compensation Committee of the Board of Directors, but in no event will
the option price for ISOs be less than 100% of the fair market value of the
stock on the date of grant. Awards will have such terms and be exercisable in
such manner and at such times as the Compensation Committee may determine.
However, each ISO must expire within a period of not more than ten years from
the date of grant.

As of December 31, 1996, a total of 100,900 ISOs and 1,124,825 NSOs have
been granted under the Incentive Plan, of which 461,250 will be exercisable at
$11.25 per share and 764,475 at $14.00 per share. The stock options become
exercisable one year after the date of the grant, vest 30%, 30%, 20% and 20% on
each anniversary date of the grant and have a term of five years. No options
have been exercised or forfeited. The weighted average contractual life of
options outstanding at December 31, 1996 was 4.9 years. No restricted shares,
stock units or SARs have been granted to date.

PRO FORMA DISCLOSURES

The weighted-average fair value of the options granted during the period
from March 11, 1995 to December 31, 1995 and during the year ended December 31,
1996 under the SAIC Bonus Compensation Plan were estimated at $3.66 and $4.30,
respectively, and $2.76 for the options granted during the year ended December
31, 1996 under the Company's Incentive Plan using the Black-Scholes model. The
following weighted average assumptions were used in calculating the option fair
values:

<TABLE>
<CAPTION>
NSI STOCK
SAIC STOCK OPTIONS OPTIONS
------------------------------ ----------
MARCH 11, 1995 YEAR ENDED YEAR ENDED
TO DECEMBER DECEMBER DECEMBER
31, 1995 31, 1996 31, 1996
-------------- ---------- ----------
<S> <C> <C> <C>
Expected life (years).............................. 4.0 4.0 4.0
Risk-free interest rate............................ 6.45% 5.91% 5.98%
Volatility......................................... 0.00% 0.00% 0.00%
Dividend yield..................................... 0.00% 0.00% 0.00%
</TABLE>

Under the above models, the total value of SAIC stock options granted
during 1995 and 1996 was approximately $89,000 and $228,000, respectively, and
$3,379,000 for the NSI stock options granted in 1996, all of which would be
amortized ratably on a pro forma basis over the four year option terms. Had the
Company recorded compensation costs for these plans in accordance with SFAS No.
123, the

F-18
<PAGE> 96

NOTE 10 -- EMPLOYEE BENEFIT PLANS (CONTINUED)

PRO FORMA DISCLOSURES (CONTINUED)

Company's pro forma net loss would have been $1,430,000 for the period March 11,
1995 to December 31, 1995 and $1,763,000 for the year ended December 31, 1996.
Net loss per share would have been $ for the year ended December 31, 1996.

NOTE 11 -- DISCONTINUED OPERATIONS

As discussed in Note 1, in November 1995 SAIC adopted a plan to transfer
the Company's government-based business to SAIC in order for NSI to focus on the
growth of the commercial business. Such transfer was substantially completed in
February 1996. Prior to SAIC's acquisition of NSI, the portion of the Company's
business relating to the minority-based government business had been transferred
into a separately-owned entity. The activities of both the minority-based
government business and the remaining government-based business are reflected as
discontinued operations in the financial statements of the Company for all
periods presented. Net income (loss) from discontinued operations exclude
general corporate overhead of the Company. No gain or loss was incurred as a
consequence of the transfer of these businesses.

The net liabilities for discontinued operations consisted of the following
as of December 31, 1995:

<TABLE>
<S> <C>
Assets:
Current............................................................ $5,306,000
Non-current........................................................ 249,000
----------
5,555,000
----------
Liabilities:
Current............................................................ 5,763,000
Non-current........................................................ --
----------
5,763,000
----------
Net liabilities -- discontinued operations.............................. $ (208,000)
==========
</TABLE>

Summary operating results of the discontinued operations were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD 1995
YEAR ENDED ----------------------------
DECEMBER 31, JANUARY 1 TO MARCH 11 TO
1994 MARCH 10 DECEMBER 31
------------ ------------ -----------
<S> <C> <C> <C>
Revenues............................................ $ 25,264,000 $ 4,270,000 $ 7,882,000
Costs and expenses.................................. (26,338,000) (5,478,000) (7,773,000)
------------ ------------ -----------
Income (loss) from discontinued operations before
income taxes...................................... (1,074,000) (1,208,000) 109,000
Provision for income taxes.......................... 95,000 167,000 137,000
------------ ------------ -----------
Loss from discontinued operations, net of income
taxes............................................. $ (1,169,000) $ (1,375,000) $ (28,000)
============ ============ ===========
</TABLE>

NOTE 12 -- EFFECT OF NEW ACCOUNTING PRONOUNCEMENT

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." This statement establishes standards for computing
and presenting earnings per share, simplifying previous standards for computing
earnings per share ("EPS") and making them comparable to international
standards. It replaces the presentation of primary EPS with a presentation of
basic EPS, and requires dual presentation of basic and diluted EPS on the face
of the income statement for all entities with complex capital structures. Basic
EPS excludes dilution and is computed by dividing income available to common
shareholders by the weighted-average number of common shares

F-19
<PAGE> 97

NOTE 12 -- EFFECT OF NEW ACCOUNTING PRONOUNCEMENT (CONTINUED)
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. SFAS No. 128 requires
restatement of all prior period earnings per share data presented, and is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. Earlier application is not permitted.

The Company will adopt this statement during the fourth quarter of 1997, as
required. Accordingly, all prior period EPS data will be restated. To illustrate
the effect of adoption, the Company has elected to disclose pro forma basic and
diluted EPS amounts computed using SFAS 128, as permitted by the standard. The
pro forma basic and diluted EPS for the year ended December 31, 1996, and for
the three months ended March 31, 1996 and 1997 are set forth below:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
YEAR ENDED ----------------------------------
DECEMBER 31, 1996 1996 1997
----------------- ----------- -----------
<S> <C> <C> <C>
Pro forma basic earnings per share............... $ $ $
================= =========== ===========
Pro forma diluted earnings per share............. $ $ $
================= =========== ===========
</TABLE>

Basic and diluted EPS amounts will be presented once the initial offering
price is known.

NOTE 13 -- RECAPITALIZATION

On June 26, 1997 the Board of Directors amended the Certificate of
Incorporation to provide for two classes of common stock, designated as Class A
and Class B. The accompanying financial statements have been adjusted to reflect
this change.

NOTE 14 -- SUBSEQUENT EVENTS (UNAUDITED)

Stock Incentive Plan

On April 18, 1997, the Board of Directors increased the number of shares
initially reserved for issuance under the Incentive Plan to 2,556,250. Between
January 1, 1997 and June 30, 1997, the Company granted options to purchase
294,000 shares of the Company's Class A common stock at $14.00 per share. In
addition, options to purchase 23,000 shares were canceled during that period.

Commitments

On May 30, 1997, the Company entered into an operating lease for additional
office facilities for the period from May 30, 1997 through July 31, 2002. During
the period from January 1, 1997 through May 31, 1997, the Company acquired
$2,455,000 of equipment under a capital lease.

Contingencies

On March 20, 1997, PG Media, Inc., a New York-based corporation ("PG
Media"), filed a lawsuit against the Company in the United States District
Court, Southern District of New York alleging that the Company had restricted
access to the Internet by not adding TLDs in violation of antitrust laws under
the Sherman Act. The Company has answered the complaint, but no motions are
pending and no schedule has yet been set by the court for these proceedings. In
addition, the Company recently received written direction from the NSF not to
take any action to create additional TLDs or to add any new TLDs to the Internet
root servers until further guidance is provided by the NSF. The Company believes
that it has meritorious defenses, and intends to vigorously defend itself
against such claims.

On June 27, 1997, SAIC received a Civil Investigative Demand ("CID") from
the U.S. Department of Justice ("DOJ") issued in connection with an
investigation to determine whether there is, has been,

F-20
<PAGE> 98

NOTE 14 -- SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)

or may be a violation of antitrust laws under the Sherman Act relating to
Internet registration products and services. The CID seeks documents and
information from SAIC and the Company relating to their Internet registration
business. Neither SAIC nor the Company is aware of the scope or nature of the
investigation. The Company cannot predict whether a civil action will ultimately
be filed by the DOJ or by private litigants as a result of the DOJ investigation
or, if filed, what such action would entail. The Company is unable to predict
the form of relief that might be sought in such an action or that might be
awarded by a court or entered as a result of any settlement between the Company
and the DOJ or private litigants. Any such relief could have a material adverse
effect on the Company's financial condition and results of operations.

F-21
<PAGE> 99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary........... 3
Risk Factors................. 8
Use of Proceeds.............. 23
Dividend Policy.............. 23
Capitalization............... 24
Dilution..................... 25
Selected Financial Data...... 26
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations................. 28
Business..................... 39
Management................... 54
Relationship with SAIC and
Certain Transactions....... 63
Principal Stockholder........ 66
Description of Capital
Stock...................... 67
Shares Eligible for Future
Sale....................... 72
Underwriting................. 74
Legal Matters................ 75
Experts...................... 75
Additional Information....... 75
Index to Financial
Statements................. F-1
</TABLE>

------------------

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

NETWORK SOLUTIONS, INC.

[LOGO]
CLASS A COMMON STOCK
-----------------------
PROSPECTUS
-----------------------

HAMBRECHT & QUIST
J.P. MORGAN & CO.
PAINEWEBBER INCORPORATED

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 100

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the securities
being registered hereby, other than underwriting discounts and commissions. All
amounts are estimated except the Securities and Exchange Commission registration
fee and the National Association of Securities Dealers, Inc. filing fee.

<TABLE>
<CAPTION>
PAYABLE BY
REGISTRANT
----------
<S> <C>
SEC registration fee.......................................... $ 10,606
National Association of Securities Dealers, Inc. filing fee... 4,000
Nasdaq Filing Fee............................................. *
Blue Sky fees and expenses.................................... *
Accounting fees and expenses.................................. *
Legal fees and expenses....................................... *
Printing and engraving expenses............................... *
Registrar and transfer agent's fees........................... *
Miscellaneous fees and expenses............................... *
--------
Total.................................................... $ *
========
</TABLE>

- ---------------
* To be filed by amendment. All expenses listed above are estimates except for
the SEC registration fee and the NASD filing fee.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). Article VIII of the Registrant's
Amended and Restated Certificate of Incorporation (Exhibit 3(i) hereto) provides
for indemnification of the Registrant's directors, officers, employees and other
agents to the extent and under the circumstances permitted by the Delaware
General Corporation Law. The Registrant has also entered into agreements with
its directors and officers that will require the Registrant, among other things,
to indemnify them against certain liabilities that may arise by reason of their
status or service as directors or officers to the fullest extent not prohibited
by law.

The Underwriting Agreement (Exhibit 1.1) provides for indemnification by
the Underwriters of the Registrant, its directors and officers, and by the
Registrant of the Underwriters, for certain liabilities, including liabilities
arising under the Act, and affords certain rights of contribution with respect
thereto.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since January 1, 1994, the Registrant has issued and sold (without payment
of any selling commission to any person) the following unregistered securities:

1. From October 14, 1996 to June 30, 1997, the Registrant granted incentive
stock options to purchase an aggregate of 100,900 shares of the Registrant's
Class A Common Stock to employees, officers and directors of the Registrant
under its 1996 Stock Incentive Plan at exercise prices ranging from $11.25 to
$14.00 per share. Certain of these options vest over a period of time following
their respective dates of grant pursuant to the Registrant's 1996 Stock
Incentive Plan.

II-1
<PAGE> 101

2. From October 14, 1996 to June 30, 1997, the Registrant granted
nonstatutory stock options to purchase an aggregate of 1,395,825 shares of the
Registrant's Class A Common Stock to employees, officers and directors of the
Company under its 1996 Stock Incentive Plan at exercise prices ranging from
$11.25 to $14.00 per share. Certain of these options vest over a period of time
following their respective dates of grant, pursuant to the Registrant's 1996
Stock Incentive Plan.

The sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder, or Rule 701 promulgated
under Section 3(b) of the Securities Act, as transactions by an issuer not
involving a public offering or transactions pursuant to compensatory benefit
plans and contracts relating to compensation as provided under such Rule 701.
The recipients of securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and instruments issued in such
transactions. All recipients had access, through their relationship with the
Company, to information about the Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3(i) Second Amended and Restated Certificate of Incorporation.
3(ii) Bylaws of the Registrant, as amended.
4.1* Form of Common Stock Certificate.
4.2 Reference is made to Exhibits 3(i) and 3(ii).
5.1* Opinion of Pillsbury Madison & Sutro LLP.
10.1 Cooperative Agreement between the National Science Foundation and Network Solutions,
Inc., as amended by Amendments Nos. 1, 2, 3 and 5.
10.2 Amendment No. 4 to the Cooperative Agreement dated September 13, 1995.
10.3 Master Services Agreement for System Management Services dated January 21, 1997 by
and between NationsBanc Services, Inc. and Network Solutions, Inc.
10.4 1996 Stock Incentive Plan and forms of agreements thereunder.
10.5* Corporate Services Agreement between Network Solutions, Inc. and Science Applications
International Corporation.
10.6* Tax Sharing Agreement between Network Solutions, Inc. and Science Applications
International Corporation.
10.7* Registration Rights Agreement between Network Solutions, Inc. and Science
Applications International Corporation.
10.8* Noncompetition and Corporate Opportunities Agreement between Network Solutions, Inc.
and Science Applications International Corporation.
11.1 Statement of computation of earnings per share.
23.1 Consent of Price Waterhouse LLP (see Page II-6).
23.2* Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1).
24.1 Power of Attorney (see Page II-4).
27.1 Financial Data Schedule.
</TABLE>

- ---------------
* To be filed by amendment.

(b) FINANCIAL STATEMENT SCHEDULES

Schedules other than those referred to above have been omitted because they
are not applicable or not required or because the information is included
elsewhere in the Financial Statements or the notes thereto.

II-2
<PAGE> 102

ITEM 17 UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(3) The Registrant will provide to the underwriters at the closing(s)
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

II-3
<PAGE> 103

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Herndon, State of
Virginia, on the 2nd day of July, 1997.

NETWORK SOLUTIONS, INC.

BY /s/ GABRIEL A. BATTISTA
------------------------------------
Gabriel A. Battista
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gabriel A. Battista and Robert J. Korzeniewski,
and each of them, his true and lawful attorneys-in-fact and agents, each with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments, including
post-effective amendments, to this Registration Statement, and any registration
statement relating to the offering covered by this Registration Statement and
filed pursuant to Rule 462(b) under the Securities Act of 1933 and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that each of said attorneys-in-fact and agents or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------- ----------------------------------- -------------
<C> <S> <C>
/s/ GABRIEL A. BATTISTA Chief Executive Officer and July 2, 1997
- ------------------------------------- Director
Gabriel A. Battista

/s/ ROBERT J. KORZENIEWSKI Chief Financial Officer (Principal July 2, 1997
- ------------------------------------- Financial Officer)
Robert J. Korzeniewski

/s/ RUSSELL L. HELBERT Controller (Principal Accounting July 2, 1997
- ------------------------------------- Officer)
Russell L. Helbert

/s/ MICHAEL A. DANIELS Chairman of the Board July 2, 1997
- -------------------------------------
Michael A. Daniels

/s/ J. ROBERT BEYSTER Director July 2, 1997
- -------------------------------------
J. Robert Beyster

/s/ CRAIG I. FIELDS Director July 2, 1997
- -------------------------------------
Craig I. Fields
</TABLE>

II-4
<PAGE> 104

<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------- ----------------------------------- -------------

- ------------------------------------- Director
John E. Glancy

/s/ WILLIAM A. ROPER, JR. Director July 2, 1997
- -------------------------------------
William A. Roper, Jr.

/s/ STRATTON D. SCLAVOS Director July 2, 1997
- -------------------------------------
Stratton D. Sclavos

/s/ DONALD N. TELAGE Director July 2, 1997
- -------------------------------------
Donald N. Telage
</TABLE>

II-5
<PAGE> 105

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 17, 1997, except as
to Note 13 which is as of June 26, 1997, relating to the financial statements of
Network Solutions, Inc., for the year ended December 31, 1996 and for the period
from March 11, 1995 to December 31, 1995 and of our report dated March 17, 1997,
except as to Note 13 which is as of June 26, 1997, relating to the financial
statements of Network Solutions, Inc., for the period from January 1, 1995 to
March 10, 1995 and for the year ended December 31, 1994, which appear in such
Prospectus. We also consent to the application of such reports to the Financial
Statement Schedule for the year ended December 31, 1996, the period from March
11, 1995 to December 31, 1995, the period from January 1, 1995 to March 10, 1995
and for the year ended December 31, 1994 listed under Item 16(b) of this
Registration Statement when such schedule is read in conjunction with the
financial statements referred to in our reports. The audits referred to in such
reports also included this schedule. We also consent to the reference to us
under the heading "Experts" in such Prospectus.

PRICE WATERHOUSE LLP

Falls Church, VA
June 30, 1997

II-6
<PAGE> 106

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
================================================================================================================
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
-------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING COSTS AND ACCOUNTS-- DEDUCTIONS-- BALANCE AT
DESCRIPTION OF YEAR EXPENSES DESCRIBE DESCRIBE END OF YEAR
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for doubtful accounts,
included in net assets
(liabilities) of discontinued
operations...................... $ 345,000 $ 464,000 $ -- $ -- $ 809,000
Deferred tax valuation allowance,
continuing operations........... 61,000 (6,000) -- 61,000 (6,000)
Deferred tax valuation allowance,
discontinued operations......... 355,000 137,000 -- 355,000 137,000
For the period from January 1, 1995 to
March 10, 1995
Allowance for doubtful accounts,
included in net assets
(liabilities) of discontinued
operations...................... 809,000 344,000 -- -- 1,153,000
Deferred tax valuation allowance,
continuing operations........... $ (6,000) $ 46,000 $ -- $ 6,000 $ 46,000(1)
Deferred tax valuation allowance,
discontinued operations......... 137,000 314,000 -- 137,000 314,000(1)
- ----------------------------------------------------------------------------------------------------------------

For the period from March 11, 1995 to
December 31, 1995
Allowance for doubtful accounts,
continuing operations........... $ -- $ 124,000 $ 1,994,000(2) $ -- $ 2,118,000
Allowance for doubtful accounts,
included in net assets
(liabilities) of discontinued
operations...................... 1,153,000 465,000 -- -- 1,618,000
Year ended December 31, 1996
Allowance for doubtful accounts,
continuing operations........... 2,118,000 3,597,000 19,270,000(2) 9,546,000 (3) 15,439,000
Allowance for doubtful accounts,
included in net assets
(liabilities) of discontinued
operations...................... $1,618,000 $ -- $ -- $1,618,000 (4) $ --
</TABLE>

- ---------------

(1) In connection with the acquisition purchase accounting, a determination was
made that the tax valuation allowances were no longer required. (See Note 7
of Notes to Financial Statements.)

(2) Charged to allowance for deferred revenue and the Internet fund liability
(See Notes 2 and 3 of Notes to Financial Statements).

(3) Amounts are write-offs of uncollectible accounts receivable.

(4) Disposition associated with discontinued operations (See Note 11 of Notes to
Financial Statements).
<PAGE> 107

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- ------ ---------------------------------------------------------------------------- ------
<S> <C> <C>
1.1* Form of Underwriting Agreement..............................................
3(i) Second Amended and Restated Certificate of Incorporation....................
3(ii) Bylaws of the Registrant, as amended........................................
4.1* Form of Common Stock Certificate............................................
4.2 Reference is made to Exhibits 3(i) and 3(ii)................................
5.1* Opinion of Pillsbury Madison & Sutro LLP....................................
10.1 Cooperative Agreement between the National Science Foundation and Network
Solutions, Inc., as amended by Amendments Nos. 1, 2, 3 and 5................
10.2 Amendment No. 4 to the Cooperative Agreement dated September 13, 1995.......
10.3 Master Services Agreement for System Management Services dated January 21,
1997 by and between NationsBanc Services, Inc. and Network Solutions,
Inc.........................................................................
10.4 1996 Stock Incentive Plan and forms of agreements thereunder................
10.5* Corporate Services Agreement between Network Solutions, Inc. and Science
Applications International Corporation......................................
10.6* Tax Sharing Agreement between Network Solutions, Inc. and Science
Applications International Corporation......................................
10.7* Registration Rights Agreement between Network Solutions, Inc. and Science
Applications International Corporation......................................
10.8* Noncompetition and Corporate Opportunities Agreement between Network
Solutions, Inc. and Science Applications International Corporation..........
11.1 Statement of computation of earnings per share..............................
23.1 Consent of Price Waterhouse LLP (see Page II-6).............................
23.2* Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1)..........
24.1 Power of Attorney (see Page II-4)...........................................
27.1 Financial Data Schedule.
</TABLE>

- ---------------
* To be filed by amendment.

<PAGE> 1
EXHIBIT 3(i)

SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION

NETWORK SOLUTIONS, INC, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, hereby
certifies as follows:

1. The name of the Corporation is Network Solutions, Inc. The
Corporation was originally incorporated under the name NSI
Merger Corporation.

2. The Corporation's original Certificate of Incorporation was
filed with the Secretary of State on July 16, 1996.

3. The Corporation's Amended and Restated Certificate of
Incorporation was filed with the Secretary of State on
September 19, 1996.

4. The Corporation's Amended and Restated Certificate of
Incorporation was amended to change the name of the
Corporation to Network Solutions, Inc. in an Agreement and
Plan of Merger filed with the Secretary of State on October
29, 1996.

5. The Second Amended and Restated Certificate of Incorporation
of this corporation, in the form attached hereto as Exhibit A,
has been duly adopted by the Board of Directors and by the
sole stockholder of the corporation in accordance with
Sections 242 and 245 of the General Corporation Law of the
State of Delaware.

6. The Second Amended and Restated Certificate of Incorporation
so adopted reads in full as set forth in Exhibit A attached
hereto and is hereby incorporated by reference.

IN WITNESS WHEREOF, Network Solutions, Inc. has caused this Second
Amended and Restated Certificate of Incorporation to be signed by its Chief
Financial Officer and attested to by its Secretary this 2nd day of July 1997.

/s/ ROBERT J. KORZENIEWSKI
---------------------------------
Robert J. Korzeniewski
Chief Financial Officer

Attest:

/s/ ALOMA H. AVERY
---------------------------------
Aloma H. Avery
Secretary
<PAGE> 2
EXHIBIT A

SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NETWORK SOLUTIONS, INC.

ARTICLE I

The name of the Corporation is Network Solutions, Inc. (hereinafter
the "Corporation").

ARTICLE II

The registered office of the Corporation within the State of Delaware
is located at 9 East Loockerman Street, City of Dover, County of Kent, Dover,
Delaware 19901. The name of its registered agent at that address is National
Corporate Research, Ltd.

ARTICLE III

The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware (the "GCL").

ARTICLE IV

A. The total number of shares of stock that the Corporation shall
have authority to issue is One-Hundred Forty Million (140,000,000) of which (i)
One-Hundred Million (100,000,000) shares shall be shares of Class A Common
Stock, $.001 par value per share (the "Class A Common Stock"), and Thirty
Million (30,000,000) shares shall be shares of Class B Common Stock, $.001 par
value per share (the "Class B Common Stock") (the Class A Common Stock and the
Class B Common Stock being collectively referred to herein as the "Common
Stock"), and (ii) Ten Million (10,000,000) shares shall be shares of Preferred
Stock, $.001 par value per share (the "Preferred Stock").

B. The number of authorized shares of any class or classes of
stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the
votes entitled to be cast by the holders of the Common Stock of the
Corporation, voting together as a single class, irrespective of

-1-
<PAGE> 3
the provisions of Section 242(b)(2) of the GCL or any corresponding provision
hereinafter enacted.

C. Upon the filing of this Amended and Restated Certificate of
Incorporation, each issued and outstanding share of Common Stock as of July 2,
1997, shall be automatically converted into one share of Class B Common Stock.

D. The following is a statement of the powers, preferences, and
relative participating, optional or other special rights and qualifications,
limitations and restrictions of the Class A Common Stock and Class B Common
Stock of the Corporation:

1. Except as otherwise set forth below in this ARTICLE
IV, the powers, preferences and relative participating, optional or
other special rights and qualifications, limitations or restrictions
of the Class A Common Stock and Class B Common Stock shall be
identical in all respects.

2. Subject to the rights of the holders of Preferred
Stock, and subject to any other provisions of this Second Amended and
Restated Certificate of Incorporation, holders of Class A Common Stock
and Class B Common Stock shall be entitled to receive such dividends
and other distributions in cash, stock or property of the Corporation
as may be declared thereon by the Board of Directors of the
Corporation from time to time out of assets or funds of the
Corporation legally available therefor. If any dividend or other
distribution in cash or other property is paid with respect to Class A
Common Stock or with respect to Class B Common Stock (other than
dividends or other distributions payable in shares of Common Stock), a
like dividend or other distribution in cash or other property shall
also be paid with respect to shares of the other class of Common
Stock, in an amount equal per share. In the case of dividends or
other distributions payable in Common Stock, including distributions
pursuant to stock splits or divisions of Common Stock of the
Corporation, only shares of Class A Common Stock shall be paid or
distributed with respect to Class A Common Stock and only shares of
Class B Common Stock shall be paid or distributed with respect to
Class B Common Stock. The number of shares of Class A Common Stock
and Class B Common Stock so distributed shall be equal in number on a
per share basis. Neither the shares of Class A Common Stock nor the
shares of Class B Common Stock may be reclassified, subdivided or
combined unless such reclassification, subdivision or combination
occurs simultaneously and in the same proportion for each class.

-2-
<PAGE> 4
3. (a) At every meeting of the stockholders of the
Corporation, every holder of Class A Common Stock shall be entitled to
one vote in person or by proxy for each share of Class A Common Stock
standing in his or her name on the transfer books of the Corporation,
and every holder of Class B Common Stock shall be entitled to ten
votes in person or by proxy for each share of Class B Common Stock
standing in his or her name on the transfer books of the Corporation
in connection with the election of directors and all other matters
submitted to a vote of the stockholders; provided, however, that with
respect to any proposed conversion subsequent to a Tax-Free Spin-Off
(as defined in paragraph (D)(6)(b) below) of the shares of Class B
Common Stock into shares of Class A Common Stock pursuant to paragraph
(D)(6)(b) below, each holder of a share of Common Stock, irrespective
of class, shall have one vote in person or by proxy for each share of
Common Stock standing in his or her name on the transfer books of the
Corporation. Except as may be otherwise required by this ARTICLE IV,
the holders of Class A Common Stock and Class B Common Stock shall
vote together as a single class, subject to any voting rights which
may be granted to holders of Preferred Stock, on all matters submitted
to a vote of the holders of Common Stock.

(b) Subject to any rights of the holders of Preferred Stock,
the provisions of this Second Amended and Restated Certificate of
Incorporation shall not be modified, revised, altered or amended,
repealed or rescinded in whole or in part, without the approval of a
majority of the votes entitled to be cast by the holders of the Class
A Common Stock and the Class B Common Stock, voting together as a
single class; provided, however, that with respect to any proposed
amendment of this Second Amended and Restated Certificate of
Incorporation which would alter or change the powers, preferences or
special rights of the shares of Class A Common Stock or Class B Common
Stock so as to affect them adversely, the approval of a majority of
the votes entitled to be cast by the holders of the shares affected by
the proposed amendment, voting separately as a class, shall be
obtained in addition to the approval of a majority of the votes
entitled to be cast by the holders of the Class A Common Stock and the
Class B Common Stock voting together as a single class as hereinbefore
provided. Any increase in the authorized number of shares of any
class or classes of stock of the Corporation or creation,
authorization or issuance of any securities convertible into, or
warrants, options or similar rights to purchase, acquire or receive,
shares of any such class or classes of stock shall be

-3-
<PAGE> 5
deemed not to affect adversely the powers, preferences or special
rights of the shares of Class A Common Stock or Class B Common Stock.
Neither the outcome of any vote with respect to any proposed
conversion subsequent to a Tax-Free Spin-Off of the shares of Class B
Common Stock into shares of Class A Common Stock pursuant to paragraph
(D)(6)(b) below nor the occurrence of the events described in the last
sentence of paragraph (D)(6)(b)(iii) below shall be deemed to be a
modification, revision, alteration, amendment, repeal or rescission of
the provisions of this Second Amended and Restated Certificate of
Incorporation.

(c) Every reference in this Second Amended and Restated
Certificate of Incorporation to a majority or other proportion of
shares of Common Stock, Class A Common Stock or Class B Common Stock
shall refer to such majority or other proportion of the votes to which
such shares of Common Stock, Class A Common Stock or Class B Common
Stock, as applicable, are entitled.

4. In the event of any dissolution, liquidation or
winding up of the affairs of the Corporation, whether voluntary or
involuntary, after payment in full of the amounts required to be paid
to the holders of Preferred Stock, the remaining assets and funds of
the Corporation shall be distributed pro rata to the holders of Class
A Common Stock and Class B Common Stock. For the purposes of this
paragraph (D)(4), the voluntary sale, conveyance, lease, exchange or
transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the assets of the
Corporation or a consolidation or merger of the Corporation with one
or more other corporations (whether or not the Corporation is the
corporation surviving such consolidation or merger) shall not be
deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary.

5. In the event of (i) any reorganization or any
consolidation of the Corporation with one or more other corporations
or a merger of the Corporation with another corporation unless (ii)
immediately following such event, and based solely on the securities
issued in connection therewith, a majority of the total voting power
of the successor corporation is held by Persons that were stockholders
of the Corporation immediately prior to such event, each holder of a
share of Class A Common Stock shall be entitled to receive with
respect to such share the same kind and amount of shares of stock and
other securities and property (including cash) receivable upon such

-4-
<PAGE> 6
reorganization, consolidation or merger by a holder of a share of
Class B Common Stock and each holder of a share of Class B Common
Stock shall be entitled to receive with respect to such share the same
kind and amount of shares of stock and other securities and property
(including cash) receivable upon such reorganization, consolidation or
merger by a holder of a share of Class A Common Stock.

6. (a) Prior to the date on which shares of Class B Common
Stock are distributed to stockholders of SAIC (as defined in paragraph
(D)(6)(b) below), or to stockholders of the Class B Transferee (as
defined in paragraph (D)(6)(b) below) in a Tax-Free Spin-Off, each
record holder of shares of Class B Common Stock may convert from time
to time any or all of such shares into an equal number of shares of
Class A Common Stock by surrendering the certificates for such shares,
accompanied by any required tax transfer stamps and by a written
notice by such record holder to the Corporation stating that such
record holder desires to convert such shares of Class B Common Stock
into the same number of shares of Class A Common Stock and requesting
that the Corporation issue all of such shares of Class A Common Stock
to Persons (as defined in paragraph (D)(6)(b) below) named therein,
setting forth the number of shares of Class A Common Stock to be
issued to each such Person and the denominations in which the
certificates therefor are to be issued. To the extent permitted by
law, such voluntary conversion shall be deemed to have been effected
at the close of business on the date of such surrender. Following a
Tax-Free Spin-Off, shares of Class B Common Stock shall no longer be
convertible into shares of Class A Common Stock except as set forth in
paragraph (D)(6)(b) below.

(b)(i) Prior to a Tax-Free Spin-Off, each share of Class B
Common Stock shall automatically convert into one share of Class A
Common Stock immediately prior to the transfer of such share if, after
such transfer, such share is not Beneficially Owned (as defined below)
by SAIC or, as set forth below in this paragraph (D)(6)(b), by the
Class B Transferee or any subsidiary of the Class B Transferee.
Shares of Class B Common Stock shall not convert into shares of Class
A Common Stock (x) in any transfer effected in connection with a
distribution of Class B Common Stock as a spin-off, split-up or
split-off to stockholders of SAIC or stockholders of the Class B
Transferee intended to be on a tax-free basis under the Internal
Revenue Code of 1986, as amended from time to time (the "Code") (a
"Tax-Free Spin-Off") or (y) except as otherwise set forth below in
this paragraph (D)(6)(b),

-5-
<PAGE> 7
in any transfer after a Tax-Free Spin-Off. For purposes of this
paragraph (D)(6), a Tax-Free Spin-Off shall be deemed to have occurred
at the time shares are first transferred to stockholders of SAIC or
stockholders of the Class B Transferee, as the case may be, following
receipt of an affidavit described in clauses (vi) or (vii) of the
first sentence of paragraph (D)(6)(d) below. For purposes of this
paragraph (D)(6), Article X and Article XI, "SAIC" shall mean Science
Applications International Corporation, a Delaware corporation, all
successors to Science Applications International Corporation by way of
merger, consolidation or sale of all or substantially all its assets,
and all corporations, partnerships, joint ventures, associations and
other entities in which Science Applications International Corporation
Beneficially Owns (as defined below), directly or indirectly, 50% or
more of the outstanding voting stock, voting power or similar voting
interests ("Voting Interests") (each, a "Subsidiary Entity"), but
which shall not include the Corporation or any Subsidiary Entity in
which the Corporation Beneficially Owns, directly or indirectly, 50%
or more of the outstanding Voting Interests. For purposes of this
paragraph (D)(6), ARTICLE X and ARTICLE XI, the terms "Beneficially
Own," "Beneficially Owns" and "Beneficially Owned" shall have the
meanings ascribed to such terms in Rule 13d-3 of the General Rules and
Regulations of the Securities Exchange Act of 1934, as in effect on
July 2, 1997.

(ii) Prior to a Tax-Free Spin-Off, shares of Class B Common
Stock representing more than a 50% equity interest in the then
outstanding shares of Common Stock taken as a whole transferred in a
single transaction to one Person who is not an affiliate of SAIC
(together with its successors, the "Class B Transferee") or to the
Class B Transferee and any Subsidiary Entity of the Class B
Transferee, and shares of Class B Common Stock transferred among a
Class B Transferee and any Subsidiary Entity thereof, shall not
automatically convert to Class A Common Stock upon the transfer of
such shares. Any shares of Class B Common Stock retained by SAIC
following any such transfer of shares of Class B Common Stock to the
Class B Transferee shall automatically convert into shares of Class A
Common Stock upon such transfer. For purposes of this paragraph
(D)(6), the term "Person" shall mean any individual, firm, corporation
or other entity; each reference to an "individual" (or to a "record
holder" of shares, if an individual) shall be deemed to include in his
or her representative capacity a guardian, committee, executor,

-6-
<PAGE> 8
administrator or other legal representative of such individual or
record holder.

(iii) In the event of a Tax-Free Spin-Off, shares of Class B
Common Stock shall automatically convert into shares of Class A Common
Stock on the fifth anniversary of the date on which shares of Class B
Common Stock are first transferred to stockholders of SAIC or the
stockholders of the Class B Transferee, as the case may be, in a
Tax-Free Spin-Off unless, prior to such Tax-Free Spin-Off, SAIC or the
Class B Transferee, as the case may be, delivers to the Corporation
the written advice of counsel, reasonably satisfactory to the
Corporation, to the effect that (x) such conversion could adversely
affect the ability of SAIC or the Class B Transferee, as the case may
be, to obtain a favorable ruling from the Internal Revenue Service
that the distribution would be a Tax-Free Spin-Off under the Code or
(y) the Internal Revenue Service has adopted a general non-ruling
policy on tax-free spinoffs and that such conversion could adversely
affect the status of the transaction as a Tax-Free Spin-Off. If such
written advice of counsel is received, approval of such conversion
shall be submitted to a vote of the holders of the Common Stock as
soon as practicable after the fifth anniversary of the Tax-Free
Spin-Off. At the meeting of stockholders called for such purpose,
every holder of Common Stock shall be entitled to one vote
(irrespective of the voting rights provided for such shares under
paragraph (D)(3)(a) above) in person or by proxy for each share of
Common Stock standing in his or her name on the transfer books of the
Corporation. Approval of such conversion shall require the approval
of a majority of the votes, on the per share voting basis provided in
the preceding sentence, entitled to be cast by the holders of the
Class A Common Stock and Class B Common Stock present and voting,
voting together as a single class, and the holders of the Class B
Common Stock shall not be entitled to a separate class vote. Such
conversion shall be effective on the date on which such approval is
given at a meeting of stockholders called for such purpose.
Notwithstanding the foregoing, if SAIC or the Class B Transferee, as
the case may be, delivers to the Corporation prior to such anniversary
the written advice of counsel, reasonably satisfactory to the
Corporation, to the effect that such vote could adversely affect the
status of the transaction as a Tax-Free Spin-Off (including without
limitation the ability to obtain a favorable ruling from the Internal
Revenue Service), such vote shall not be held and no such conversion
shall take place. Upon delivery of such written advice of counsel as
to such vote, and

-7-
<PAGE> 9
the further advice that the continued existence of this paragraph
(D)(6)(b)(iii) itself could adversely affect the status of the
transaction as a Tax-Free Spin-Off (including without limitation the
ability to obtain a favorable ruling from the Internal Revenue
Service), then this paragraph (D)(6)(b)(iii) shall thereafter be null
and void and no longer be deemed to be part of this Second Amended and
Restated Certificate of Incorporation.

(iv) If at any time prior to a Tax-Free Spin-Off SAIC or a
Class B Transferee shall cease respectively to Beneficially Own a
number of outstanding shares of Class B Common Stock at least equal to
30% of the economic ownership represented by the aggregate number of
shares of Common Stock then outstanding, then each share of Class B
Common Stock Beneficially Owned by such less than 30% owner shall
automatically convert into one share of Class A Common Stock.

(v) The Corporation will provide notice of any automatic
conversion of all outstanding shares of Class B Common Stock to
holders of record as soon as practicable after the conversion;
provided, however, that the Corporation may satisfy such notice
requirement by providing such notice prior to conversion. Such notice
shall be provided by mailing notice of such conversion first class
postage prepaid, to each holder of record of the Common Stock, at such
holder's address as it appears on the transfer books of the
Corporation; provided, however, that no failure to give such notice
nor any defect therein shall affect the validity of the automatic
conversion of any shares of Class B Common Stock. Each such notice
shall state, as appropriate, the following:

(w) the automatic conversion date;

(x) that all outstanding shares of Class B Common Stock are
automatically converted;

(y) the place or places where certificates for such shares
are to be surrendered for conversion; and

(z) that no dividends will be declared on the shares of Class
B Common Stock converted after such conversion date.

Immediately upon such conversion, the rights of the holders of
shares of Class B Common Stock as such shall cease and such holders
shall be treated for all purposes as having become the record owners
of the shares of Class A Common Stock issuable upon such

-8-
<PAGE> 10
conversion; provided, however, that such Persons shall be entitled to
receive when paid any dividends declared on the Class B Common Stock
as of a record date preceding the time of such conversion and unpaid
as of the time of such conversion, subject to paragraph (D)(6)(f)
below.

(c) Prior to a Tax-Free Spin-Off, holders of shares of
Class B Common Stock may (i) sell or otherwise dispose of or transfer
any or all of such shares held by them, respectively, only in
connection with a transfer which meets the qualifications of paragraph
(D)(6)(d) below, and under no other circumstances, or (ii) convert any
or all of such shares into shares of Class A Common Stock as provided
in paragraph (D)(6)(a) above. Prior to a Tax-Free Spin-Off, no one
other than those Persons in whose names shares of Class B Common Stock
originally are registered on the stock ledger of the Corporation, or
transferees or successive transferees who receive shares of Class B
Common Stock in connection with a transfer which meets the
qualifications set forth in paragraph (D)(6)(d) below, shall by virtue
of the acquisition of a certificate for shares of Class B Common Stock
have the status of an owner or holder of shares of Class B Common
Stock or be recognized as such by the Corporation or be otherwise
entitled to enjoy for his or her own benefit the special rights and
powers of a holder of shares of Class B Common Stock.

Holders of shares of Class B Common Stock may at any and all
times transfer to any Person the shares of Class A Common Stock
issuable upon conversion of such shares of Class B Common Stock.

(d) Prior to a Tax-Free Spin-Off, shares of Class B
Common Stock shall be transferred on the books of the Corporation and
a new certificate therefor issued, upon presentation at the office of
the Secretary of the Corporation (or at such additional place or
places as may from time to time be designated by the Secretary of the
Corporation) of the certificate for such shares, in proper form for
transfer and accompanied by all requisite stock transfer tax stamps,
only if such certificate when so presented shall also be accompanied
by any one of the following:

(i) an affidavit from SAIC stating that such certificate is
being presented to effect a transfer by SAIC of such shares to a
Subsidiary Entity of SAIC; or

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<PAGE> 11
(ii) an affidavit from SAIC stating that such certificate is
being presented to effect a transfer by any Subsidiary Entity of SAIC
of such shares to SAIC or another Subsidiary Entity of SAIC; or

(iii) an affidavit from SAIC (or the Class B Transferee)
stating that such certificate is being presented to effect a transfer
by SAIC (or the Class B Transferee) or any of its (or the Class B
Transferee's) Subsidiary Entities of such shares to a Class B
Transferee or a Subsidiary Entity of the Class B Transferee as
contemplated by paragraph (D)(6)(b); or

(iv) an affidavit from the Class B Transferee stating that
such certificate is being presented to effect a transfer by the Class
B Transferee of such shares to a Subsidiary Entity of the Class B
Transferee; or

(v) an affidavit from the Class B Transferee stating that
such certificate is being presented to effect a transfer by any
Subsidiary Entity of the Class B Transferee of such shares to the
Class B Transferee or another Subsidiary Entity of the Class B
Transferee; or

(vi) an affidavit from SAIC stating that such certificate is
being presented to effect a transfer by SAIC of such shares to the
stockholders of SAIC in connection with a Tax-Free Spin-Off; or

(vii) an affidavit from the Class B Transferee stating that
such certificate is being presented to effect a transfer by the Class
B Transferee of such shares to the stockholders of the Class B
Transferee in connection with a Tax-Free Spin-Off.

Each affidavit of a record holder furnished pursuant to this
paragraph (D)(6)(d) shall be verified as of a date not earlier than
five days prior to the date of delivery thereof, and, where such
record holder is a corporation or partnership, shall be verified by an
officer of the corporation or by a general partner of the partnership,
as the case may be.

(e) Prior to the occurrence of a Tax-Free Spin-Off, each
certificate for shares of Class B Common Stock shall bear a legend on
the face thereof reading as follows:

"The shares of Class B Common Stock represented by this
certificate may not be transferred to any

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<PAGE> 12
person or entity in connection with a transfer that does not meet the
qualifications set forth in paragraph (D)(6)(d) of ARTICLE IV of the
Second Amended and Restated Certificate of Incorporation of this
Corporation and no person who receives such shares in connection with
a transfer which does not meet the qualifications prescribed by
paragraph (D)(6)(d) of said ARTICLE IV is entitled to own or to be
registered as the record holder of such shares of Class B Common Stock
and such shares will have been automatically converted into Class A
Common Stock upon any such purported transfer. The record holder of
this certificate may at any time convert such shares of Class B Common
Stock into the same number of shares of Class A Common Stock. Each
holder of this certificate, by accepting the same, accepts and agrees
to all of the foregoing."

Upon and after the transfer of shares in a Tax-Free Spin-Off,
shares of Class B Common Stock shall no longer bear the legend set
forth above in this paragraph (D)(6)(e).

(f) Upon any conversion of shares of Class B Common Stock
into shares of Class A Common Stock pursuant to the provisions of this
paragraph (D)(6), any dividend, for which the payment date shall be
subsequent to such conversion, which may have been declared on the
shares of Class B Common Stock so converted shall be deemed to have
been declared, and shall be payable, with respect to the shares of
Class A Common Stock into or for which such shares of Class B Common
Stock shall have been so converted, and any such dividend payable in
Common Stock shall be deemed to have been declared, and shall be
payable, in shares of Class A Common Stock.

(g) The Corporation shall not reissue or resell any
shares of Class B Common Stock which shall have been converted into
shares of Class A Common Stock pursuant to or as permitted by the
provisions of this paragraph (D)(6), or any shares of Class B Common
Stock which shall have been acquired by the Corporation in any other
manner. The Corporation shall, from time to time, take such
appropriate action as may be necessary to retire such shares and to
reduce the authorized amount of Class B Common Stock accordingly.

The Corporation shall at all times reserve and keep available,
out of its authorized but unissued Common Stock, such number of shares
of Class A Common Stock as would become issuable upon the conversion
of all shares of Class B Common Stock then outstanding.

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<PAGE> 13
(h) In connection with any transfer or conversion of any
stock of the Corporation pursuant to or as permitted by the provisions
of this paragraph (D)(6) or in connection with the making of any
determination referred to in this paragraph (D)(6):

(1) the Corporation shall be under no obligation to make any
investigation of facts unless an officer, employee or agent of the
Corporation responsible for making such transfer or determination or
issuing Class A Common Stock pursuant to such conversion has
substantial reason to believe, or unless the Board of Directors (or a
committee of the Board of Directors designated for such purpose)
determines that there is substantial reason to believe, that any
affidavit or other document is incomplete or incorrect in a material
respect or that an investigation would disclose facts upon which any
determination referred to in paragraph (D)(6)(f) above should be made,
in either of which events the Corporation shall make or cause to be
made such investigation as it may deem necessary or desirable in the
circumstances and have a reasonable time to complete such
investigation; and

(2) neither the Corporation nor any director, officer,
employee or agent of the Corporation shall be liable in any manner for
any action taken or omitted in good faith.

(i) The Corporation will not be required to pay any
documentary, stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of shares of Class A Common Stock on
the conversion of shares of Class B Common Stock pursuant to this
paragraph (D)(6), and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Corporation
the amount of any such tax or has established, to the satisfaction of
the Corporation, that such tax has been paid.

7. All rights to vote and all voting power (including,
without limitation thereto, the right to elect directors) shall be
vested exclusively in the holders of Common Stock, voting together as
a single class, except as otherwise expressly provided in this Second
Amended and Restated Certificate of Incorporation, in a Preferred
Stock Designation or as otherwise expressly required by applicable
law.

E. Subject to the limitations and in the manner provided by law,
shares of the Preferred Stock may be issued from time to time in series, and
the Board of Directors of the Corporation or a duly-authorized committee of the
Board of Directors of the Corporation, in accordance with the laws of the State
of

-12-
<PAGE> 14
Delaware, is hereby authorized to determine or alter the relative rights,
powers (including voting powers), preferences, privileges and restrictions
granted to or imposed upon Preferred Stock or any wholly unissued series of
shares of Preferred Stock, and to increase or decrease (but not below the
number of shares of any series of Preferred Stock then outstanding) the number
of shares of any such series subsequent to the issue of shares of that series.
In case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall upon the taking of any action required by
applicable law resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of such series.

ARTICLE V

In accordance with Section 203(b)(3) of the GCL, the Corporation
expressly elects not to be governed by Section 203 of the GCL.

ARTICLE VI

The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In addition to the powers and
authority expressly conferred upon them by statute or by this Second Amended
and Restated Certificate of Incorporation or the bylaws of the Corporation, the
directors are hereby empowered to exercise all such powers and do all such acts
and things as may be exercised or done by the Corporation. Election of
directors need not be by written ballot unless the bylaws so provide.

ARTICLE VII

The books and records of the Corporation may be kept (subject to any
mandatory requirement of law) outside the State of Delaware at such place or
places as may be designated from time to time by the Board of Directors or by
the bylaws of the Corporation.

ARTICLE VIII

In furtherance and not in limitation of the powers conferred upon it
by the laws of the State of Delaware, the Board of Directors shall have the
power without the assent or vote of the stockholders to make, alter, amend,
change, add to or repeal the bylaws of the Corporation.

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<PAGE> 15
ARTICLE IX

A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Corporation and its stockholders; (b) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violations of law; (c) under Section 174 of the GCL; or (d) for any transaction
from which the director derived an improper personal benefit.

If the GCL hereafter is amended to further eliminate or limit the
liability of directors, then the liability of a director of the Corporation, in
addition to the limitation on personal liability provided herein, shall be
limited to the fullest extent permitted by the amended GCL. Any repeal or
modification of the foregoing provisions of this Article IX shall not adversely
affect any right or protection of any director, officer, employee or agent of
the Corporation existing at the time of such repeal or modification.

ARTICLE X

A. In anticipation that the Corporation will cease to be a wholly
owned subsidiary of SAIC, but that SAIC will remain a stockholder of the
Corporation, and in anticipation that the Corporation and SAIC may engage in
the same or similar activities or lines of business and have an interest in the
same areas of corporate opportunities, and in recognition of (i) the benefits
to be derived by the Corporation through its continued contractual, corporate
and business relations with SAIC (including service of officers and directors
of SAIC as officers and directors of the Corporation) and (ii) the difficulties
attendant to any director, who desires and endeavors to fully satisfy such
director's fiduciary duties, in determining the full scope of such duties in
any particular situation, the provisions of this Article X are set forth to
regulate, define and guide the conduct of certain affairs of the Corporation as
they may involve SAIC and its officers and directors, and the powers, rights,
duties and liabilities of the Corporation or its officers, directors and
stockholders in connection therewith.

B. Except as the Corporation and SAIC may otherwise agree in
writing:

(a) SAIC shall not have a duty to refrain from engaging directly or
indirectly in the same or similar business activities or lines of business as
the Corporation, and

(b) neither SAIC nor any officer or director thereof shall be
presumed liable to the Corporation or its stockholders for breach of any
fiduciary duty by reason of any such activities of SAIC or of such person's
participation therein.

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<PAGE> 16
In the event that SAIC acquires knowledge of a potential transaction
or matter that may be a corporate opportunity for both SAIC and the
Corporation, SAIC (and its officers and directors) shall be entitled to offer
such corporate opportunities to the Corporation or SAIC as SAIC deems
appropriate under the circumstances in its sole discretion and shall not be
presumed liable to the Corporation or its stockholders for breach of any
fiduciary duty as a stockholder of the Corporation or controlling person of a
stockholder by reason of the fact that SAIC pursues or acquires such corporate
opportunity for itself, directs such corporate opportunity to another person or
entity, or does not communicate information regarding, or offer, such corporate
opportunity to the Corporation.

C. In the event that a director, officer or employee of the
Corporation who is also a director, officer or employee of SAIC acquires
knowledge of a potential transaction or matter that may be a corporate
opportunity for the Corporation and SAIC (whether such potential transaction or
matter is proposed by a third-party or is conceived of by such director,
officer or employee of the Corporation), such director, officer or employee
shall be entitled to offer such corporate opportunity to the Corporation or
SAIC as such director, officer or employee deems appropriate under the
circumstances in his or her sole discretion, and no such director, officer or
employee shall be presumed liable to the Corporation or its stockholders
thereof for breach of any fiduciary duty or duty of loyalty or failure to act
in (or not opposed to) the best interests of the Corporation or the derivation
of any improper personal benefit by reason of the fact that (i) such director,
officer or employee offered such corporate opportunity to SAIC rather than the
Corporation or did not communicate information regarding such corporate
opportunity to the Corporation or (ii) SAIC pursues or acquires such corporate
opportunity for itself or directs such corporate opportunity to another person
or does not communicate information regarding such corporate opportunity to the
Corporation.

D. Any person or entity purchasing or otherwise acquiring any
interest in any shares of capital stock of the Corporation shall be deemed to
have notice of and to have consented to the provisions of this ARTICLE X.

E. For purposes of this ARTICLE X and ARTICLE XI only, the term
"Corporation" shall mean the Corporation and all corporations, partnerships,
joint ventures, associations and other entities in which the Corporation
Beneficially Owns (as defined in ARTICLE IV, Section (D)(6)(b) above) (directly
or indirectly) 50% or more of the outstanding Voting Interests (as defined in
Article IV, Section (D)(6)(b) above).

F. Notwithstanding anything in this Second Amended and Restated
Certificate of Incorporation to the contrary, the

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<PAGE> 17
foregoing provisions of this ARTICLE X shall expire on the date that SAIC
ceases to Beneficially Own (as defined in Article IV, Section (D)(6)(b) above)
(directly or indirectly) Common Stock representing at least 20% of the number
of outstanding shares of Common Stock of the Corporation and no person who is a
director or officer of the Corporation is also a director or officer of SAIC.
Neither the alteration, amendment, change or repeal of any provision of this
ARTICLE X nor the adoption of any provision of this Second Amended and Restated
Certificate of Incorporation inconsistent with any provision of this ARTICLE X
shall eliminate or reduce the effect of this ARTICLE X in respect of any matter
occurring, or any cause of action, suit or claim that, but for this ARTICLE X,
would accrue or arise, prior to such alteration, amendment, repeal or adoption.

G. The provisions of this ARTICLE X are in addition to the
provisions of ARTICLE XI.

ARTICLE XI

A. No contract, agreement, arrangement or transaction (or any
amendment, modification or termination thereof) between the Corporation and
SAIC or any Related Entity (as defined below) or between the Corporation and
one or more of the directors or officers of the Corporation, SAIC or any
Related Entity, shall be void or voidable solely for the reason that SAIC, a
Related Entity or any one or more of the officers or directors of the
Corporation, SAIC or any Related Entity are parties thereto, or solely because
any such directors or officers are present at or participate in the meeting of
the Board of Directors or committee thereof which authorizes the contract,
agreement, arrangement, transaction, amendment, modification or termination or
solely because his, her or their votes are counted for such purpose, but any
such contract, agreement, arrangement or transaction (or any amendment,
modification or termination thereof) shall be governed by the provisions of
this Second Amended and Restated Certificate of Incorporation, the
Corporation's bylaws, the GCL, written agreement between the Corporation and
SAIC and other applicable law. For purposes of this ARTICLE XI, (i) the term
"Related Entity" means a corporation, partnership, joint venture, association
or other organization in which one or more of the directors of the Corporation
has or have a direct or indirect financial interest and (ii) the terms the
"Corporation" and "SAIC" have the meanings set forth in ARTICLE X, Section (E).

B. Directors of the Corporation who are also directors or
officers of SAIC or of any Related Entity may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
that authorizes or approves any such contract, agreement, arrangement or
transaction (or amendment, modification or termination thereof). Outstanding
shares of Common Stock owned by SAIC and any Related Entity may

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<PAGE> 18
be counted in determining the presence of a quorum at a meeting of stockholders
that authorizes or approves any such contract, agreement, arrangement or
transaction (or amendment, modification or termination thereof).

C. Neither SAIC nor any officer or director thereof or of any
Related Entity shall be presumed liable to the Corporation or its stockholders
for breach of any fiduciary duty or duty of loyalty or failure to act in (or
not opposed to) the best interests of the Corporation or the derivation of any
improper personal benefit by reason of the fact that SAIC or an officer or
director thereof or of such Related Entity in good faith takes any action or
exercises any rights or gives or withholds any consent in connection with any
agreement or contract between SAIC or such Related Entity and the Corporation.
No vote cast or other action taken by any person who is an officer, director or
other representative of SAIC or such Related Entity, which vote is cast or
action is taken by such person in his or her capacity as a director of this
Corporation, shall constitute an action of or the exercise of a right by or a
consent of SAIC or such Related Entity for the purpose of any such agreement or
contract.

E. For purposes of this ARTICLE XI, any contract, agreement,
arrangement or transaction with any corporation, partnership, joint venture,
association or other entity in which the Corporation Beneficially Owns (as
defined in ARTICLE IV, Section (D)(6)(b) above) (directly or indirectly) 50% or
more of the outstanding Voting Interests (as defined in Article IV, Section
(D)(6)(b) above), or with any officer or director thereto, shall be deemed to
be a contract, agreement, arrangement or transaction with the Corporation.

F. Neither the alteration, amendment, change or repeal of any
provision of this ARTICLE XI nor the adoption of any provision inconsistent
with any provision of this ARTICLE XI shall eliminate or reduce the effect of
this ARTICLE XI in respect of any matter occurring, or any cause of action,
suit or claim that, but for this ARTICLE XI, would accrue or arise, prior to
such alteration, amendment, change, repeal or adoption.

G. The provisions of this ARTICLE XI are in addition to the
provisions of ARTICLE X.

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<PAGE> 19
ARTICLE XII

The Corporation reserves the right to amend or repeal any provision
contained in this Second Amended and Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred
upon a stockholder herein are granted subject to this reservation.

-18-

<PAGE> 1

EXHIBIT 3(ii)

AMENDED AND RESTATED

B Y - L A W S

NETWORK SOLUTIONS, INC.

(a Delaware corporation)

<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 Offices . . . . . . . . . . . . . . . . . . . . . 1
1.1 Principal Office . . . . . . . . . . . . . . . . . 1
1.2 Additional Offices . . . . . . . . . . . . . . . . 1

ARTICLE 2 Meeting of Stockholders . . . . . . . . . . . . . 1
2.1 Place of Meeting . . . . . . . . . . . . . . . . . 1
2.2 Annual Meeting . . . . . . . . . . . . . . . . . . 1
2.3 Special Meetings . . . . . . . . . . . . . . . . . 2
2.4 Notice of Meetings . . . . . . . . . . . . . . . . 2
2.5 Business Matter of a Special Meeting . . . . . . . 3
2.6 List of Stockholders . . . . . . . . . . . . . . . 3
2.7 Organization and Conduct of Business . . . . . . . 3
2.8 Quorum and Adjournments . . . . . . . . . . . . . 3
2.9 Voting Rights . . . . . . . . . . . . . . . . . . 4
2.10 Majority Vote . . . . . . . . . . . . . . . . . . 4
2.11 Record Date for Stockholder Notice and Voting . . 4
2.12 Proxies . . . . . . . . . . . . . . . . . . . . . 4
2.13 Inspectors of Election . . . . . . . . . . . . . . 5
2.14 Action Without Meeting . . . . . . . . . . . . . . 5

ARTICLE 3 Directors . . . . . . . . . . . . . . . . . . . . 5
3.1 Number; Qualifications . . . . . . . . . . . . . . 5
3.2 Resignation and Vacancies . . . . . . . . . . . . 5
3.3 Removal of Directors . . . . . . . . . . . . . . . 6
3.4 Powers . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Place of Meetings . . . . . . . . . . . . . . . . 7
3.6 Annual Meetings . . . . . . . . . . . . . . . . . 7
3.7 Regular Meetings . . . . . . . . . . . . . . . . . 7
3.8 Special Meetings . . . . . . . . . . . . . . . . . 7
3.9 Quorum and Adjournments . . . . . . . . . . . . . 7
3.10 Action Without Meeting . . . . . . . . . . . . . . 8
3.11 Telephone Meetings . . . . . . . . . . . . . . . . 8
3.12 Waiver of Notice . . . . . . . . . . . . . . . . . 8
3.13 Fees and Compensation of Directors . . . . . . . . 8
3.14 Rights of Inspection . . . . . . . . . . . . . . . 9
3.15 Nominating Procedures . . . . . . . . . . . . . . 9

ARTICLE 4 Committees of Directors . . . . . . . . . . . . . 9
4.1 Selection . . . . . . . . . . . . . . . . . . . . 9
4.2 Power . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Committee Minutes . . . . . . . . . . . . . . . . 10

ARTICLE 5 Officers . . . . . . . . . . . . . . . . . . . . . 10
5.1 fficers Designated . . . . . . . . . . . . . . . . 10
5.2 Appointment of Officers . . . . . . . . . . . . . 11
5.3 Subordinate Officers . . . . . . . . . . . . . . . 11
5.4 Removal and Resignation of Officers . . . . . . . 11
5.5 Vacancies in Offices . . . . . . . . . . . . . . . 11
5.6 Compensation . . . . . . . . . . . . . . . . . . . 11
5.7 The Chairman of the Board . . . . . . . . . . . . 11
</TABLE>

-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
5.8 The President . . . . . . . . . . . . . . . . . . 11
5.9 The Vice President . . . . . . . . . . . . . . . . 12
5.10 The Secretary . . . . . . . . . . . . . . . . . . 12
5.11 The Assistant Secretary . . . . . . . . . . . . . 12
5.12 The Treasurer . . . . . . . . . . . . . . . . . . 12
5.13 The Assistant Treasurer . . . . . . . . . . . . . 13

ARTICLE 6 Stock Certificates . . . . . . . . . . . . . . . . 13
6.1 Certificates for Shares . . . . . . . . . . . . . 13
6.2 Signatures on Certificates . . . . . . . . . . . . 13
6.3 Transfer of Stock . . . . . . . . . . . . . . . . 14
6.4 Registered Stockholders . . . . . . . . . . . . . 14
6.5 Record Date . . . . . . . . . . . . . . . . . . . 14
6.6 Lost, Stolen or Destroyed Certificates . . . . . . 14

ARTICLE 7 Notices . . . . . . . . . . . . . . . . . . . . . 15
7.1 Notice . . . . . . . . . . . . . . . . . . . . . . 15
7.2 Waiver . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE 8 General Provisions . . . . . . . . . . . . . . . . 15
8.1 Dividends . . . . . . . . . . . . . . . . . . . . 15
8.2 Dividend Reserve . . . . . . . . . . . . . . . . . 15
8.3 Checks . . . . . . . . . . . . . . . . . . . . . . 15
8.4 Fiscal Year . . . . . . . . . . . . . . . . . . . 15
8.5 Corporate Seal . . . . . . . . . . . . . . . . . . 16
8.6 Execution of Corporate Contracts and Instruments . 16

ARTICLE 9 Amendments . . . . . . . . . . . . . . . . . . . . 16
</TABLE>

-ii-
<PAGE> 4
EXHIBIT 3(ii)

B Y-L A W S

NETWORK SOLUTIONS, INC.

(a Delaware corporation)

ARTICLE 1

Offices

1.1 Principal Office. The principal executive office of the Corporation
shall be 9 East Loockerman Square, City of Dover, County of Kent, Dover,
Delaware 19901, and the name of the registered agent in charge thereof is
National Corporate Research, Ltd.

1.2 Additional Offices. The Corporation may also have offices at such
other places, either within or without the State of Delaware, as the Board of
Directors (the "Board") may from time to time designate or the business of the
Corporation may require.

ARTICLE 2

Meeting of Stockholders

2.1 Place of Meeting. All meetings of the stockholders for the election
of directors shall be held at the principal office of the Corporation, at such
place as may be fixed from time to time by the Board or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the Board and stated in the notice of the meeting. Meetings of
stockholders for any purpose may be held at such time and place within or
without the State of Delaware as the Board may fix from time to time and as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.

2.2 Annual Meeting. Annual meetings of stockholders shall be held each
year at such date and time as shall be designated from time to time by the
Board and stated in the notice of the meeting. At such annual meetings, the
stockholders shall elect a Board and transact such other business as may
properly be brought before the meetings.

At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board, otherwise properly brought before the meeting by or at

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<PAGE> 5
the direction of the Board, or otherwise properly brought before the meeting by
a stockholder. In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of the Corporation,
not less than fifty (50) days nor more than seventy-five (75) days prior to the
meeting; provided, however, that in the event that less than sixty-five (65)
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the 15th day following the day
on which such notice of the date of the annual meeting was mailed or such
public disclosure was made. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business.

Notwithstanding anything in these By-Laws to the contrary, no
business shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 2.2 by any stockholder of any business
properly brought before the annual meeting in accordance with said procedure.

The chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.

2.3 Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, may, unless otherwise prescribed by statute or by the
Certificate of Incorporation, be called only by the Chairman of the Board, the
President, or the Board.

2.4 Notice of Meetings. Written notice of stockholders' meetings,
stating the place, date and time of the meeting and the purpose or purposes for
which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than ten (10) nor more than sixty (60) days prior
to the meeting.

When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the

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place, date and time thereof are announced at the meeting at which the
adjournment is taken; provided, however, that if the date of any adjourned
meeting is more than thirty (30) days after the date for which the meeting was
originally noticed, or if a new record date is fixed for the adjourned meeting,
written notice of the place, date and time of the adjourned meeting shall be
given in conformity herewith. At any adjourned meeting, any business may be
transacted which might have been transacted at the original meeting.

2.5 Business Matter of a Special Meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.

2.6 List of Stockholders. The officer in charge of the stock ledger of
the Corporation or the transfer agent shall prepare and make, at least ten (10)
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, at a place
within the city where the meeting is to be held, which place, if other than the
place of the meeting, shall be specified in the notice of the meeting. The
list shall also be produced and kept at the place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present in
person thereat.

2.7 Organization and Conduct of Business. The Chairman of the Board or,
in his or her absence, the President of the Corporation or, in their absence,
such person as the Board may have designated or, in the absence of such a
person, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, shall call to order
any meeting of the stockholders and act as chairman of the meeting. In the
absence of the Secretary of the Corporation, the secretary of the meeting shall
be such person as the chairman appoints.

The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seems to him or her in order.

2.8 Quorum and Adjournments. Except where otherwise provided by law or
the Certificate of Incorporation or these By-Laws, the holders of a majority of
the stock issued and outstanding and entitled to vote, present in person or
represented in proxy, shall constitute a quorum at all meetings of the
stockholders. The stockholders present at a duly called or held meeting at
which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of

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enough stockholders to have less than a quorum if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If, however, a quorum shall not be present
or represented at any meeting of the stockholders, the stockholders entitled to
vote thereat who are present in person or represented by proxy shall have the
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented.

2.9 Voting Rights. Unless otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder.

2.10 Majority Vote. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the Certificate of Incorporation or of these By-Laws, a different vote is
required in which case such express provision shall govern and control the
decision of such question.

2.11 Record Date for Stockholder Notice and Voting. For purposes of
determining the stockholders entitled to notice of any meeting or to vote, or
entitled to receive payment of any dividend or other distribution, or entitled
to exercise any right in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty (60) days nor less than ten
(10) days before the date of any such meeting nor more than sixty (60) days
before any other action.

If the Board does not so fix a record date, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.

2.12 Proxies. Every person entitled to vote for directors or on any
other matter shall have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
Secretary of the Corporation. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stock-

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<PAGE> 8
holder or the stockholder's attorney-in-fact. A validly executed proxy which
does not state that it is irrevocable shall continue in full force and effect
unless (i) revoked by the person executing it, before the vote pursuant to that
proxy, by a writing delivered to the Corporation stating that the proxy is
revoked or by a subsequent proxy executed by, or attendance at the meeting and
voting in person by, the person executing the proxy; or (ii) written notice of
the death or incapacity of the maker of that proxy is received by the
Corporation before the vote pursuant to that proxy is counted; provided,
however, that no proxy shall be valid after the expiration of eleven months
from the date of the proxy, unless otherwise provided in the proxy.

2.13 Inspectors of Election. Before any meeting of stockholders the
Board may appoint any person other than nominees for office to act as
inspectors of election at the meeting or its adjournment. If no inspectors of
election are so appointed, the chairman of the meeting may, and on the request
of any stockholder or a stockholder's proxy shall, appoint inspectors of
election at the meeting. The number of inspectors shall be either one (1) or
three (3). If inspectors are appointed at a meeting on the request of one or
more stockholders or proxies, the holders of a majority of shares or their
proxies present at the meeting shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, the chairman of the meeting may, and upon
the request of any stockholder or a stockholder's proxy shall, appoint a person
to fill that vacancy.

2.14 Action Without Meeting. Any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking
of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.

ARTICLE 3

Directors

3.1 Number; Qualifications. The Board shall consist of one or more
members, the number thereof to be determined from time to time by resolution of
the Board. The directors shall be elected at the annual meeting of the
stockholders or at any special meeting of stockholders, except as provided in
Section 3.2, and each director so elected shall hold office until his

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<PAGE> 9
successor is elected and qualified or until his earlier resignation or removal.
Directors need not be stockholders.

3.2 Resignation and Vacancies. A vacancy or vacancies in the Board shall
be deemed to exist in the case of the death, resignation or removal of any
director, or if the authorized number of directors be increased. Vacancies may
be filled by a majority of the remaining directors, though less than a quorum,
or by a sole remaining director, unless otherwise provided in the Certificate
of Incorporation. The stockholders may elect a director or directors at any
time to fill any vacancy or vacancies not filled by the directors. If the
Board accepts the resignation of a director tendered to take effect at a future
time, the Board shall have power to elect a successor to take office when the
resignation is to become effective. If there are no directors in office, then
an election of directors may be held in the manner provided by statute.

3.3 Removal of Directors. Unless otherwise restricted by statute, the
Certificate of Incorporation or these By-Laws, any director or the entire Board
may be removed, with or without cause, by the holders of at least a majority of
the shares entitled to vote at an election of directors.

3.4 Powers. The business of the Corporation shall be managed by or under
the direction of the Board which may exercise all such powers of the
Corporation and do all such lawful acts and things which are not by statute or
by the Certificate of Incorporation or by these By-Laws directed or required to
be exercised or done by the stockholders.

Without prejudice to these general powers, and subject to the same
limitations, the directors shall have the power to:

(a) Select and remove all officers, agents, and employees of the
Corporation; prescribe any powers and duties for them that are consistent
with law, with the Certificate of Incorporation, and with these By-Laws;
fix their compensation; and require from them security for faithful
service;

(b) Confer upon any office the power to appoint, remove and
suspend subordinate officers, employees and agents;

(c) Change the principal executive office or the principal
business office in the State of California or any other state from one
location to another; cause the Corporation to be qualified to do business
in any other state, territory, dependency or country and conduct business
within or without the State of Virginia; and designate any place within or
without the State of Virginia for the holding of any stock-

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holders meeting, or meetings, including annual meetings;

(d) Adopt, make, and use a corporate seal; prescribe the forms of
certificates of stock; and alter the form of the seal and certificates;

(e) Authorize the issuance of shares of stock of the Corporation
on any lawful terms, in consideration of money paid, labor done, services
actually rendered, debts or securities cancelled, tangible or intangible
property actually received;

(f) Borrow money and incur indebtedness on behalf of the
Corporation, and cause to be executed and delivered for the Corporation's
purposes, in the corporate name, promissory notes, bonds, debentures,
deeds of trust, mortgages, pledges, hypothecations and other evidences of
debt and securities;

(g) Declare dividends from time to time in accordance with law;

(h) Adopt from time to time such stock option, stock purchase,
bonus or other compensation plans for directors, officers, employees and
agents of the Corporation and its subsidiaries as it may determine; and

(i) Adopt from time to time regulations not inconsistent with
these By-Laws for the management of the Corporation's business and
affairs.

3.5 Place of Meetings. The Board may hold meetings, both regular and
special, either within or without the State of Delaware.

3.6 Annual Meetings. The annual meetings of the Board shall be held
immediately following the annual meeting of stockholders, and no notice of such
meeting shall be necessary to the Board, provided a quorum shall be present.
The annual meetings shall be for the purposes of organization, and an election
of officers and the transaction of other business.

3.7 Regular Meetings. Regular meetings of the Board may be held without
notice at such time and place as may be determined from time to time by the
Board.

3.8 Special Meetings. Special meetings of the Board may be called by the
Chairman of the Board, the President, a Vice President or a majority of the
Board. Four (4) hours' notice to each director, either personally or by
telegram, cable, facsimile, commercial delivery service, telex or similar means
sent to such director's business or home address, or two (2)

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day's notice by written notice deposited in the mail or delivered by a
nationally recognized courier service, shall be given to each director by the
Secretary or by the person calling the meeting.

3.9 Quorum and Adjournments. At all meetings of the Board, a majority of
the directors then in office shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board, except as may otherwise
be specifically provided by law or the Certificate of Incorporation. If a
quorum is not present at any meeting of the Board, the directors present may
adjourn the meeting from time to time, without notice other than announcement
at the meeting at which the adjournment is taken, until a quorum shall be
present. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved of by at least a majority of the required quorum for that
meeting.

3.10 Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be
taken without a meeting, if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.

3.11 Telephone Meetings. Unless otherwise restricted by the Certificate
of Incorporation or these By-Laws, any member of the Board or any committee may
participate in a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.

3.12 Waiver of Notice. Notice of a meeting need not be given to any
director who signs a waiver of notice or a consent to holding the meeting or an
approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such director. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.

3.13 Fees and Compensation of Directors. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, the Board shall have the
authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board and may be
paid a fixed sum for attendance at each meeting of the Board or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing

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committees may be allowed like compensation for attending committee meetings.

3.14 Rights of Inspection. Every director shall have the absolute right
at any reasonable time to inspect and copy all books, records and documents of
every kind and to inspect the physical properties of the Corporation and also
of its subsidiary corporations, domestic or foreign. Such inspection by a
director may be made in person or by agent or attorney and includes the right
to copy and obtain extracts.

3.15 Nominating Procedures. Subject to the rights of holders of any
class or series of stock having a preference over the common stock as to
dividends or upon liquidation, nominations for election to the Board of
Directors of the Corporation at a meeting of stockholders may be made on behalf
of the board by the nominating committee appointed by the Board, or by any
stockholder of the Corporation entitled to vote for the election of directors
at such meeting. Such nominations, other than those made by the nominating
committee on behalf of the board, shall be made by notice in writing delivered
or mailed by first-class United States mail or a nationally recognized courier
service, postage prepaid, to the Secretary or Assistant Secretary of the
Corporation, and received by him not less than one hundred twenty (120) days
prior to any meeting of stockholders called for the election of directors;
provided, however, that if less than one hundred (100) days' notice of the
meeting is given to stockholders, such nomination shall have been mailed or
delivered to the Secretary or the Assistant Secretary of the Corporation not
later than the close of business on the seventh (7th) day following the day on
which the notice of meeting was mailed. Such notice shall set forth as to each
proposed nominee who is not an incumbent director (i) the name, age, business
address and, if known, residence address of each nominee proposed in such
notice, (ii) the principal occupation or employment of each such nominee, (iii)
the number of shares of stock of the Corporation which are beneficially owned
by each such nominee and by the nominating stockholder, and (iv) any other
information concerning the nominee that must be disclosed of nominees in proxy
solicitations regulated by Regulation 14A of the Securities Exchange Act of
1934. The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if the chairman should so determine, the chairman
shall so declare to the meeting and the defective nomination shall be
disregarded.

ARTICLE 4

Committees of Directors

4.1 Selection. The Board may, by resolution passed by a majority of the
entire Board, designate one or more committees, each committee to consist of
one or more of the directors of the

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Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee.

In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or she or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member.

4.2 Power. Any such committee, to the extent provided in the resolution
of the Board, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for
the issuance of shares of stock adopted by the Board as provided in Section
151(a) of the General Corporation Law of Delaware, fix any of the preferences
or rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation),
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution, removing or
indemnifying directors or amending the By-Laws of the Corporation; and, unless
the resolution or the Certificate of Incorporation expressly so provides, no
such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock or to adopt a certificate of ownership and
merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board.

4.3 Committee Minutes. Each committee shall keep regular minutes of its
meetings and report the same to the Board when required.

ARTICLE 5

Officers

5.1 Officers Designated. The officers of the Corporation shall be chosen
by the Board and shall be a President, a Secretary and a Treasurer. The Board
may also choose a Chairman of the Board, one or more Vice Presidents, and one
or more assistant Secretaries and assistant Treasurers. Any number of

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offices may be held by the same person, unless the Certificate of Incorporation
or these By-Laws otherwise provide.

5.2 Appointment of Officers. The officers of the Corporation, except
such officers as may be appointed in accordance with the provisions of Section
5.3 or 5.5 of this Article 5, shall be appointed by the Board, and each shall
serve at the pleasure of the Board, subject to the rights, if any, of an
officer under any contract of employment.

5.3 Subordinate Officers. The Board may appoint, and may empower the
President to appoint, such other officers and agents as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in the By-Laws or as the
Board may from time to time determine.

5.4 Removal and Resignation of Officers. Subject to the rights, if any,
of an officer under any contract of employment, any officer may be removed,
either with or without cause, by an affirmative vote of the majority of the
Board, at any regular or special meeting of the Board, or, except in case of an
officer chosen by the Board, by any officer upon whom such power of removal may
be conferred by the Board.

Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is a
party.

5.5 Vacancies in Offices. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.

5.6 Compensation. The salaries of all officers of the Corporation shall
be fixed from time to time by the Board and no officer shall be prevented from
receiving a salary because he is also a director of the Corporation.

5.7 The Chairman of the Board. The Chairman of the Board, if such an
officer be elected, shall, if present, perform such other powers and duties as
may be assigned to him from time to time by the Board. If there is no
President, the Chairman of the Board shall also be the Chief Executive Officer
of the Corporation and shall have the powers and duties prescribed in Section
5.8 of this Article 5.

5.8 The President. Subject to such supervisory powers, if any, as may be
given by the Board to the Chairman of the Board,

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if there be such an officer, the President shall be the Chief Executive Officer
of the Corporation, shall preside at all meetings of the stockholders and in
the absence of the Chairman of the Board, or if there be none, at all meetings
of the Board, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board are
carried into effect. He or she shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board to some other officer or agent of the Corporation.

5.9 The Vice President. The Vice President (or in the event there be
more than one, the Vice Presidents in the order designated by the directors, or
in the absence of any designation, in the order of their election), shall, in
the absence of the President or in the event of his disability or refusal to
act, perform the duties of the President, and when so acting, shall have the
powers of and subject to all the restrictions upon the President. The Vice
President(s) shall perform such other duties and have such other powers as may
from time to time be prescribed for them by the Board, the President, the
Chairman of the Board or these By-Laws.

5.10 The Secretary. The Secretary shall attend all meetings of the Board
and the stockholders and record all votes and the proceedings of the meetings
in a book to be kept for that purpose and shall perform like duties for the
standing committees, when required. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and special meetings of the
Board, and shall perform such other duties as may from time to time be
prescribed by the Board, the Chairman of the Board or the President, under
whose supervision he or she shall act. The Secretary shall have custody of the
seal of the Corporation, and the Secretary, or an Assistant Secretary, shall
have authority to affix the same to any instrument requiring it, and, when so
affixed, the seal may be attested by his or her signature or by the signature
of such Assistant Secretary. The Board may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing thereof
by his or her signature. The Secretary shall keep, or cause to be kept, at the
principal executive office or at the office of the Corporation's transfer agent
or registrar, as determined by resolution of the Board, a share register, or a
duplicate share register, showing the names of all stockholders and their
addresses, the number and classes of shares held by each, the number and date
of certificates issued for the same and the number and date of cancellation of
every certificate surrendered for cancellation.

5.11 The Assistant Secretary. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order designated by the Board
(or in the absence of any designa-

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tion, in the order of their election) shall, in the absence of the Secretary or
in the event of his or her inability or refusal to act, perform the duties and
exercise the powers of the Secretary and shall perform such other duties and
have such other powers as may from time to time be prescribed by the Board.

5.12 The Treasurer. The Treasurer shall have the custody of the
Corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board. The
Treasurer shall disburse the funds of the Corporation as may be ordered by the
Board, taking proper vouchers for such disbursements, and shall render to the
President and the Board, at its regular meetings, or when the Board so
requires, an account of all his or her transactions as Treasurer and of the
financial condition of the Corporation.

5.13 The Assistant Treasurer. The Assistant Treasurer, or if there shall
be more than one, the Assistant Treasurers in the order designated by the Board
(or in the absence of any designation, in the order of their election) shall,
in the absence of the Treasurer or in the event of his or her inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board.

ARTICLE 6

Stock Certificates

6.1 Certificates for Shares. The shares of the Corporation shall be
represented by certificates or shall be uncertificated. Certificates shall be
signed by, or in the name of the Corporation by, the Chairman of the Board, or
the President or a Vice President and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation.

Within a reasonable time after the issuance or transfer of uncertified
stock, the Corporation shall send to the registered owner thereof a written
notice containing the information required by the General Corporation Law of
the State of Delaware or a statement that the Corporation will furnish without
charge to each stockholder who so requests the powers, designations,
preferences and relative participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.

6.2 Signatures on Certificates. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile

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signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.

6.3 Transfer of Stock. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate of shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated share, such uncertificated shares shall
be cancelled and issuance of new equivalent uncertificated shares or
certificated shares shall be made to the person entitled thereto and the
transaction shall be recorded upon the books of the Corporation.

6.4 Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a percent registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.

6.5 Record Date. In order that the Corporation may determine the
stockholders of record who are entitled to receive notice of, or to vote at,
any meeting of stockholders or any adjournment thereof, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or to
exercise any rights in respect of any change, conversion, or exchange of stock
or for the purpose of any lawful action, the Board may fix, in advance, a
record date which shall not be more than sixty (60) nor less than ten (10) days
prior to the date of such meeting, nor more than sixty (60) days prior to the
date of any other action. A determination of stockholders of record entitled
to notice or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.

6.6 Lost, Stolen or Destroyed Certificates. The Board may direct that a
new certificate or certificates be issued to replace any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing the issue of a new certificate or certificates, the Board may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of the lost, stolen or destroyed certificate or certificates, or his
or

-14-
<PAGE> 18
her legal representative, to advertise the same in such manner as it shall
require, and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.

ARTICLE 7

Notices

7.1 Notice. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these By-Laws, notice is required to be
given to any director or stockholder it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his or her address as it appears on the records of
the Corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram or telephone.

7.2 Waiver. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.

ARTICLE 8

General Provisions

8.1 Dividends. Dividends upon the capital stock of the Corporation,
subject to any restrictions contained in the General Corporation Laws of
Delaware or the provisions of the Certificate of Incorporation, if any, may be
declared by the Board at any regular or special meeting. Dividends may be paid
in cash, in property or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation.

8.2 Dividend Reserve. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest
of the Corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.

8.3 Checks. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or

-15-
<PAGE> 19
such other person or persons as the Board may from time to time designate.

8.4 Fiscal Year. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.

8.5 Corporate Seal. The Board may provide a suitable seal, containing
the name of the Corporation, which seal shall be in charge of the Secretary.
If and when so directed by the Board or a committee thereof, duplicates of the
seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.

8.6 Execution of Corporate Contracts and Instruments. The Board, except
as otherwise provided in these By-Laws, may authorize any officer or officers,
or agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the Corporation; such authority may be general or
confined to specific instances. Unless so authorized or ratified by the Board
or within the agency power of an officer, no officer, agent or employee shall
have any power or authority to bind the Corporation by any contract or
engagement or to pledge its credit or to render it liable for any purpose or
for any amount.

ARTICLE 9

Amendments

The Board of Directors is expressly empowered to adopt, amend or repeal
By-Laws of the Corporation, provided, however, that any adoption, amendment or
repeal of By-Laws of the Corporation by the board of directors shall require
the approval of at least sixty-six and two-thirds percent of the total number
of authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any resolution providing for adoption,
amendment or repeal is presented to the board). The stockholders shall also
have power to adopt, amend or repeal By-Laws of the Corporation, provided,
however, that in addition to any vote of the holders of any class or series of
stock of this Corporation required by law or by the Certificate of
Incorporation of the Corporation, the affirmative vote of the holders of at
least sixty-six and two-thirds percent of the voting power of all of the then
outstanding shares of the stock of the Corporation entitled to vote generally
in the election of directors, voting together as a single class, shall be
required for such adoption, amendment or repeal by the stockholders of any
provisions of the By-Laws of the Corporation.

-16-
<PAGE> 20
CERTIFICATE OF SECRETARY

I, the undersigned, hereby certify:

1. That I am the duly elected, acting and qualified Secretary of
NSI Merger Corporation, a Delaware corporation; and

2. That the foregoing Amended and Restated By-Laws, comprising sixteen
(16) pages, constitute the By-Laws of such Corporation as duly adopted
at a meeting of the Board of Directors of such Corporation held on September
18, 1996 and reflected in the minutes thereof.

IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the
seal of said Corporation this 18th day of September, 1996.

/s/ Aloma H. Avery
--------------------------
Secretary
Aloma H. Park

<PAGE> 1
EXHIBIT 10.1

NSF Cooperative Agreement
No. NCR-9218742

Network Information Services Manager(s) for
NSFNET and the NREN:
INTERNIC Registration Services
COOPERATIVE AGREEMENT NO. NCR-9218742

Parties:
National Science Foundation
1800 G Street, N.W.
Washington, D.C. 20550

and

Network Solutions, Incorporated
505 Huntmar Park Drive
Herndon, VA 20170

COOPERATIVE AGREEMENT NO. NCR-9218742

Parties:

National Science Foundation

and

Network Solutions, Incorporated

Title:

Network Information Services Manager(s) for NSFNET and the NREN: INTERNIC
Registration Services

Type of Award:

Cost-Plus-Fixed-Fee Cooperative Agreement

Estimated Total Amount:

$4,219,339

Effective Date:

January 1, 1993

Expiration Date:

September 30, 1998
<PAGE> 2
Authority:

This agreement is awarded under the authority of the National Science
Foundation Act (R@ U.S.C. 186 et seq.) and the Federal Grant and Cooperative
Agreement Act (31 U.S.C. 6301 et seq.)

This agreement is entered into between the United States of America,
Hereinafter called the Government, represented by the National Science
Foundation, hereinafter called the Foundation or NSF, and Network Solutions,
Incorporated, hereinafter called the A wardee.

NSF Program Official:

Donald R. Mitchell
Telephone : 202-357-9717
e-mail: [email protected]

NSF Administrative Official:

Altie H. Metcalf
Telephone: 202-357-9843
e-mail: [email protected]

IN WITNESS WHEREOF, the parties have executed Cooperative Agreement No.
NCR-9218742, Network Information Services Manager(s) for NSFNET and the NREN:
INTERNIC Registration Services.

UNITED STATES OF AMERICA ACCEPTANCE

Aaron R. Asrael Roger L.Evans
Grants and Contracts Chief Financial Officer

(Date) (Date)

NATIONAL SCIENCE FOUNDATION Network Solutions, Incorporated
Washington, D.C. 20550 Herndon, VA 22070

- ------------------------------------------------------------------------
INDEX TO COOPERATIVE AGREEMENT NCR-9218742

I. SPECIAL CONDITIONS

ARTICLE -1. Background and Purpose of Agreement -2. Special Requirements -3.
Statement of Work -4. Turnaround and Performance Measures -5. Estimated
Requirements and Review -6. Responsibilities -7. Period of Performance -8.
Funding -9. Annual Report, Program Plan, and Budget -10. Other Reporting
Requirements -11. Directed Activities -12. Key Personnel -13. Order of
Precedence -14. Publicity, Public Information and Publications -15. Project
Income from Registration Fees
<PAGE> 3

II. GENERAL CONDITIONS

Grant General Conditions - GC-1 (10/91)
Cooperative Agreement General Conditions - CA-1 (12/91)

ARTICLE 1. BACKGROUND AND PURPOSE OF AGREEMENT

During the past two decades computer networks have facilitated collaboration
among members of many research and education communities and provided them
with remote access to information and computing resources. These networks have
continued to grow both in the number of users connected and in the
capabilities provided to the individual users. It is anticipated that such
networks will become essential to research and education during this decade.
In particular, the collection of interconnected networks known as the Internet
has become important for many research communities. It is also of increasing
importance for education.

Today more than 5,000 networks comprise the Internet. These networks link
together hundreds of thousands of computers and millions of users throughout
the world. The domestic, non-military portion of the Internet includes NSFNET.
It also includes other federally sponsored networks such as NASA Science
Internet (NSI) and Energy Sciences Network (Esnet). NSFNET, NSI, and Esnet, as
well as some other networks of the Internet, are related to the National
Research and Education Network (NREN) which was defined in the President's
Fiscal 1992 budget and which has been authorized by the passage in December,
1991, of the High Performance Computing and Communications Act, Public Law
102-194.

The NREN is projected to evolve from a part of the Internet containing
portions of NSFNET, NSI, and Esnet. This evolution will reflect the legal and
technical requirements of the various sponsoring agencies. For example, NASA
and DOE are mission agencies whose networksi traffic must relate to the
agenciesi missions. NSF, on the other hand, is chartered to support science
and engineering research and education; hence NSFNET can carry all traffic
contemplated for the NREN and may in fact support additional traffic as well.

Because of the breadth of the charter of the NSFNET, it is projected that it
will continue to serve an expanding base of research and education users. The
provision of enhanced network information services for NSFNET will be an
important part of the expansion in user base.

In cooperation with the Internet community, the National Science Foundation
developed and released, in the spring of 1992, Project Solicitation NSF92-24
for one or more Network Information Services Managers (NIS Manager(s)) to
provide and/or coordinate (i) Registration Services, (ii) Director and
Database Services, and (iii) Information Services for the NSFNET. As a result
of this solicitation, three separate organizations were selected to receive
cooperative agreements in the areas of (i) Registration Services, (ii)
Directory and Database Services, and (iii) Information Services. Together,
these three awards constitute the NIS Manager(s) Project.

It is essential that the three project participants selected work closely
together to provide a seamless interface for users in need of services. For
this reason, the three awardees, at the request of the Foundation, have
developed a detailed concept and plan to provide this seamless interface
called the "INTERNIC," have revised their proposals to reflect the
implementation of the "INTERNIC" concept, and have agreed to the structuring
of their three (separate) awards as one collaborative project. This
Cooperative Agreement for Registration Services is one of the three (3)
collaborative awards resulting from the NIC Manager(s) Project solicitation.
<PAGE> 4

It is anticipated that all registration services required during the period of
this Agreement will be obtained and furnished under the terms of this
Agreement and that the definition and providing of these services will help
facilitate the evolution of the NSFNET and the development of the NREN.
References to NSFNET in this Agreement should in general be understood to
include the NREN as well.

ARTICLE 2. SPECIAL REQUIREMENTS

A. Collaborative Proposals and Effort(s)
1. An important aspect of the Awardee's work is coordination with the Network
Information Services Managers for (i) Database and Directory Services (AT&T
under Cooperative Agreement NCR-9218179) and (ii) Information Services
(General Atomics under Coop erative Agreement NCR-9218749) to provide a
"seamless interface" for internet users in accordance with the "INTERNIC"
concept explicated in the Awardee's revised proposal dated October 19, 1992.
Hereafter in this agreement, Awardee's two collaborating pa rtners, General
Atomics and AT&T, shall be referred to as Collaborators and Awardee shall
coordinate its performance hereunder with the efforts of its Collaborators in
accordance with the "INTERNIC" concept explicated in the Awardee's revised
proposal dat ed October 19,1992. The NSF Program Official reserves the
authority to resolve technical, managerial, or scheduling disputes.

2. This requirement for close collaboration and coordination among the three
aspects of the Network Information Services Management Project shall be stated
in each of the three awards. Such collateral agreements and fund transfers
consistent with the cu rrently approved Program Plan (see Article9) as may be
necessary to effect the coordination, collaboration and seamless interface to
users called for by the "INTERNIC" concept or improve the overall integration
of the NIS Manager(s) Project may be entered into by, between and among the
Awardee and its Collaborators without further Foundation approvals. Absent a
specific inclusion in the approved Program Plan, Awardee fund transfers made
pursuant to this Article may not exceed $50,000 in any Program Year.

B. Directed Activities

At the request of the NSF Program Director, as set forth in article 13
(below), the Awardee shall attend such meetings, seminars, conference and
planning and other events and shall provide such related supplies and services
as necessary to promulgate info rmation regarding registration activity to the
worldwide internet community and to facilitate the most effective, efficient
and ubiquitous registration services possible.

ARTICLE 3. STATEMENT OF WORK

A. The Awardee shall provide to non-military internet users and networks all
necessary registration services (which were) previously provided by the
Defense Information Systems Agency Network Information Center(the DISA NIC).

B. The work will be performed in general accordance with NSF Project
Solicitation NSF 92-24 for Network Information Services Manager(s) for the
NSFNET and the NREN, the Awardee's proposal No. NCR-9218742, dated September
23,1992, amended by Awardee's sup plemental proposal addressing collaborative
INTERNIC activity, dated October 19, 1992, hereinafter referred to
cumulatively as Awardee's Proposal, and in conformance with the technical
and/or performance requirements contained therein and set forth below.
<PAGE> 5
C. The Awardee shall provide registration services in accordance with the
provisions of RFC 1174. As stated in RFC 1174:

[T]he Internet system has employed a central Internal Assigned Numbers
Authority (IANA) for the allocation and assignment of various numeric
identifiers needed for the operation of the Internet. The IANA function is
currently performed by the Universit y of Southern California's Information
Sciences Institute. The IANA has the discretionary authority to delegate
portions of this responsibility and, with respect to numeric network and
autonomous system identifiers, has lodged this responsibility with an Internet
Registry (IR).

D. Moreover, in cooperation with the IANA, the IR may create delegate
registries to carry out registration services for specified domains.

E. The Awardee shall work with the DISA NIC to design and implement a
transition plan, as outlined in Awardee's Proposal, that will minimize
inconvenience to the networking community during and after the transition.

F. The Non-military internet registration services to be provided under this
agreement will initially include, but not be limited to, the following:

1. Domain name registration
2. Domain name server registration
3. Network number assignment
4. Autonomous system number assignment

G. Possible future changes in the registration services provided under this
Agreement may include, but shall not be limited to, the use of alternate
registration/numbering systems or schemes and the imposition of a user based
fee structure. However, in no case shall any user based fee structure be
imposed or changed without the express direction/approval of the NSF Program
Official.

ARTICLE 4. TURNAROUND AND PERFORMANACE MEASURES

A. The following describes the required turnaround and availability of
Registration data:

1. 3 working days/Class C
2. 5 working days/Class B
3. 22 working days/Class A

B. Turnaround is the time from receipt of a completed template, and any
information pertaining to network topology and usage of previously assigned
address space as may be specifically requested in individual cases, to the
assignment of a number. Availa bility is the provision of the registration
data to the INTERNIC Database and Directory Services Awardee.

C. The quality of Awardee's registration services will be measured in
accordance with the formulae contained in Section J of Awardee's revised
proposal of September 23, 1992 and in light of the turnaround times specified
above.
<PAGE> 6
ARTICLE 5. ESTIMATED REQUIREMENTS AND REVIEW

A. Estimated Requirements

The registration services currently required for the performance of this
Cooperative Agreement are described above. The registration services described
above are only an estimate of the immediate and long-term requirements of the
scientific research an d education community and are furnished for planning
purposes only. Since the future needs of the scientific research and education
community are unknown at this time, the Foundation reserves the right to
increase, decrease or modify the quantity, qualit y, content or nature of the
registration services to be provided hereunder. Should the Foundation exercise
the right to increase, decrease or modify the quantity, quality, content or
nature of the registration services provided hereunder, appropriate cha nge to
estimated costs, fees, and funding schedules for shall be negotiated and
incorporated into the Agreement.

B. Performance Review

By December 31, 1994, the Foundation will review the project to determine
whether to continue funding and to provide general direction as to the
continuation and contemplated level of future support to be provided for the
remainder of the agreement.

ARTICLE 6. RESPONSIBILITIES

A. Awardee

The Awardee has primary responsibility for ensuring the quality, timeliness
and effective management of the registration services provided under this
agreement. To the extent that NSF does not reserve specific responsibility for
accomplishing the purpo ses of this Agreement, by either special condition or
general condition of the Agreement, all such responsibilities remain with the
Awardee.

B. National Science Foundation

1. General

NSF has responsibility for registration services support, support planning,
oversight, monitoring, and evaluation. NSF will make approvals required under
the General Conditions and, where necessary and appropriate, NSF will contact
and negotiate with Federal agencies and other national and International
members of the Internet community to further the efforts of this project.

2. Technical

a. Program Officer Authority

Performance of work under this Cooperative Agreement shall be subject to the
general oversight and monitoring of the NSF Program Officer. This involvement
may include, but is not limited to:
(1) Review of the Quarterly and Annual Reports, Program Plans and Budget.
(2) Participation in resolution of technical, managerial and scheduling
concerns; review and, where required by the Agreement, approval of technical
reports and information to be delivered by Awardee.
<PAGE> 7
b. Limitations

NSF technical involvement will be consistent with the general statement of
work as stated in this Agreement. The Program Officer does not have the
authority to and may not:

(1) request additional work outside the Statement of Work;
(2) issue instructions which constitute a change as defined in Article 8 of
GC-1(10/91);
(3) require an increase in the Agreement's estimated cost or extension to the
Agreement's period of performance, or;
(4) change any of the expressed terms, conditions or specifications of the
Agreement.

c. Awardee Notifications
If, in the opinion of the Awardee, any instructions or requests issued by the
Program Officer are within one of the categories as defined in (1) through (4)
in the above paragraph, the Awardee shall not proceed but shall notify the NSF
Grants and Contr acts Officer and shall request, if appropriate, amendment of
the Agreement in accordance with Article 37, "Changes -- Limitations of
Funds," of the Attached Cooperative Agreement General Conditions.

3. Approvals

Unless stated otherwise, all NSF approvals, authorizations, notifications and
instructions required pursuant to the terms of this agreement must be set
forth in writing by the NSF Grants and Contracts Officer.

ARTICLE 7. PERIOD OF PERFORMANCE

This Agreement, effective January 1, 1993, shall include a three month
phase-in period, a five (5) year period of operational support (commencing
April 1, 1993), and a six month (no additional cost) flexibility period and
shall continue through September 30, 1998.

ARTICLE 8. FUNDING

A. Agreement Amount

The current total estimated amount of this Cooperative Agreement, exclusive of
such amounts as may be provided in connection with Directed Activities
provided pursuant to Article 11 (below) is $5,219,339 of which

[Proprietary Figures Omitted]

B. Allotted Amount(s)

1. There is currently allotted and available for expenditure for provision of
registration services under this agreement, exclusive of amounts allotted for
Directed Activities(as shown in paragraph 3, below), $1,162,245, of which

[Proprietary Figures Omitted]

2. Amounts anticipated to be needed for reimbursement of costs incurred in
connection with Directed Activities as provided pursuant to Article 11 (below)
are not included in the allotted amount(s) shown in
<PAGE> 8
paragraph 8.C, below. Amounts for directed act ivities may be allotted from
time to time throughout the period of this agreement.

3. There is currently allotted and available for expenditure in connection
with reimbursement for directed activities under this agreement $0.

C. Obligation

For purposes of payment of the Foundation's portion of all allowable costs
(including those incurred in connection with the performance of Directed
Activities in accordance with Article 11 below) pursuant to the terms outlined
in this Agreement, the tot al amount currently allotted by the Government to
this Cooperative Agreement is $1,162,245. This allotment covers performance
through March 31, 1994.

D. Limitation of Funds

1. The parties estimate that performance of this Cooperative Agreement will
not cost the Government more than the estimated amount specified in Article
8.A, Agreement Amount, above. The Awardee shall use its best efforts to
perform the work specified in Article 3 and all obligations under this award
within the allotted funds.
2. Paragraph C of this Article specifies the cumulative amount presently
available for payment by the Government and allotted to this award. The
parties contemplate that the Government will allot additional funds
incrementally to the award up to the fu ll estimate specified in Article 8.A,
Agreement Amount, above.
3. The Awardee shall notify the NSF Grants and Contracts Officer in writing
whenever it has reason to believe that the costs it expects to incur under
this Agreement in the next 60 days, when added to all costs previously
incurred, will exceed 85% of th e total amount so far allotted to the
Agreement by the Government.
4. When and to the extent that the amount allotted by the Government is
increased, any costs the Awardee incurs before the increase that are in excess
of the amount previously allotted by the Government, shall be allowable to the
same extent as if incur red afterward.

E. Compensation and Expenditures

1. As compensation for its performance under this agreement, Awardee shall be
compensated for its direct and indirect costs (see Article 8.E.3) and shall be
paid a fixed fee as provided in this agreement.
2. The Awardee shall also be reimbursed for such travel and related costs as
may be specifically required and approved by the NSF Program Director pursuant
to Article 11 (below). Expenditures under this agreement must be in accordance
with a current Bud get or Program Plan which as been approved by the NSF
Grants Officer and no reallocation of funds in excess of $10,000 between
budget line items is permitted without prior written (or e-mail) approval of
the NSF Program Official.
3. The amount currently allotted includes an indirect cost allowance at the
following maximum provisional rates, subject to downward adjustment only:

Internet Services [Proprietary Figure Omitted]
Material Burden [Proprietary Figure Omitted]
G&A [Proprietary Figure Omitted]

F. Future Allotments

The actual level of continued NSF support for future years will be negotiated
annually with the Awardee and will depend upon annual review of progress, the
proposed Program Plan and the availability of funds. The actual funding of
such allotments may b e provided unilaterally by NSF on an incremental basis.
<PAGE> 9
ARTICLE 9. ANNUAL REPORT, PROGRAM PLAN AND BUDGET

By December 31 each year, the Awardee shall submit both electronically and in
10 hard copies an Annual Report, Program Plan and Budget to the Foundation for
approval. These Program Plans and Budgets shall be submitted in a format and
level of detail approved by the Foundation but shall, as a minimum, contain
project goals and objectives specified with sufficient technical criteria,
milestones, and timetables to measure the progress of the effort toward the
attainment of objectives during the time period for which it is being
submitted. This Program Plan will be the basis for the performance goals and
funding for succeeding twelve month operational period beginning April 1. Each
submission should contain narrative information indicating (for the past
year's activities) by functional area and overall; any goals accomplished,
exceeded, or missed and explaining any significant deviations from the
previous year's plan; any educational achievements; patents, copyrights, or
other innovations resulting from the activities; industrial and other funding,
income and contributions. Each annual submission should also contain
information on actual line charges and expenditures (both annual and
cumulative) by functional area and overall, in the same level of detail for
which it projects the succeeding year's costs, and a summary budget in
accordance with NSF Form 1030. The Awardee will receive formal approval of the
Program Plan from the NSF Grants Officer. The Foundation accepts (i) the
Awardee's proposal as the Program Plan covering the period April 1, 1993,
through May 31, 1994; and (ii) the budgets dated October 19, 1992, as the
approved budgets for the period January 1, 1993, through May 31, 1994.

ARTICLE 10. OTHER REPORTING REQUIREMENTS

A. Timely Notification of Significant Problems

The Awardee shall inform the NSF Program Official (either by e-mail or in
writing) in a timely manner of any significant problems or events that could
affect the overall schedule or progress in the program.

B. Verbal Reports, Collaboration Briefings and Liaison

1. The Awardee shall meet on an informal basis, as necessary or requested,
with the NSF Program Director to review progress to date and to exchange
views, ideas, and information concerning the program. During the initial three
(3) month phase in period, and thereafter until notified by the NSF Program
Director, a weekly status review meeting shall be held to discuss the progress
of the transition/phase in, including any problems or delays encountered and
changes occasioned by same. (Such weekly status review meetings may be held by
telephone and the substance thereof confirmed via e-mail when agreed.

2. The Awardee and Collaborators shall jointly meet, as requested, with the
NSF Program Director to detail the progress and discuss the status of the
collaboration effort and any difficulties being encountered in providing to
the Internet community the seamless interface service envisioned by their
collaborative proposal and called for in Article 2 in (above). It is currently
contemplated that, at least during the first twelve (12) months of the award,
such meetings shall be held quarterly at either NSF, the Awardee's or
Collaborator's facilities.

3. When requested by the NSF Program Director, Awardee shall arrange to have
its subawardees in attendance at meetings which deal with their areas of
activity. In addition, at the request of the NSF Program Director, the Awardee
shall arrange on-site meetings for the Program Officer, other Federal staff
and/or representatives of the world-wide Internet community and the Awardee's
professional personnel, and/or those of its subawardees.

C. Monthly Letter Progress Reports
<PAGE> 10
Monthly letter progress reports may be submitted electronically to the NSF
Program Official and NSF Administrative Official at the address shown on the
cover page. These (monthly letter progress) reports shall be submitted in such
detail and format as required by the Foundation's Program Director and shall
contain statistical and narrative information on the performance of the
Awardee during the preceding month.

D. Quarterly Status Report

1. Awardee shall prepare and furnish electronically and in four hard (4)
copies quarterly letter status reports; the first quarterly status report will
be for the period from January 1,1993, through March 31, 1993. These reports
shall show the status of all major events and summaries and major work
performed during the quarter, including technical status, accomplishments,
problems, collaboration activities, changes in future plans, and any pending
requests for NSF approval and should be fully reconciled with the information,
goals and projections contained in the Annual Report and Program Plan. The
report shall also include a summary of award expenditures and line charges
both cumulative and for the current quarter.

2. The report shall be prepared on a quarterly basis and shall be submitted
within (30) days after the reporting period ends. No quarterly report need be
submitted for the quarter in which the Annual Reports are submitted, but,
Awardee must insure that any germane information for the quarter not contained
in the Annual Report (i.e., list of pending requests for NSF approval) and
submitted by separate letter.

E. Final Report

The Awardee shall submit electronically and in ten hard (10) copies a final
report to NSF at the conclusion of the Cooperative Agreement. The final report
shall contain a description of all work performed and problems encountered
(and if requested a copy and documentation of any and all software and data
generated) in such form and sufficient detail as to permit replication of the
work by a reasonably knowledgeable party or organization.

F. Submission of Reports

All reports and Program Plans are to be forwarded to the Foundation
electronically. Hard copies of reports are indicated to be forwarded in the
specified number of copies to the following destinations:

No. of Copies Addressee

1 National Science Foundation e-mail: [email protected]

ATTN: Alfred W. Wilson

Division of Grants and Agreements, Room 495

Arlington, VA 22230 [Amend 01]

Remainder National Science Foundation e-mail: [email protected]

ATTN: Donald Mitchell

Division of Networking and Communications

Research and Infrastructure, Room 1175

Arlington, VA 22230 [Amend 01]
<PAGE> 11
ARTICLE 11. DIRECTED ACTIVITIES

From time to time the NSF Program Director may require the Awardee to attend
such meetings, seminars, conferences and planning and other events and/or to
provide related supplies and services as necessary to disseminate information
regarding registration services activity to the worldwide Internet community
and/or to facilitate the most effective, efficient and ubiquitous registration
services possible on an expedited basis. In such a case, the following
procedures will be followed;

A. The NSF Program Director shall request, by e-mail, the Awardee's attendance
or special services required and an estimate by the Awardee of any
reimbursable costs involved;

B. Awardee shall submit to the NSF Program director, by e-mail, its estimate
of any such reimbursable costs involved; and

C. the NSF Program Director shall forward to the Awardee a letter directive
requesting that the travel be performed and/or the special services be
provided and specifying the maximum amount that Awardee will be reimbursed for
its efforts pursuant to the letter directive.

D. Pursuant to such a letter directive, Awardee may incur costs against the
"Directed Activities" amounts included in the approved budget provided (i)
that the costs so incurred do not exceed the maximum amount specified in the
letter directive and (ii) provided also that the awardee may not incur costs
under a letter directive if such costs, when combined with costs incurred
under other letter directives will exceed the amount allotted for directed
activities as set forth in Article 8.B.2 (above).

ARTICLE 12. KEY PERSONNEL

A. The following individuals are considered key personnel and essential to the
work:

Alan S. Williamson
John Zabluski

B. Any changes in the individual (s) or significant changes in their proposed
level of effort as set forth in the approved Program Plan for any period
requires the prior written approval of the NSF Grants and Contracts Officer.

ARTICLE 13. ORDER OF PRECEDENCE

Any inconsistency in this Cooperative Agreement shall be resolved by giving
precedence in the following order (a) the Special Provisions; and (b) Grant
General Conditions (5/94) and Cooperative Agreement General Conditions (5/94).
[Amend 01]

ARTICLE 14 PUBLICITY, PUBLIC INFORMATION, AND PUBLICATIONS
<PAGE> 12
A. All news releases, public information brochures, publications and other
similar items (not limited to printed media, and including video, etc.,
prepared by Awardee, subawardees, and/or their employees or contractors which
describe activities or results under this Registration Services Agreement
shall:

1. acknowledge the sponsorship of NSF:

2. be sent to NSF in reasonable quantities for project and related NSF
distribution before being distributed or shown to the public; and

3. in the case of news releases or public information, be coordinated with and
have the approval of the NSF Program Official before release.

B. An acknowledgment of NSF support must appear in any publication of any
material, whether copyrighted or not, based upon or developed under this
project, in substantially the following terms:

The material is based on work sponsored by the National Science Foundation
under Cooperative Agreement No. NCR-9218742. The Government has certain rights
in this material.

C. All writings such as reports, books, journal articles, software, data
bases, sound recordings, video tapes and video discs, except scientific
articles or papers published in scientific, technical or professional
journals, must also contain the following disclaimer:

Any opinions, findings and conclusions or recommendations expressed in this
publication are those of the author(s) and do not necessarily reflect the
views of the National Science Foundation.

ARTICLE 15. PROJECT INCOME FROM REGISTRATION FEES

A. If, and to the extent that Awardee is authorized and/or directed to charge
and collect user fees for the Registration Services provided hereunder, any
user fees so collected shall be placed in an interest bearing account, and
shall be used to defray the Awardee's and the Foundation's Project expenses in
the following descending order of priority:

1. Project expenses incurred by Awardee as a result of the imposition of such
fees.

2. Project expenses of the Awardee charged to the Foundation under this award.
(Program Plans and future year funding requests should reflect any such
Income.

3. Project expenses of Awardee's Collaborators charged to the Foundation under
their respective Awards. (Program Plans and future year funding requests
should reflect any such inform and project fund transfers.

4. The provisions of this Article shall apply only to any Project Income which
is generated from the imposition of user based fees on registration services.
Article 19, Project Income, of the General Conditions shall apply to project
related revenue from any other source [Amend 01].
<PAGE> 13

NSF Cooperative Agreement No. NCR-9218742,
Amendment 1

Mr. David M. Graves
Contracts Administrator
Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, Virginia 22070

Cooperative Agreement No. NCR-9218742
Amendment 01
Proposal No. NCR-9442033

Dear Mr. Graves:

This amendment increases the funds available under Cooperative Agreement No.
NCR-9218742 by $1,258,457. These funds are for the continued support of the
"Network Information Services Manager(s) for NSFNET and the NREN," in
accordance with the letter and revised budget dated February 25, 1994.The
amount also includes $5,000 for Research Experiences for Undergraduates (REU)
in accordance with the proposal and budget April 7, 1994.

The Foundation hereby approves the Awardee's Program Plan dated January 3,
1994, covering the period April 1, 1994 through March 31, 1995.

The referenced Cooperative Agreement, is hereby amended as follows:

Under II. GENERAL CONDITIONS and Article 6.B2b(2)., and Article 13.b., delete
referenceds to NSF GC-1 (10/91), and substitute NSF GC-1 (5/94). A copy is
enclosed.

Under II. GENERAL CONDITIONS and Article 13.b., delete references to NSF CA-1
(12/91) and substitute NSF CA-1 (5/94). A copy is enclosed.

Under Article 6.B2c., delete CA-1 Article 37 (12/91). "Changes --Limitation of
Funds," and substitute CA-1 Article 38 (5/94). "Changes -- Limitation of
Funds."

Under Article 8. "Funding," part A., "Agreement Amount," make the following
change --

Under Article 8.B1., delete $1,162,245 and substitute $2,420,702, of which
[Proprietary Figure Omitted]

Under Article 8.C., delete $1,162,245 and substitute $2,420,720. By this
amendment, $1,258,457 covers performance through March 31, 1995.

On the Cooperative Agreement face pag and Under Article 10, "Other Reporting
Requirements," part F., "Submission of Reports," delete the name and address
of the NSF Program Administrative Official and Program Official and insert --
<PAGE> 14
NSF Administrative Official
Alfred W. Wilson
Division of Grants and Agreements
Room 495
Arlington, VA 22230
e-mail [email protected]

NSF Program Official
Donald Mitchell
Division of Networking and Communications
Research and Infrastructure
Room 1175
Arlington, VA 22230
e-mail [email protected]

Under Article 15.A4., delete Article 18. "Project Income," and substitute
Article 19. "Project Income."

Except as modified by this amendment, terms and conditions of this Agreement,
including the expiration date remain unchanged.

Please indicate your acceptance of the agreement by having an authorized
official of your organization sign and return one copy as soon as possible.

Karen L. Sandberg
Grants and Agreements Officer
<PAGE> 15

NSF Cooperative Agreement No. NCR-0218742,
Amendment 2

Mr. David M. Graves
Contract Administrator
Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, Virginia 22070
Cooperative Agreement No. NCR-9218742
Amendment No. 02

Dear Mr. Graves:

The referenced Cooperative Agreement is hereby amended in accordance with
Network Solutions, Incorporated (NSI) letter dated January 4, 1995.

Under Article 12. Key Personnel, substitute:

Robert W. McCollum and Mark A. Kosters for Alan S. Williamson
Deborah B. Fuller for John Zabluski

The cognizant NSF Program official is Priscilla Jane Huston, 703-306-1950; the
cognizant NSF Grant and Agreements Official is Alfred W. Wilson 703-306-1212.

Sincerely,

Mary Frances O'Connell
Grants and Agreements Officer
<PAGE> 16
NSF Cooperative Agreement No. NCR-9218742,
Amendment 3

Mr. Dave M. Graves
Contracts Administrator
Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, VA 22070

Cooperative Agreement No. NCR-9218742
Amendment No. 03
Proposal No. NCR - 9543563

Dear Mr. Graves:

The National Science Foundation (NSF) hereby awards $1,948,632 to Network
Solutions, Inc. for additional support in accordance wi the Program Plan
entitled "Network Information Services Manager(s) for NSFNET and the NREN,"
submitted May 5, 1995, and revis ed budged dated August 18, 1995.

The Foundation hereby approves the Awardee's Year 3 Program Plan dated May 5,
1995 covering the period April 1, 1995 through March 31, 1996 with the
following exception:

The Foundation is reviewing the fee-for-service concept outlined in Network
Solutions letters of June 19, 1995 and June 30, 1995, as well as any
modifications of the Cooperative Agreement which may be required to implement
the fee-for-service concept.

The Cooperative Agreement, as amended, is further amended as follows:

Under Article 8.B1., delete $2,420,702, and substitute $4,369,334, of which
[Proprietary Figure Omitted]

Under Article 8.C., delete $2,420,702 and substitute $4,369,334. By this
amendment, $1,948,632 covers performance through September 30, 1995.

It is understood that funding for Awardees performance beyond September 30,
1995 will require either the allotment of additional funds or NSF approval to
initiate fees for registration services in accordance with Article 3.G. of the
Cooperative Agreement.

The amount awarded includes indirect cost allowance at the rates specified in
the approved budget. These maximum provisional rates are subject to downward
adjustment only.

The Foundation authorizes the grantee to enter into the proposed contractual
arrangements and to fund such arrangements with Cooperative Agreement funds up
to the amount indicated in the approved budget. Such consistent with the
applicable Cooperative Agreement general terms and conditions and any special
conditions included in the Cooperative Agreement.
<PAGE> 17
Except as modified by this amendment, terms and conditions of this Cooperative
Agreement, including the expiration date remain unchanged.

Please indicate your acceptance of this amendment by having an authorized
official of your organization sign and return one copy as soon as possible.

Sincerely,

Carol A. Langguth
Grants and Agreements Officer
<PAGE> 18

NSF Cooperative Agreement No. NCR-9218742,
Amendment 5

NATIONAL SCIENCE FOUNDATION
4201 WILSON BOULEVARD
ARLINGTON , VIRGINIA

Jan. 6, 1997

Mr. Dave M. Graves
Contract Administrator
Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, VA 22070

Cooperative Agreement No. NCR-9218742
Amendment No. 05

Dear Mr. Graves:

The purpose of this amendment is to cover the following administrative actions
with respect to the NSI Cooperative Agreement No. NCR-9218742.

The Foundation hereby approves the following:

- - The Foundation hereby approves the Awardee's Annual Progress Report for
Year 3 submitted October 10, 1996 However, consistent with the previous
agreement between NSI and NSF, NSI will bear the costs ($61,979) of computer
equipment listed in the "materials and supplies" category of the Year 3
Financial Report and NSF will not reimburse these costs. In addition, fees in
excess of the costs incurred (including the litigation costs associated with
the Knowledgenet suit) for work not d.one during the period April 1, 1995
through September 13, 1995 will not be invoiced by NSI nor paid by NSF.

- - The Foundation hereby approves the Awardee's Year 4 Program Plan dated
October 10, 1996 covering he period April 1, 1996 through March 31, 1997.

- - The Foundation hereby approves payment of the Awardee's invoice covering
litigation costs with Knowledgenet, Inc. in the (reduced) amount of $74,617.
This amount includes only the actual cost of the litigation and associated fee
amount.

- - NSF authorizes the Awardee to invoice NSF via the Electronic Fund Transfer
process for payment (when due) of registration and renewal fees for the .EDU
and .GOV domain names at the rates set forth in this agreement. The Awardee's
invoices and NSF payment of these fees will not exceed $253,300

Except as modified by this amendment, all other Agreement terms and conditions
remain unchanged.

Sincerely,

Karen Sandberg
Grants and Agreements Officer

<PAGE> 1
EXHIBIT 10.2

NSF Cooperative Agreement No. NCR-9218742,
Amendment 4

NATIONAL SCIENCE FOUNDATION
4201 WILSON BOULEVARD
ARLINGTON, VIRGINIA 22230

September 13, 1995

Mr. Dave M. Graves
Contracts Administrator
Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, VA 22070

Cooperative Agreement No. NCR-9218742
Amendment No. 04
Proposal No. NCR-9544193

Dear Mr. Graves:

The purpose of this amendment is to modify the agreement to allow for the
collection of user fees for registration services and establish the provisions
for the use, disbursement and accountability of Program Income generated by
such fees.

The Foundation and the Awardee hereby agree that the imposition of user fees
for registration services will be carried out in accordance with the following
general guidelines:

1.NSI will provide Registration and information Services as outlined in your
approved Year 3 Program Plan.

2.Effective 12:00 A.M. EDST, September 14, 1995, Awardee is authorized to
impose an annual fee of $50/year per 2nd level domain name in .gov, .edu,
.com, .net, and .org to pay for the services provided. NSF will pay the annual
fee for domain name holders in .edu and .gov on a temporary basis. (The
specifics of the imposition include an initial charge of $100 for two years
for new registrants and $50/year payable on the anniversary date of the
original registration for every year thereafter. Existing domain name holders
will be charged the $50/year on their anniversary date.)

3.The funds collected by reason of the fee imposition will be treated as
"Program Income" under the terms of the agreement. Of those funds:

a. 70% will be available to Awardee as consideration for the services
provided.

b. the remaining 30% will be placed into an interest-bearing account which
will be used for the preservation and enhancement of the "Intellectual
Infrastructure" of the Internet in general conformance with approved Program
Plans. Awardee will develop and implement mechanisms to insure the involvement
of the Internet communities in determining and overseeing disbursements from
this account. Awardee will
<PAGE> 2
also establish and maintain publically available records of all deposits to
and disbursements from the account.

4.Any changes in the fee structure or amount will require approval (as set
forth in Article 3.G of the agreement).

5.Awardee will continue to submit a Program Plan for approval by NSF in
advance of each Program Year, to submit monthly, quarterly, and annual reports
and attend/host quarterly InterNIC reviews as requested by the NSF Program
Official.

The specific details of the implementation of user fees will be as set forth
in Awardees letter of September 13, 1995 (including all attachments) which is
incorporated herein by reference.

The Agreement, as amended, is hereby further amended as follows:

1.In Article 2.A.1, effective with this amendment, the reference to "General
Atomics under Cooperative Agreement NCR-9218179" is hereby deleted,
(reflecting the recent termination of that agreement).

2.To Article 4, the following section D is added:

"D. Beginning in November 1995, the Awardee shall make available on
rs.internic.net performance measures for registration services and turnaround
times, as well as Awardee's performance against those measures and turnaround
times for public review and comment."

3.To Article 5, the following section C is added:

"C. The report generated by the performance review required by paragraph B.
above will be available at ds.internic.net for public review."

4.In Article 8:

a. In section C. delete the date "September 30, 1995" and substitute in lieu
thereof the date "September 13, 1995", and;

b. Add the following section G:

Article 8. Funding contained in the original cooperative agreement, and as
amended by Amendments No. 1, 2 and 3 and above shall apply for the period
January 1, 1993 through September 13, 1995). Effective September 14, 1995, the
following shall apply:

Compensation:

In consideration of all work performed under this agreement after September
13, 1995, Awardee shall impose a user fee of $50/year per second level domain
name in .gov, .edu, .com, .net, and .org to pay for the services provided as
detailed in Awardees proposal of September 13, 1995. (The specifics of the
imposition include an initial charge of $100 for two years for new registrants
and $50/year payable on the anniversary date of the original registration for
every year thereafter. Existing domain name holders will be charged the
$50/year on their anniversary date.) Implementation of the user fee imposition
shall be in general accordance with Awardees proposal of September 13, 1995.

NSF shall pay the fees for the second level domain name registrations in the
.edu domain for the period of this agreement, and shall on an interim basis
support the fees for second level domain name registrations in the .gov
domain. Notwithstanding the foregoing, Awardee will defer invoicing of fees
for registrations in
<PAGE> 3
the .edu and .gov domains until a further amendment is added explicating the
provisions for the invoicing and payment of these fees.

The funds collected by reason of the user fee imposition will be considered
"Program Income" under the terms of the agreement. Of these funds:

a. 70% will be available to NSI as consideration for the services provided.

b. the remaining 30% will be placed into an interest-bearing account which
will be used for the preservation and enhancement of the "Intellectual
Infrastructure" of the Internet. Awardee will develop and implement mechanisms
to insure the involvement of the Internet communities in determining and
overseeing disbursements from this account. Awardee will also establish and
maintain publically available records of all deposits to and disbursements
from the account.

5.Effective October 1, 1995, Article 9, Annual Report, Program Plan and
Budget, (effective for the period January 1, 1993 through September 30, 1995)
is hereby superseded and replaced by the following Article 9. Annual Report,
Program Plan and Budget:

ARTICLE 9. Annual Report, Program Plan and Budget

By January 31 each year, Awardee shall submit both electronically and in 10
hard copies an Annual Report, Program Plan and Budget to the Foundation for
approval. These documents shall be submitted in a format and level of detail
approved by the Foundation but shall, as a minimum, contain project goals and
objectives specified with sufficient technical criteria, milestones, and
objectives to measure the progress of the effort toward attainment of
objectives during the time period for which it is being submitted. The Program
Plan will be the basis for performance goals, areas of emphasis and any
adjustments in the user fee charged for registration services (or the
distribution of revenues from those fees in the succeeding 12 month period).
Each submission should contain narrative information indicating (for the past
years' activities) by functional area and overall: any goals accomplished,
exceeded or missed and explaining any significant deviations from the previous
year's plan; any educational achievements; patents, copyrights or other
innovations resulting from the activities. Each annual submission shall also
contain information on projected revenues and expenditures for the upcoming
year and actual projected revenues and expenditures for the reporting period.

The Awardee will receive a formal approval of the Program Plan from the
Foundation.

6.Effective September 14, 1995, Article 15. Project Income from Registration
Fees is superseded and replaced in its entirety by the following:

Article 15. Revenues from Registration Fees

All income generated by the imposition of user fees charged for registration
services shall be considered "Project Income" within the agreement.
Distribution and use of these funds shal~ be made in accordance with the
provisions of Article 8. (as amended above) and Awardee's proposal of
September 13, 1995.

Please indicate your acceptance of this amendment by having it signed by an
authorized official of your organization and returning one copy to me as soon
as possible.

Sincerely,

Karen L. Sandberg
Grants and Agreements Officer

<PAGE> 1
EXHIBIT 10.3

MASTER SERVICES AGREEMENT

FOR

SYSTEM MANAGEMENT SERVICES

REFERENCE NO.012272-001-001

BY AND BETWEEN

NATIONSBANC SERVICES, INC.

AND

NETWORK SOLUTIONS, INC.
<PAGE> 2

MASTER SERVICES AGREEMENT
REFERENCE NO.012272-001-001

TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION NO. SECTION HEADING
- ---------- -----------------------------------------------
<S> <C>
1.0 Term of Agreement
2.0 Affiliates
3.0 Scope of Agreement
4.0 Mutual Representations and Warranties
5.0 Representations and Warranties of Company
6.0 Covenants
7.0 Force Majeure
8.0 Relationship/Personnel
9.0 Subcontracting
10.0 Ordering of Services
11.0 Non-Discrimination
12.0 Confidentiality
13.0 Security
14.0 Indemnification
15.0 Damages
16.0 Insurance
17.0 Minority Business Development Initiative
18.0 Administration
19.0 Pricing/Fees
20.0 Invoices/Taxes/Payments
21.0 Retention of Records/Audit
22.0 Termination
23.0 Notices
24.0 Assignment
25.0 Arbitration
26.0 Applicable Law
27.0 Miscellaneous

EXHIBIT A GENERAL CLASSIFICATIONS FOR SERVICES
EXHIBIT B JOB CATEGORIES
EXHIBIT C NATIONSBANC MASTER CONTRACT TIME AND MATERIAL/LABOR
HOUR RATES
</TABLE>
<PAGE> 3

MASTER SYSTEM MANAGEMENT SERVICES AGREEMENT
REFERENCE NO.012272-001-001

This Master System Management Services Agreement ("Agreement") is entered into
by and between NationsBanc Services, Inc. ("NBSI") and Network Services, Inc.
("Company").

This Agreement establishes the terms, conditions and consideration under which
Company will provide services ("Services") for System Management Services as
specified in EXHIBIT B, attached and by this reference incorporated hereto.

1.0 TERM OF AGREEMENT
1.01. INITIAL TERM. This Agreement shall apply and remain in effect from
January 1, 1997 through December 31, 1999, excluding any potential
renewal term(s) ("Initial Term") unless sooner terminated as provided
herein.

1.02. EXTENSIONS. NBSI shall have the right to extend this Agreement for an
additional twelve (12) month period(s) ("Renewal Term") by giving
Company written notice of its intent at least thirty (30) calendar
days prior to the end of the Initial Term.

1.03. CONTINUATION OF AGREEMENT. In the event NBSI fails to notify Company
of its intent to renew or terminate this Agreement, the Agreement
shall continue in effect on a month-to-month basis, at the prices last
offered for Services under the Initial Term, until canceled by either
party upon thirty (30) calendar days prior written notice to the
other.

2.0 AFFILIATES
2.01. Definition. When used in this Agreement, the term "NBSI Affiliate"
shall mean all entities now or hereafter controlling, controlled by,
or under common control, directly or indirectly, of NBSI or NBSI's
parent.

2.02. RIGHTS OF NBSI AFFILIATES. Company expressly acknowledges and agrees
that (a) NBSI has contracted with Company under this Agreement in
order to satisfy current or future obligations of NBSI to, or
requirements of, one or more NBSI Affiliates, (b) to the extent that
the interests of NBSI Affiliates are affected by this Agreement, all
obligations of Company under this Agreement shall extend, and all
rights and privileges of NBSI shall accrue, to the NBSI Affiliates to
the same extent as such obligations, rights and privileges extend or
accrue to NBSI under this Agreement, and (c) notwithstanding the
foregoing, NBSI shall solely be responsible to Company for the
performance of NBSI's obligations under this Agreement.

3.0 SCOPE OF THE AGREEMENT
3.01. Company will provide the Services as set forth in EXHIBIT B, attached
hereto, in accordance with the requirements for Services set forth
therein.

3.02. Any written document submitted to NBSI by Company in connection with
this Agreement, including but not limited to, invoices, Services
schedules, and the like shall reference, as applicable, Contract Task
Order number and/or Agreement reference number.

4.0 MUTUAL REPRESENTATIONS AND WARRANTIES
4.01. Each party represents and warrants the following: (a) in performance
of its obligations under this Agreement, each party shall act fairly
and in good faith; (b) its execution, delivery and performance of this
Agreement (i) have been authorized by all necessary corporate action,
(ii) do not violate the terms of any law, regulation, or court order
to which such party is subject, or the terms of any material agreement
to which the party or any of its assets may be subject, and (iii) are
not subject to the consent or approval

1
<PAGE> 4

of any third party; (c) this Agreement is the valid and binding
obligation of the representing party, enforceable against such party
in accordance with its terms; and (d) such party is not subject to any
pending or threatened litigation or governmental action which could
interfere with such party's performance of its obligations hereunder.

5.0 REPRESENTATIONS AND WARRANTIES OF COMPANY
5.01. In rendering its obligations under this Agreement, without limiting
other applicable performance warranties, Company represents and
warrants to NBSI as follows: (a) all work will be performed in a
professional and workmanlike manner; (b) Company is in good standing
in the state of its incorporation and is qualified to do business as a
foreign corporation in each of the states in which it is providing
services hereunder; and (c) Company shall secure all permits,
licenses, regulatory approvals and registrations required to render
services set forth herein, including without limitation, registration
with the appropriate taxing authorities for remittance of taxes.

6.0 COVENANTS
6.01. During the term of this Agreement, Company shall (a) use all
reasonable efforts to avoid the disruption of normal operations of
NBSI or any NBSI Affiliate; (b)at all times maintain capital and other
financial resources sufficient to permit Company to perform its
obligations under this Agreement; (c) pay its debts generally as they
become due; and (d) at the request of NBSI, shall deliver to NBSI
financial statements of Company as prepared by or for Company in the
ordinary course of its business and covenant that such financial
statements are true and correct in all material respects; and (e)
notify NBSI immediately in the event there is a material adverse
change in the business or financial condition of Company since the
last submission of financial statements to NBSI.

7.0 FORCE MAJEURE
7.01. SUSPENSION OF OPERATIONS. Neither party shall be liable for damages
for delay in the Services herein arising out of causes beyond its
control and without its fault or negligence, including, but not
limited to, act of God or of the public enemy, acts of the Government,
fires, floods, epidemics, strikes, labor disturbances or freight
embargoes (but not including delays caused by subcontractors or
suppliers), provided that, in the case of Company, Company shall
within ten (10) days from the beginning of such delay, notify NBSI in
writing of the cause of delay and Company's contingency plan to cure
such delay; however, if a delay exceeds a total of thirty (30) days,
NBSI may terminate this Agreement.

7.02. CONTINGENCY PLAN. Company agrees to establish and maintain policies
and procedures relevant to contingency plans, recovery plans, and
proper risk controls to ensure Company's continued performance under
this Agreement. Said policies and procedures must be in place within
sixty (60) business days from the date of execution of this Agreement
and shall include, but not be limited to, testing with respect to
reasonable assurance of effectiveness, control functions with respect
to accountability elements and corrective actions to be immediately
implemented, if necessary. Company agrees to provide copies of said
policies and procedures to NBSI, upon request.

8.0 RELATIONSHIP/PERSONNEL
8.01. INDEPENDENT CONTRACTOR STATUS. This Agreement shall not be construed
as creating an employee/employer, agency, partnership, or joint
venture relationship between Company (or any of its agents or
employees) and NBSI or NBSI Affiliates. Each party shall have the
obligation to supervise, manage, contract, direct, procure, perform or
cause to be performed, all work to be performed under this Agreement
and shall be liable for the acts or omissions of their employees and
agents in performing their respective obligations hereunder.

8.02. CHANGE IN PERSONNEL. Upon the request of NBSI, Company agrees to
immediately remove any of Company's employee(s) or agent(s) who's
performance is unsatisfactory under this Agreement and replace such
employee(s) or agent(s) as soon as practicable.

2
<PAGE> 5

8.03. EMPLOYMENT. During the term of this Agreement including any extensions
thereof, each party agrees not to recruit, solicit, or hire any of the
other party's employees who are directly associated or performing
under any Task Order issued under the Agreement. However, former
employees of either party who have left the employ of that party for a
period of six months during the term of this Agreement are not subject
to this provision. Notwithstanding the above, the parties may jointly
agree to waive this provision on a case-by-case basis upon prior
thirty (30) Calendar Day written notice by the party seeking a waiver
from this provision to the other party when it is in the best
interests of either party's employee. Such notice shall be provided to
the representative listed in Section 23 "Notices" below. No single
waiver of this provision shall constitute a continuing or subsequent
waiver.

9.0 SUBCONTRACTING
9.01. In performing its obligations under this Agreement, Company may engage
subcontractors and other third parties ("Subcontractor(s)"). Company
shall require all Subcontractors, as a condition to their engagement,
to agree to be bound by provisions substantially identical to those
included in this Agreement, specifically those relating to the
indemnification of NBSI and NBSI Affiliates, insurance requirements,
treatment of Confidential Information, and Security. Company shall
notify NBSI in writing of its intent to engage a Subcontractor. The
engagement of a Subcontractor by Company shall be subject to NBSI's
prior written consent and shall not relieve Company of any of its
obligations under this Agreement.

10.0 ORDERING OF SERVICES
10.01. (a) All products and Services to be purchased by NBSI hereunder
shall be made pursuant to Task Orders issued by NBSI to Company. The
terms and conditions this Agreement shall control all Task Orders
issued under of this Agreement, and no terms or conditions contained
in the Task Orders (other than the specific delivery instructions)
shall be of any force or effect.

(b) Each Task Order shall have a detailed statement of work
describing the services ordered by that Task Order, number of labor
hours, estimated direct costs and total ceiling amount of the Task
Order. Each Task Order shall obligate a dollar amount against which
Company shall invoice. Company shall not be required to perform work
that would cause the not-to-exceed amount of the Task Order to be
exceeded until the Task Order ceiling amount is increased by a Task
Order modification. Task Orders become effective when executed by NBSI
and received by Company's contract administrator listed in Section 23
"Notices". In the event NBSI changes its requirements subsequent to
issuance of a Task Order, the Task Order must be modified in writing
and executed by NBSI. Such modification shall be delivered to
Company's contract administrator for Company's execution prior to
Company being obligated to make changes to its performance under a
Task Order(s).

(c) Under each Task Order Company will provide personnel, its own
employees, consultants or employees of its Subcontractors, who satisfy
the minimum qualifications for the corresponding labor category they
will perform under as set forth in Exhibit B of this Agreement. All
hours provided under the Task Order(s) by Company's employees or its
Subcontractors or consultants will be applied to the level of effort
ordered by NBSI, plus or minus 10%. In order to perform under the Task
Order(s) in the most effective manner Company may use more hours of
one labor category and fewer hours of another category as long as
Company does not exceed the ceiling amount of each Task Order.

10.02. NBSI reserves the right to require reasonable changes in the criteria
and/or schedule of Services, consisting of additions, deletions or
modifications. All such changes in Services shall be authorized in
writing and mutually agreed to by both parties referencing this
Agreement.

10.03. All instruments ("Instruments"), such as Contract Task Orders and
invoices and the like used in conjunction with this Agreement shall be
for the sole purpose of defining quantities, prices and a description
of services or products to be provided hereunder, and to this extent
only are incorporated as a part of this Agreement. Any terms and
conditions included in Instruments beyond the purposes of

3
<PAGE> 6

Instrument stated above shall not be incorporated and in no event
shall such Instrument be construed to modify, amend, or alter the
terms of this Agreement.

11.0 NON-DISCRIMINATION
11.01. EQUAL OPPORTUNITY EMPLOYERS. NBSI and Company are equal opportunity
employers and do not discriminate in employment of persons or awarding
of subcontracts because of a persons race, sex, age, religion,
national origin, veteran or handicap status.

11.02. COMPLIANCE. Company is aware of and fully informed of Company's
responsibilities and agrees to the provisions under the following: (a)
Executive Order 11246, as amended or superseded in whole or in part,
and as contained in Section 202 of said Executive Order as found at 41
C.F.R: Section 60-1.4(a)(1-7); (b) Section 503 of the Rehabilitation
Act of 1973 as contained in 41 C.F.R. Section 60-741.4; and (c) The
Vietnam Era Veterans' Readjustment Assistance Act of 1974 as
contained in 41 C.F.R. Section 60-250.4.

12.0 CONFIDENTIALITY
12.01. DEFINITION. When used in this Agreement, the term "Confidential
Information" shall mean this Agreement, all Proprietary Information
(as defined below) and all data, trade secrets, business information
and other information of any kind whatsoever which (a) has been
disclosed to either party, or to which either party has access, in
connection with the negotiation and performance of this Agreement, and
(b) relates to (i) the other party, (ii) in the case of Company, the
NBSI Affiliates and their customers, or (iii) third party vendors or
licensors which have made confidential or proprietary information
available to NBSI or an NBSI Affiliate.

12.02. PROPRIETARY INFORMATION. When used in this Agreement, the term
"Proprietary Information" shall mean all work performed under this
Agreement and all work product resulting from such work, including,
without limitation, all data, designs, software, programs, card decks,
tapes, ideas, concepts, techniques, inventions, proprietary rights,
modifications and enhancements, together with all applicable rights to
patents, copyrights, trademarks and trade secrets.

12.03. NON-DISCLOSURE. Each of the parties on behalf of itself and its
employees, officers, directors, affiliates and agents, hereby agrees
that Confidential Information will not be disclosed or made available
to any third party, agent or employee for any reason whatsoever, other
than with respect to: (a) its employees on a "need to know" basis; (b)
subcontractors and other third parties specifically permitted under
this Agreement, on a "need to know" basis, provided that all such
parties are subject to a confidentiality agreement which shall be no
less restrictive than the provisions of this Section (in favor of NBSI
and NBSI Affiliates and in form and substance satisfactory to NBSI);
(c) independent contractors, agents, and consultants hired by NBSI,
provided that NBSI uses reasonable efforts to cause such parties to
maintain the confidentiality of Company's Confidential Information;
and (d) as required by law or as otherwise permitted by this
Agreement, either during the term of this Agreement or after the
termination of this Agreement, provided that, prior to any disclosure
of either party's Confidential Information as required by law, the
party subject to the requirement shall (i) notify the other party of
all, if any, actual or threatened legal compulsion of disclosure, and
any actual legal obligation of disclosure immediately upon becoming so
obligated, and (ii) cooperate with the other party's reasonable,
lawful efforts to resist, limit or delay disclosure. Nothing in this
Section shall prohibit or limit either party's use of information or
data (a) that can be demonstrated to have been previously known to it,
other than through its relationship with the other party, without a
confidentiality restriction on the use of such information, (b)
independently developed by it, as established by written evidence, (c)
rightfully acquired by it from a third party with full legal right to
disclose such information, (d) disclosed without similar restrictions
by the party that disclosed such Confidential Information pursuant to
this Agreement to a third party, (e) approved for disclosure by the
affected party pursuant to this Agreement, or (f) which becomes part
of the public domain through no breach of this Agreement.

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<PAGE> 7

12.04. EXCEPTIONS. Nothing in this Section shall prohibit or limit either
party's use of information or data (a) that can be demonstrated to
have been previously known to it, other than through its relationship
with the other party, without a confidentiality restriction on the use
of such information, (b) independently developed by it, as established
by written evidence, (c) rightfully acquired by it from a third party
with full legal right to disclose such information, (d) disclosed
without similar restrictions by the party that disclosed such
Confidential Information pursuant to this Agreement to a third party,
(e) approved for disclosure by the affected party pursuant to this
Agreement, or (f) which becomes part of the public domain through no
breach of this Agreement.

12.05. RETURN OF CONFIDENTIAL INFORMATION. Upon the termination of this
Agreement, or at any time upon the request of the other party, each
party shall return all Confidential Information in the possession of
such party or in the possession of a third party (over which such
party has or may exercise control).

12.06. INJUNCTIVE RELIEF. In the event of any breach of the obligations under
this Section, each party acknowledges that the other party would have
no adequate remedy at law, since the harm caused by such a breach
would not be easily measured and compensated for in damages, and that
in addition to such other remedies as may be available to the other
party, the other party may obtain injunctive relief including, but not
limited to, specific performance.

12.07. PUBLICITY. All media releases, public announcements and public
disclosures by either party, or their employees or agents, relating to
this Agreement or the name of NBSI, any NBSI Affiliate or Company,
including, without limitation, promotional or marketing material, but
not including any announcement intended solely for internal
distribution by the releasing party or any disclosure required by
legal, accounting or regulatory requirements beyond the reasonable
control of the releasing party, shall be coordinated with and approved
by the other party in writing prior to the release thereof.

12.08. SURVIVAL. The provisions of this Section shall survive the term or
termination of this Agreement for any reason.

13.0 SECURITY
13.01. DEFINITION. Company understands that NBSI and NBSI Affiliates operate
under various laws and federal regulatory agencies that are unique to
the security sensitive banking industry, As such, persons engaged by
Company to provide services under this Agreement are held to a higher
standard of conduct and scrutiny than in other industries or business
enterprises. Company understands and acknowledges that its employee(s)
("Employee(s)") shall possess appropriate character, disposition and
honesty conducive to the environment where services are provided under
this Agreement. Company shall, to the extent permitted by law,
exercise reasonable and prudent efforts to comply with the Security
provisions of this Agreement.

13.02. ACCESS. Company shall not knowingly permit an Employee(s) to have
access to the premises, records or data, or to engage in the conduct
of the banking affairs of NBSI or NBSI Affiliates when such
Employee(s): (a) has been convicted of a crime or has agreed to or
entered into a pretrial diversion or similar program in connection
with (i) a dishonest act or a breach of trust, as stipulated under
Section 19 of the Federal Deposit Insurance Act, 12 U.S.C. 1829(a);
and/or (ii) a felony; (b) uses illegal drugs.

13.03 COMPLIANCE. Upon written request from NBSI, Company shall provide
evidence of Company's actions to comply with the above provisions for
its Employee(s).

13.04 NOTIFICATION. NBSI shall notify Company of any act of dishonesty or
breach of trust committed against NBSI or NBSI Affiliates which may
involve an Employee(s) and Company shall notify NBSI if it becomes
aware of any such offense. Following such notice, at the request of
NBSI and to the extent permitted by law, Company shall cooperate with
investigations conducted by or on behalf of NBSI or NBSI Affiliates.
Such cooperation may include access to Company's Employee(s) for
personal

5
<PAGE> 8

interviews related to such investigations. In addition, at the request
of NBSI, Company shall conduct its own investigations into the
activities of said Employee(s), which may include polygraph
examinations when permitted by law and not specifically prohibited by
existing collective bargaining (Union) agreements or state statutes,
with the results of such investigations and all files and records
related thereto being made available to NBSI.

13.05. INTERNAL CONTROLS. Company shall cooperate with the internal operating
controls and security processes of NBSI and NBSI Affiliates where
products and/or services are provided under this Agreement.

14.0 INDEMNIFICATION
14.01. Company shall indemnify, defend, and hold harmless NBSI and the NBSI
Affiliates and their respective officers, directors, employees,
agents, successors and permitted assigns from and against any and all
claims made, or asserted, or threatened by any third party and all
related losses, expenses, damages, costs and liabilities, including
reasonable attorneys' fees and expenses incurred in investigation or
defense, arising out of or related to the following: (a) any act or
omission by Company, its employees and agents or any Subcontractor
engaged by Company in the performance of Company's obligations under
this Agreement or otherwise; (b)any material breach in a
representation, covenant or obligation of Company contained in this
Agreement; (c) any claims that, in using the Products or Services
provided to NBSI under this Agreement, NBSI or an NBSI Affiliate has
infringed the proprietary rights of any third party; or (d) Company's
relationship with its employees, agents or Subcontractors or its
capacity as an employer.

14.02. NBSI shall indemnify, defend, and hold harmless Company and its
respective officers, directors, employees, agents, successors and
permitted assigns from and against any and all claims made, or
asserted, or threatened by any third party and all related losses,
expenses, damages, costs and liabilities, including reasonable
attorneys' fees and expenses incurred in investigation or defense,
arising out of or related to the following: (a) any act or omission by
NBSI, its employees and agents or any Subcontractor engaged by NBSI in
the performance of NBSI's obligations under this Agreement or
otherwise; (1))any material breach in a representation, covenant or
obligation of NBSI contained in this Agreement; or (c) NBSI's
relationship with its employees, agents or Subcontractors or its
capacity as an employer.

15.0 DAMAGES
15.01. CERTAIN RECOVERABLE DAMAGES. Damages recoverable under this Agreement
shall include, without limitation, costs, expenses, losses and
injuries incurred or suffered by: (a) NBSI or an NBSI Affiliate, as a
result of an act, omission, breach, breach of warranty,
non-performance or misrepresentation of Company; or (b) NBSI, on
account of claims made against NBSI by an NBSI Affiliate, or payment
of claims made by NBSI to an NBSI Affiliate, to the extent that such
claims or payments result (directly or indirectly) from an act,
omission, breach, breach of warranty, non-performance or
misrepresentation of Company.

15.02. CONSEQUENTIAL DAMAGES. Neither Company nor NBSI shall be liable for
those consequential damages which consist of lost profits or loss of
goodwill; provided, however, that the limitations set forth in this
Section shall not apply to or in any way limit (a) Company's indemnity
obligations under this Agreement, or (b) Company's liability to NBSI or
an NBSI Affiliate for consequential damages which arise from Company's
gross negligence or willful misconduct.

15.03. ENFORCEMENT EXPENSES. If either party employs an attorney or commences
legal or arbitral proceedings to enforce the provisions of this
Agreement, the prevailing party shall be entitled to recover from the
other, reasonable costs incurred in connection with such enforcement,
including but not limited to, attorney's fees and costs of
investigation and litigation/arbitration.

16.0 INSURANCE

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<PAGE> 9

16.01. REQUIREMENTS. Company shall, and shall require its Subcontractors to,
secure and maintain, at its own expense, throughout the entire term of
this Agreement, the following insurance and shall furnish to NBSI
certificates evidencing such insurance prior to commencing work. Said
certificates shall contain a provision whereby the policy and/or
policies shall not be canceled or altered without at least thirty (30)
calendar days prior written notice to NBSI.

(a) WORKER'S COMPENSATION/EMPLOYERS' LIABILITY. Worker's Compensation
Insurance which shall fully comply with the statutory
requirements of all applicable state and federal laws and
Employers' Liability Insurance which limit shall be $500,000 per
accident for Bodily Injury and $500,000 per employee/aggregate
for disease. Company and its underwriter shall waive subrogation
against NBSI.

(b) COMMERCIAL GENERAL LIABILITY. Commercial General Liability
Insurance with a minimum combined single limit of liability of
$1,000,000 per occurrence and $2,000,000 aggregate for bodily
injury and/or death and/or property damage and/or personal
injury. This shall include products/completed operations coverage
and shall also include Broad Form Contractual specifically
covering this Agreement. Further, NBSI is to be added as an
Additional Insured on this policy with respect to operations
covered under this Agreement.

(c) BUSINESS AUTOMOBILE LIABILITY. Business Automobile Liability
Insurance covering all owned, hired and non-owned vehicles and
equipment used by Company with a minimum combined single limit of
liability of $1,000,000 for injury and/or death and/or property
damage.

(d) EXCESS COVERAGE. Excess coverage with respect to (A), (B) and
(C) above with a minimum combined single limit of $5,000,000.

(e) FIDELITY BOND. Company shall be responsible for loss to bank
property and customer property, directly or indirectly, from
dishonest acts of its employees in a minimum amount of
$1,000,000. Company shall maintain Fidelity Bond coverage and
NBSI shall be named as "Loss Payee, As Their Interest May
Appear," on this Fidelity Bond.

17.0 MINORITY BUSINESS DEVELOPMENT INITIATIVE
17.01. Company recognizes the NationsBank Minority Business Development
Initiative supporting Minority and Women-Owned Business Enterprises
and is committed, to the maximum extent practicable, participation
with minority and women-owned business enterprises in its
construction, procurement, and professional Services programs.

17.02. DEFINITIONS. For purposes of this Agreement, the following are the
definitions of "Minority-Owned Business Enterprise" and "Women-Owned
Business Enterprise":

(a) "Minority-Owned Business Enterprise" is recognized as a "for
profit" business concern, public or privately owned, which is at
least fifty-one percent (51%) owned, controlled and operated by
one or more "Minority Individuals" who maintain United States
citizenship.

(b) "Minority Individuals" are recognized as Black Americans,
Hispanic Americans, Native Americans (American Indians, Eskimos,
Aleuts, and native Hawaiians), Asian-Pacific Americans, and other
minorities as recognized by the United States Small Business
Administration Office of Minority Small Business and Capital
Ownership Development.

(c) "Women-Owned Business Enterprise" is recognized as a "for profit"
business concern which is at least fifty-one percent (51%) owned,
controlled and operated by women who maintain United Stated
citizenship.

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<PAGE> 10

(d) To quality as a Minority or Women-Owned Business Enterprise
("M/WBE") under this Agreement, the M/WBE must be certified by an
agency acceptable to NBSI.

17.03. PARTICIPATION.

(a) Company agrees that a minimum spending goal of five percent (5%)
of the total dollar amount of this Agreement shall be provided by
Minority Owned Business Enterprises.

(b) Company agrees that a minimum spending goal of five percent (5%)
of the total dollar amount of this Agreement shall be provided by
Women Owned Business Enterprises.

17.04. Company shall provide NBSI monthly, by the 5th of each calendar month,
a report which specifies the total amounts invoiced by and paid to
such Minority and/or Women Owned Business Enterprises for the Calendar
Month being reported. The report shall be in a format to be mutually
agreed upon by Company and NBSI.

18.0 ADMINISTRATION
18.01. REPRESENTATIVES. Company shall designate an employee and NBSI shall
designate employee(s) ("Representative(s)") to act on each respective
party's behalf with regard to matters arising under this Agreement;
however, such authority does not include the authority to alter or
amend any term, condition, or provision of this Agreement. Thereafter,
either party may change their respective Representative by providing
the other party prior written notice.

18.02. CONSTRUING DOCUMENTS. Any terms and conditions included in purchase
orders, invoices and the like used in conjunction with this Agreement
shall be for the sole purpose of defining quantities, prices and a
description of services or products to be provided hereunder and in no
event shall such be construed to modify, amend, or alter the terms of
this Agreement.

19.0 PRICING/FEES
19.01. FEES. NBSI shall pay Company for Services provided under this
Agreement as set forth in EXHIBIT C hereto,

19.02. TRAVEL. Any travel by Company for the performance of Services under
this Agreement shall be pre-approved by NBSI and reservations shall be
made through NBSI's Travel Department, unless otherwise authorized by
NBSI. Further, all pre-approved travel must be itemized on the monthly
invoices submitted to NBSI and accompanied by supporting
documentation.

19.03. ADDITIONAL FEES. ADDITIONAL FEES. Additional fees for Services not
listed on EXHIBIT C shall be as mutually agreed in writing between
NBSI and Company prior to performance.

19.04. The Service fees listed on EXHIBIT C may not be increased for a period
of twelve (12) months from the date of this Agreement. Thereafter, the
Service fees may only be increased by the mutual written agreement of
NBSI and Company one time only during any twelve (12) month period.
Company shall provide sixty (60) calendar days prior written notice to
NBSI of any proposed price increases. Proposed price increases shall
not exceed five (5%) percent of the current fees or the increase in
the Consumer Price Index (CPI) for the preceding twelve (12) month
period, whichever is less.

20.0 INVOICES/TAXES/PAYMENT
20.01. INVOICES. Invoices are to be submitted by Company monthly, in
duplicate, to the address set forth in the applicable Contract Task
Order. Invoices without reference to this Agreement reference number
or listing Services that were not requested in writing by NBSI will
not be paid but will be returned to Company. The items listed on
Company's invoice must appear in the same sequence as listed on the
Contract Task Order.

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<PAGE> 11

20.02. ITEMIZED INVOICES. Unless otherwise specified, invoices shall include
and list all applicab1e taxes as a separate item. NBSI shall pay
Company for all Services and applicable taxes invoiced in accordance
with the terms of this Agreement, within thirty (30) calendar days of
the date of receipt of invoice.

20.03. TAXES. NBSI will reimburse Company for all sales, use or excise taxes
levied on amounts payable by NBSI to Company pursuant to this
Agreement, provided that NBSI shall not be responsible for remittance
of such taxes to applicable tax authorities. NBSI shall not be
responsible for any ad valorem, income, franchise, privilege, value
added or occupational taxes of Company. Company shall cooperate with
NBSI's efforts to identity taxable and nontaxable portions of amounts
payable pursuant to this Agreement (including segregation of such
portions on invoices) and to obtain refunds of taxes paid, where
appropriate. NBSI may furnish Company with certificates or other
evidence supporting applicable exemptions from sales, use or excise
taxation.

20.04. COMPLETION OF WORK. NBSI's payments, if any, for Services prior to the
completion of such Services shall not diminish Company's obligations
hereunder and shall not constitute a waiver of NBSI's rights or
remedies hereunder.

21.0 RETENTION OF RECORDS/AUDIT
21.01. Retention of Records. For a period of not less than two (2) years
after the termination of this Agreement, Company shall maintain at no
additional cost to NBSI, in a reasonably accessible location, all
material data, files and records pertaining to its performance under
this Agreement and to charges and costs paid or payable by NBSI under
this Agreement.

21.02. AUDIT. Throughout the term of this Agreement and for two (2) years
thereafter, all of the Company's data, files and records referenced
above may be inspected, audited and copied by NBSI, its duly
authorized agents, representatives or employees or by federal or state
agencies having jurisdiction over NBSI or an NBSI Affiliate, at such
reasonable times as NBSI may determine.

22.0 TERMINATION
22.01. TERMINATION WITHOUT CAUSE. NBSI may terminate this Agreement at any
time by providing Company with thirty (30) calendar days prior written
notice indicating an intent to terminate.

22.02. TERMINATION UPON DEFAULT. In addition to any other remedies available
to either party in law or equity or under this Agreement, upon the
occurrence of a Termination Event (as defined below) with respect to
either party, the other party may immediately terminate this Agreement
by providing written notice of its intent to terminate.

22.03. TERMINATION EVENT. A Termination Event shall be deemed to have
occurred if either party: (a) shall commit a material breach of its
obligations under this Agreement, and the breach shall remain uncured
for a period of thirty (30) calendar days after written notice of the
breach is provided to the other party; (b) shall become insolvent, or
generally unable to pay its debts as they become due, or shall become
the subject of a bankruptcy, conservatorship, receivership or similar
proceeding, or shall make a general assignment for the benefit of its
creditors; (c) shall commit a fraudulent act against the other party;
(d) shall fail to comply with any material law, statute, rule or
regulation applicable to such party.

22.04. Termination of this Agreement, however, shall not preclude Company's
obligation to satisfactorily complete any Services requested under any
Contract Task Order in effect at the time of termination, at the
option of NBSI.

22.05. SURVIVAL. All provisions of this Agreement and related obligations
concerning indemnification, security, examination/audit,
confidentiality and representations and warranties shall survive the
termination of this Agreement.

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<PAGE> 12

23.0 NOTICES
23.01. All material notices or other communications or notices required under
this Agreement shall be given to the parties in writing as follows:
(a) by registered or certified United States mail, return receipt
requested and postage prepaid to the applicable addresses below, or to
such other addresses as the parties may substitute by written notice
given in the manner prescribed in this Section; (b) by hand delivery,
including courier service delivery, to such addresses; or (c) by
facsimile machine transmission, to the numbers provided below:

If to NBSI: If to Company:

<TABLE>
<S> <C>
Telecommunications Contracts Department
One Independence Center 505 Huntmar Park Drive
101 N. Tryon Street Herndon, VA 22070
NC1-001-02-07 Telephone No.: 703/736-0193
Charlotte, NC 28255-0001 Facsimile : 703/742-8449
Attn.: Otto Caudell, III
Telephone No.: 704/386-4401
Facsimile: 704/386-8876
- and -
Corporate Contracts & Procurement
127 North Tryon Street, 2nd Flood
NCI-018-02-01
Charlotte, NC 28255
Attn.: Phyllis Warren
Telephone No.: 704/386-8213
Facsimile: 704/386-8213

</TABLE>

23.02. RECEIPT. Such notices shall be deemed to have been duly given either
three (3) calendar days after the date of mailing as described above,
or one (1) calendar day after being given to an express courier or
when sent by facsimile and receipt confirmed.

24.0 ASSIGNMENT
24.01. ASSIGNMENT. Neither party may assign this Agreement or any of the
rights or obligations under this Agreement without the prior written
consent of the other party, and any such attempted assignment shall be
void. Notwithstanding the foregoing however, NBSI may assign any of
its rights and obligations under this Agreement to an NBSI Affiliate,
the surviving corporation with or into which NBSI may merge or
consolidate, or an entity to which NBSI transfers all, or
substantially all, of its business and assets and Company may assign
any of Company's rights and obligations under this Agreement to a
Company subsidiary.

24.02. THIRD PARTY BENEFICIARIES. Subject to this Section, this Agreement
shall be binding upon, and inure to the benefit of, the parties and
their respective successors and assigns. Except as specifically set
forth in this Agreement, the parties do not intend the benefits of
this Agreement to inure to any third party, and nothing contained
herein shall be construed as creating any right, claim or cause of
action in favor of any such third party, against either of the parties
hereto.

25.0 ARBITRATION
25.01. BINDING ARBITRATION. Any controversy or claim between or among the
parties hereto shall be determined by binding arbitration in
accordance with the Federal Arbitration Act (or if not applicable, the
applicable state law), the Rules of Practice and Procedure for the
Arbitration of Commercial Disputes of Judicial Arbitration and
Mediation Services, lnc./Endispute, Inc. ("J.A.M.S./Endispute"), and
if

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<PAGE> 13

J.A.M.S./Endispute is unable or legally precluded from administering
the arbitration, then the American Arbitration Association ("AAA")
will serve.

25.02. JUDGMENTS. Judgment upon any arbitration award may be entered in any
court having jurisdiction. Any party to this Agreement may bring an
action, including a summary or expedited proceeding, to compel
arbitration of any controversy or claim to which this Agreement
applies in any court having jurisdiction over such action in the
Governing State set forth herein.

25.03. PROCEDURES. Upon receipt of demand for arbitration from either NBSI or
Company, J.A.M.S./Endispute or AAA as applicable shall use its best
efforts to appoint an arbitrator and notify NBSI and Company of such
appointment within fifteen (15) calendar days and further to commence
arbitration within ninety (90) calendar days. Any NBSI or Company
demand for arbitration shall include detail sufficient to establish
the nature of the dispute and shall be delivered to the other party
concurrent with delivery to J.A.M.S./Endispute or AAA.

25.04. OTHER REMEDIES. Nothing in this Section shall limit the right of
either Company or NBSI to obtain from a court provisional or ancillary
remedies such as, but not limited to, injunctive relief, or the
appointment of a receiver, before, during or after the pendency of any
arbitration proceeding brought pursuant to this Agreement.

26.0 APPLICABLE LAW
26.01. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of North Carolina ("Governing State"). Each
party hereby submits to the jurisdiction of such courts, and waives
any objection to venue with respect to actions brought in such courts
in the Governing State.

27.0 MISCELLANEOUS
27.01. CORRESPONDENCE. Where notice, approval or similar action by either
party is permitted or required by any provision of this Agreement,
such action shall not be unreasonably delayed or withheld.

27.02. COMPLETE AGREEMENT. This Agreement, including EXHIBITs and all
materials attached hereto or referenced herein, constitute the entire
agreement of NBSI and Company with respect to the subject matter of
this Agreement and any agreement(s) between Company and NBSI or any
NBSI Affiliate with respect to the subject matter is hereby superseded
and shall hereafter have no force or effect. Other than those remedies
specifically disclaimed in this Agreement, all remedies set forth in
this Agreement shall be in addition to all other remedies available
under this Agreement or at law or in equity.

27.03. AMENDMENT AND WAIVERS. This Agreement may not be modified, waived or
amended unless mutually agreed to in writing by the parties hereto.

27.04. CAPTION REFERENCES AND HEADINGS. All section headings in this
Agreement are for convenience or reference only and are not intended
to define or limit the scope of any provision of this Agreement.

27.05. SEVERABILITY. If any provision of this Agreement shall be held invalid
for any reason, then such provision shall be severed from the
remaining provisions of this Agreement and shall not affect the
validity or enforceability of the other provisions of this Agreement,
unless the invalidity of any such provision deprives any party of the
economic benefit intended to be conferred by this Agreement.

27.06. WAIVER. Any waiver by either party of any provision of this Agreement
shall not imply a subsequent waiver of that or any other provision,
and any failure to enforce strict performance of any provision of this
Agreement shall not be construed as a waiver or relinquishment to
enforce strict performance in respect to such provision on any future
occasion.

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<PAGE> 14

27.07. CONSTRUCTION. Notwithstanding the general rules of construction, both
NBSI and Company acknowledge that both parties were given an equal
opportunity to negotiate the terms and conditions contained in this
Agreement, and agree that the identity of the drafter of this
Agreement is not relevant to any interpretation of the terms and
conditions of this Agreement.

27.O8. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which when so executed shall be deemed to be an original.

EXECUTED this 21st day of January, 1997

NBSI: NATIONSBANC SERVICES, INC. COMPANY: NETWORK SOLUTIONS, INC.

BY: /s/BETTY W. LUTHER BY: /s/JAMES M. ULAM
----------------------------------- -------------------------

PRINTED NAME: Betty W. Luther PRINTED NAME: James M. Ulam

OFFICER's TITLE: Vice President TITLE: Director of Contracts

For more information regarding the negotiation and content of this Agreement,
the following persons may be contacted:

FOR NBSI: Phyllis A. Warren FOR COMPANY: James M. Ulam

12
<PAGE> 15

EXHIBIT A

GENERAL CLASSIFICATIONS FOR SERVICES

The scope of work will be defined under each Task Order, and will meet one or
more of the following general classifications:

- - Engineering. Engineering support is defined as Network, Systems,
Application, or other Information Technology engineering in which a
professionally developed, technically accurate, cost effective,
solution or product is delivered to NBSI.

- - Technical Studies: Technical Studies is defined as research, reviews,
requirements analyses, evaluations, or problem determination and
recommendations that are professionally produced and delivered to
NBSI.

- - Operations Support. Operations Support is defined as network, systems,
or platform operations and management in which day-to-day service
objectives and cost versus performance are fundamental objectives and
potential deliverables to NBSI.

- - Project Management. Project Management is defined as professional
management of projects or programs where such services as project
planning and scheduling, staff supervision, and progress analysis and
reporting are fundamental objectives and potential deliverables to
NBSI.

NBSI will provide, at its cost, connectivity from the NationsBanc LAN/WAN to
Company's Charlotte office. This connectivity will facilitate coordination and
delivery of project support under this Agreement.

13
<PAGE> 16

EXHIBIT B

JOB CATEGORIES

JOB CATEGORY: NETWORK ANALYST

POSITION DESCRIPTION

This is an entry level position for network analysis and engineering. The
individual must possess a knowledge of network operations functions and
demonstrated skills in analysis and diagnosis of network problems. The
individual shall be experienced with specialized monitoring and diagnostic
equipment and software. The individual may possess skills and training with
particular Network Operating Systems (NOS) or network infrastructure support
equipment, such as Routers, Switches, and Concentrators.

DUTIES RESPONSIBILITIES
- - Provide support of the site's physical network, multi-user computer
system LANs including backbone network connections and equipment, or
desktop software and configurations.

- - Troubleshoot problems on the site network, passing on all information,
as necessary, to the users of the site network.

- - Provide coordination and/or automation of network subscriber requests.

- - Provide logistic support to change-control and deployment of new
network equipment and software.

EMPLOYMENT STANDARDS

Individual shall possess an Associates degree or equivalent education and
experience plus four years applicable work experience and/or technical
training. Knowledge and experience with networks to include LAN/WAN, SNA,
and/or telecommunications.

14
<PAGE> 17

EXHIBIT B

JOB CATEGORIES

JOB DESCRIPTION: NETWORK ENGINEER

POSITION DESCRIPTION

This is an intermediate level position for network analysis and engineering.
The individual must possess a basic knowledge of network infrastructure design
and modification and demonstrated skills with analysis, formulation, and
delivery of moderately complex documentation and specifications including
diagrams, technical studies, and cost-benefit analyses in support of their
recommendations. The individual shall possess specialized skills and limited
experience with particular Network architectures, protocols, and standards.

DUTIES AND RESPONSIBILITIES

- - Provide technical engineering in support of projects and planning
efforts with objective of delivering cost-effective solutions with
sound, industry-standard approaches.

- - Examine and review designs, processes, standards, and technologies for
improvement and innovation, providing appropriate written/oral
feed-back and recommendations.

- - Assist in third-level network and network application problem analysis
and trouble-shooting.

EMPLOYMENT STANDARDS

Individual shall possess a BA/BS degree or equivalent education and experience
plus six years applicable work experience and/or technical training. Knowledge
and experience with networks architectures to include LAN/WAN, SNA, and/or
telecommunications. Individual must have knowledge of Internet/Intranet
technologies.

15
<PAGE> 18

EXHIBIT B

JOB CATEGORIES

JOB DESCRIPTION: NETWORK SPECIALIST

POSITION DESCRIPTION

This is a journeyman level position for network analysis and engineering. The
individual must possess a broad knowledge of network infrastructure design and
modification and demonstrated skills with analysis, formulation, and delivery
of highly complex documentation and engineering specifications including
detailed diagrams, technical studies, and cost-benefit analyses in support of
their recommendations. The individual shall possess specialized skills and
experience with a broad base of Network architectures, protocols, and
standards.

DUTIES AND RESPONSIBILITIES

- - Provide technical engineering in support of projects and planning
efforts with objective of delivering cost-effective solutions with
sound, industry-standard approaches.

- - Examine and review designs, processes, standards, and technologies for
improvement and innovation, providing appropriate written/oral
feed-back and recommendations.

- - Conduct or assist with major requirements studies and deliver
recommendations.

- - Provide third-level network and network application problem analysis
and trouble-shooting.

- - Provide review and guidance on internal network policies and
standards, wherever applicable.

- - Provide review and guidance for access to external networks including
the Internet, to assure adherence to any and all applicable policies
and standards.

EMPLOYMENT STANDARDS

Individual shall possess a BA/BS degree or equivalent education and experience
plus six years applicable work experience and/or technical training. Knowledge
and experience with networks to include LAN/WAN, SNA, and/or
telecommunications. Individual must have knowledge and experience with
integration of Internet/Intranet technologies.

16
<PAGE> 19

EXHIBIT B

JOB CATEGORIES

JOB DESCRIPTION: NETWORK CONSULTANT

POSITION DESCRIPTION

This is a journeyman level position for network consulting. The individual must
possess a broad background of knowledge and experience to support integration
and optimization of network technologies and applications. The individual
possesses a broad base of skills and experience with Network architectures,
protocols, and standards. The individual may possess specialized skills in
specific industry-standard networking solutions, such as IP-based or SNA
Networks.

DUTIES AND RESPONSIBILITIES

- - Provide technical consulting in support of projects and planning
efforts with objective of delivering cost-effective solutions with
sound, industry-standard approaches.

- - Examine and review designs, processes, standards, and technologies for
improvement and innovation, providing appropriate written/oral
feed-back and recommendations.

- - Independently conduct or lead major requirements studies and deliver
recommendations.

- - Provide third-level network and network-application problem analysis
and trouble-shooting.

- - Provide review and guidance on internal network policies and
standards, wherever applicable.

- - Provide review and guidance for access to external networks including
the Internet, to assure adherence to any and all applicable policies
and standards.

- - Provide project planning and support.

EMPLOYMENT STANDARDS

Individual shall possess a BA/BS degree or equivalent education and experience
plus eight years applicable work experience and/or technical training. An
advanced degree is desirable. Knowledge and experience with networks to include
LAN/WAN, SNA, and/or telecommunications. Individual must have knowledge and
experience with integration of Internet/Intranet technologies.

17
<PAGE> 20

EXHIBIT B

JOB CATEGORIES

JOB DESCRIPTION: ADVISORY NETWORK CONSULTANT

POSITION DESCRIPTION

This is a senior level position for network consulting. Individuals in this
position shall fully participate in complex analysis and design projects. The
individual must possess a broad background of knowledge and experience to
support integration and optimization of network technologies and applications.
The individual shall possess a broad base of skills and experience with Network
architectures, protocols, and standards. The individual shall possess
specialized skills in one or more specific industry-standard networking
solutions, such as IP-based or SNA Networks.

DUTIES AND RESPONSIBILITIES

- - Provide technical consulting in support of projects and planning
efforts with objective of delivering cost-effective solutions with
sound, industry-standard approaches.

- - Examine and review designs, processes, standards, and technologies for
improvement and innovation, providing appropriate written/oral
feed-back and recommendations.

- - Independently conduct or lead major requirement studies and deliver
recommendations.

- - Provide third-level network and network-application problem and
analysis and trouble-shooting.

- - Provide review and guidance for access to external networks including
the Internet, to assure adherence to any and all applicable policies
and standards.

- - Conduct technology studies, reviews, and investigations.

- - Provide project planning and support.

- - Provide project leadership.

EMPLOYMENT STANDARDS

Individual shall possess a BA/BS degree or equivalent education and experience
plus 10 years applicable work experience and/or technical training. An advanced
degree is desirable. Knowledge and experience with networks to include LAN/WAN,
SNA, and/or telecommunications. Individual must have knowledge and experience
with integration of Internet/Intranet technologies.

18
<PAGE> 21

EXIIIBIT B

JOB CATEGORIES

JOB DESCRIPTION: PRINCIPAL NETWORK CONSULTANT

POSITION DESCRIPTION

This is a mastery level position for network consulting. The individual shall
possess a broad technical and analytical background of knowledge and experience
to support integration and optimization of network technologies and
applications. The individual shall possess a broad base of skills and
experience with consulting services to all areas of the company, including
marketing/business acquisition, current client support, technical staff
development, and strategic planning. The individual shall be capable of
performing independently, as required, and provide team leadership to assigned
technical staff members. The individual shall also interact with senior level
technical and executive staff; both within Network Solutions and with current
potential clients. Individuals in this position are expected to compose and
deliver, orally and in writing, reports and presentations of the highest
professional quality.

DUTIES AND RESPONSIBILITIES

- - Provide technical consulting in support of projects and planning
efforts with objective of delivering cost-effective solutions with
sound, industry-standard approaches.

- - Examine and review designs, processes, standards, and technologies for
improvement and innovation, providing appropriate written/oral
feed-back and recommendations.

- - Independently conduct or lead major requirement studies and deliver
recommendations.

- - Provide third-level network and network-application problem analysis
and trouble-shooting.

- - Provide review and guidance on internal network policies and
standards, wherever applicable.

- - Provide review and guidance for access to external networks including
the Internet, to assure adherence to any and all applicable policies
and standards.

- - Conduct technology studies, reviews, and investigations.

- - Provide project planning and support.

- - Provide project management support.

EMPLOYMENT STANDARDS

Individual shall possess a BA/BS degree or equivalent education and experience
plus ten years applicable work experience and/or technical training. An
advanced is desirable. Knowledge and experience with networks to include
LAN/WAN, SNA, and/or telecommunications. Individual must have knowledge and
experience with integration of Internet/Intranet technologies.

19
<PAGE> 22

EXHIBIT C

NATIONSBANC MASTER CONTRACT TIME AND MATERIAL/LABOR HOUR RATES

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
LABOR CATEGORY DURATION OF LONGER THAN 6
ASSIGNMENT MONTHS
1 HOUR TO 6 MONTHS
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
PRINCIPAL NETWORK CONSULTANT $173 $138
- --------------------------------------------------------------------------------------
ADVISOR NETWORK CONSULTANT $158 $126
- --------------------------------------------------------------------------------------
NETWORK CONSULTANT $143 $114
- --------------------------------------------------------------------------------------
NETWORK SPECIALIST $124 $99
- -------------------------------------------------------------------------------------
NETWORK ENGINEER $109 $87
- -------------------------------------------------------------------------------------
NETWORK ANALYST $94 $75
- -------------------------------------------------------------------------------------
</TABLE>

Subject to Section 19.04 of this Agreement, the above listed rates are valid
through December 31, 1999. Material, travel and other direct costs incurred in
the performance of the Agreement shall be reimbursed at cost plus a 5% handling
fee. Lodging and travel arrangements for Company will be made by NBSI. Task
Order modifications which extend the duration of the assignment will not
entitle NBSI to a credit or refund resulting from the change in the hourly
rate. If a Task Order modification shortens the duration of the assignment so
that the effective hourly rate increases, Company is entitled to bill the
higher rate from the date of the modification.

<PAGE> 1
EXHIBIT 10.4

NETWORK SOLUTIONS, INC.

1996 STOCK INCENTIVE PLAN

(Adopted Effective September 18, 1996)
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE 2. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Committee Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Committee Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE 3. SHARES AVAILABLE FOR GRANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Basic Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Additional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Dividend Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE 4. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1 General Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.2 Incentive Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.3 Limits on Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

ARTICLE 5. OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.1 Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.2 Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.3 Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.4 Exercisability and Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.5 Effect of Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5.6 Modification or Assumption of Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ARTICLE 6. PAYMENT FOR OPTION SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.2 Surrender of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.3 Exercise/Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.4 Exercise/Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.5 Promissory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.6 Other Forms of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

ARTICLE 7. STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.1 SAR Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.2 Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.3 Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.4 Exercisability and Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.5 Effect of Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.6 Exercise of SARs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.7 Modification or Assumption of SARs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>

-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.1 Time, Amount and Form of Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.2 Payment for Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.3 Vesting Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.4 Form and Time of Settlement of Stock Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.5 Death of Recipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8.6 Creditors' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE 9. VOTING AND DIVIDEND RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.1 Restricted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
9.2 Stock Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE 10. PROTECTION AGAINST DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
10.1 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
10.2 Reorganizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE 11. AWARDS UNDER OTHER PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE 12. PAYMENT OF DIRECTOR'S FEES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12.1 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12.2 Elections to Receive NSOs or Stock Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12.3 Number and Terms of NSOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
12.4 Number and Terms of Stock Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE 13. LIMITATION ON RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13.1 Retention Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13.2 Stockholders' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13.3 Regulatory Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE 14. LIMITATION ON PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14.1 Basic Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14.2 Reduction of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
14.3 Overpayments and Underpayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
14.4 Related Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

ARTICLE 15. WITHHOLDING TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
15.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
15.2 Share Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE 16. ASSIGNMENT OR TRANSFER OF AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
16.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>

-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 17. FUTURE OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
17.1 Term of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
17.2 Amendment or Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE 18. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE 19. EXECUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>

-iii-
<PAGE> 5
NETWORK SOLUTIONS, INC.

1996 STOCK INCENTIVE PLAN

(Adopted Effective September 18, 1996)

ARTICLE 1. INTRODUCTION.

The Plan was adopted by the Board on September 18, 1996, subject to
approval by the Company's stockholders.

The purpose of the Plan is to promote the long-term success of the
Company and the creation of stockholder value by (a) encouraging Key Employees
to focus on critical long-range objectives, (b) encouraging the attraction and
retention of Key Employees with exceptional qualifications and (c) linking Key
Employees directly to stockholder interests through increased stock ownership.
The Plan seeks to achieve this purpose by providing for Awards in the form of
Restricted Shares, Stock Units, Options (which may constitute incentive stock
options or nonstatutory stock options) or stock appreciation rights.

The Plan shall be governed by, and construed in accordance with, the
laws of the State of Delaware (except their choice-of-law provisions).

ARTICLE 2. ADMINISTRATION.

2.1 Committee Composition. The Plan shall be administered by the
Committee. Effective with the Company's initial public offering, the Committee
shall consist of two or more directors of the Company who shall satisfy the
requirements of Rule 16b-3 (or its successor) under the Exchange Act with
respect to the grant of Awards to persons who are officers or directors of the
Company under Section 16 of the Exchange Act.

The Board may also appoint one or more separate committees of the
Board, each composed of one or more directors of the Company who need not
qualify under Rule 16b-3, who may administer the Plan with respect to Key
Employees who are not considered officers or directors of the Company under
Section 16 of the Exchange Act, may grant Awards under the Plan to such Key
Employees and may determine all terms of such Awards.

2.2 Committee Responsibilities. The Committee shall:

(a) Select the Key Employees who are to receive Awards under the
Plan;

(b) Determine the type, number, vesting requirements and other
features and conditions of such Awards;

-1-
<PAGE> 6
(d) Make all other decisions relating to the operation of the Plan.

The Committee may adopt such rules or guidelines as it deems
appropriate to implement the Plan. The Committee's determinations under the
Plan shall be final and binding on all persons.

ARTICLE 3. SHARES AVAILABLE FOR GRANTS.

3.1 Basic Limitation. Common Shares issued pursuant to the Plan may
be authorized but unissued shares or treasury shares. The aggregate number of
Common Shares initially reserved for award under the Plan shall be 2,306,250
shares. Effective January 1, 1997 and on each January 1 thereafter for the
remaining term of the Plan, the aggregate number of Common Shares which may be
issued under the Plan to individuals shall be increased by a number of Common
Shares equal to 2% of the total number of Common Shares of the Company
outstanding at the end of the most recently concluded calendar year. Any
Common Shares that have been reserved but not issued as Restricted Shares,
Share Units, Options or SARs during any calendar year shall remain available
for grant during any subsequent calendar year. Notwithstanding the foregoing,
no more than 1,000,000 Common Shares shall be available for the grant of ISOs
for the remaining term of the Plan. The limitation of this Section 3.1 shall
be subject to adjustment pursuant to Article 10.

3.2 Additional Shares. If Stock Units, Options or SARs are
forfeited or if Options or SARs terminate for any other reason before being
exercised, then the corresponding Common Shares shall again become available
for Awards under the Plan. If SARs are exercised, then only the number of
Common Shares (if any) actually issued in settlement of such SARs shall reduce
the number available under Section 3.1 and the balance shall again become
available for Awards under the Plan. If Restricted Shares are forfeited, then
such Shares shall again become available for Awards under the Plan.

3.3 Dividend Equivalents. Any dividend equivalents distributed
under the Plan shall not be applied against the number of Restricted Shares,
Stock Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.

ARTICLE 4. ELIGIBILITY.

4.1 General Rules. Only Key Employees (including, without
limitation, independent contractors who are not members of the Board) shall be
eligible for designation as Participants by the Committee. All Outside
Directors shall be eligible for making an election described in Article 12.

4.2 Incentive Stock Options. Only Key Employees who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs. In addition, a Key Employee who owns more than ten percent
(10%) of the total combined voting power of all classes of outstanding stock of
the Company or any of its Parents or Subsidiaries shall not be eligible for the
grant of an ISO unless the requirements set forth in section 422(c)(5) of the
Code are satisfied.

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4.3 Limits on Awards. No Key Employee shall receive Options or
SARs to purchase Common Shares during any fiscal year covering in excess of
1,000,000 Common Shares; provided, however, a newly hired Key Employee may
receive Options or SARs to purchase up to 1,000,000 Common Shares during the
portion of the fiscal year remaining after his or her date of hire.

ARTICLE 5. OPTIONS.

5.1 Stock Option Agreement. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are not inconsistent with the Plan,
including but not limited to rights of repurchase and rights of first refusal.
The Stock Option Agreement shall specify whether the Option is an ISO or an
NSO. The provisions of the various Stock Option Agreements entered into under
the Plan need not be identical. Options may be granted in consideration of a
cash payment or in consideration of a reduction in the Optionee's other
compensation. A Stock Option Agreement may provide that new Options will be
granted automatically to the Optionee when he or she exercises the prior
Options.

5.2 Number of Shares. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 10.

5.3 Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price of an ISO shall in no event be
less than one hundred percent (100%) of the Fair Market Value of a Common Share
on the date of grant. In the case of an NSO, a Stock Option Agreement may
specify an Exercise Price that varies in accordance with a predetermined
formula while the NSO is outstanding.

5.4 Exercisability and Term. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed ten (10)
years from the date of grant. A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee's death, disability or
retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. Options
may be awarded in combination with SARs, and such an Award may provide that the
Options will not be exercisable unless the related SARs are forfeited. NSOs
may also be awarded in combination with Restricted Shares or Stock Units, and
such an Award may provide that the NSOs will not be exercisable unless the
related Restricted Shares or Stock Units are forfeited.

5.5 Effect of Change in Control. The Committee may determine, at
the time of granting an Option or thereafter, that such Option shall become
fully exercisable as to all Common Shares subject to such Option in the event
that a Change in Control occurs with respect to the Company.

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5.6 Modification or Assumption of Options. Within the limitations
of the Plan, the Committee may modify, extend or assume outstanding options or
may accept the cancellation of outstanding options (whether granted by the
Company or by another issuer) in return for the grant of new options for the
same or a different number of shares and at the same or a different exercise
price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair his or her rights or
obligations under such Option.

ARTICLE 6. PAYMENT FOR OPTION SHARES.

6.1 General Rule. The entire Exercise Price for the Common Shares
issued upon exercise of Options shall be payable in cash at the time when such
Common Shares are purchased, except as follows:

(a) In the case of an ISO granted under the Plan, payment
shall be made only pursuant to the express provisions of the
applicable Stock Option Agreement. The Stock Option Agreement may
specify that payment may be made in any form(s) described in this
Article 6.

(b) In the case of an NSO, the Committee may at any time
accept payment in any form(s) described in this Article 6.

6.2 Surrender of Stock. To the extent that this Section 6.2 is
applicable, payment for all or any part of the Exercise Price may be made with
Common Shares which have already been owned by the Optionee for such duration
as shall be specified by the Committee. Such Common Shares shall be valued at
their Fair Market Value on the date when the new Common Shares are purchased
under the Plan.

6.3 Exercise/Sale. To the extent that this Section 6.3 is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to a securities broker approved by the
Company to sell Common Shares and to deliver all or part of the sales proceeds
to the Company in payment of all or part of the Exercise Price and any
withholding taxes.

6.4 Exercise/Pledge. To the extent that this Section 6.4 is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Common Shares to a securities
broker or lender approved by the Company, as security for a loan, and to
deliver all or part of the loan proceeds to the Company in payment of all or
part of the Exercise Price and any withholding taxes.

6.5 Promissory Note. To the extent that this Section 6.5 is
applicable, payment may be made with a full-recourse promissory note; provided
that to the extent required by applicable law, the par value of the Common
Shares shall be paid in cash.

6.6 Other Forms of Payment. To the extent that this Section 6.6 is
applicable, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.

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ARTICLE 7. STOCK APPRECIATION RIGHTS.

7.1 SAR Agreement. Each grant of a SAR under the Plan shall be
evidenced by a SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various SAR Agreements entered into under the Plan need not be identical. SARs
may be granted in consideration of a reduction in the Optionee's other
compensation.

7.2 Number of Shares. Each SAR Agreement shall specify the number
of Common Shares to which the SAR pertains and shall provide for the adjustment
of such number in accordance with Article 10.

7.3 Exercise Price. Each SAR Agreement shall specify the Exercise
Price. A SAR Agreement may specify an Exercise Price that varies in accordance
with a predetermined formula while the SAR is outstanding.

7.4 Exercisability and Term. Each SAR Agreement shall specify the
date when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. A SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end
of its term in the event of the termination of the Optionee's service. SARs
may also be awarded in combination with Options, Restricted Shares or Stock
Units, and such an Award may provide that the SARs will not be exercisable
unless the related Options, Restricted Shares or Stock Units are forfeited. A
SAR may be included in an ISO only at the time of grant but may be included in
an NSO at the time of grant or thereafter. A SAR granted under the Plan may
provide that it will be exercisable only in the event of a Change in Control.

7.5 Effect of Change in Control. The Committee may determine, at
the time of granting a SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Shares subject to such SAR in the event that a
Change in Control occurs with respect to the Company.

7.6 Exercise of SARs. If, on the date when a SAR expires, the
Exercise Price under such SAR is less than the Fair Market Value on such date
but any portion of such SAR has not been exercised or surrendered, then such
SAR shall automatically be deemed to be exercised as of such date with respect
to such portion. Upon exercise of a SAR, the Optionee (or any person having
the right to exercise the SAR after his or her death) shall receive from the
Company (a) Common Shares, (b) cash or (c) a combination of Common Shares and
cash, as the Committee shall determine. The amount of cash and/or the Fair
Market Value of Common Shares received upon exercise of SARs shall, in the
aggregate, be equal to the amount by which the Fair Market Value (on the date
of surrender) of the Common Shares subject to the SARs exceeds the Exercise
Price.

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<PAGE> 10
7.7 Modification or Assumption of SARs. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding SARs or may
accept the cancellation of outstanding SARs (whether granted by the Company or
by another issuer) in return for the grant of new SARs for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of a SAR shall, without the consent
of the Optionee, alter or impair his or her rights or obligations under such
SAR.

ARTICLE 8. RESTRICTED SHARES AND STOCK UNITS.

8.1 Time, Amount and Form of Awards. Awards under the Plan may be
granted in the form of Restricted Shares, in the form of Stock Units, or in any
combination of both. Restricted Shares or Stock Units may also be awarded in
combination with NSOs or SARs, and such an Award may provide that the
Restricted Shares or Stock Units will be forfeited in the event that the
related NSOs or SARs are exercised.

8.2 Payment for Awards. To the extent that an Award is granted in
the form of newly issued Restricted Shares, the Award recipient, as a condition
to the grant of such Award, shall be required to pay the Company in cash an
amount equal to the par value of such Restricted Shares. To the extent that an
Award is granted in the form of Restricted Shares from the Company's treasury
or in the form of Stock Units, no cash consideration shall be required of the
Award recipients.

8.3 Vesting Conditions. Each Award of Restricted Shares or Stock
Units shall become vested, in full or in installments, upon satisfaction of the
conditions specified in the Stock Award Agreement which may include performance
conditions. A Stock Award Agreement may provide for accelerated vesting in the
event of the Participant's death, disability or retirement or other events.
The Committee may determine, at the time of making an Award or thereafter, that
such Award shall become fully vested in the event that a Change in Control
occurs with respect to the Company.

8.4 Form and Time of Settlement of Stock Units. Settlement of
vested Stock Units may be made in the form of (a) cash, (b) Common Shares or
(c) any combination of both. The actual number of Stock Units eligible for
settlement may be larger or smaller than the number included in the original
Award, based on predetermined performance factors. Methods of converting Stock
Units into cash may include (without limitation) a method based on the average
Fair Market Value of Common Shares over a series of trading days. Vested Stock
Units may be settled in a lump sum or in installments. The distribution may
occur or commence when all vesting conditions applicable to the Stock Units
have been satisfied or have lapsed, or it may be deferred to any later date.
The amount of a deferred distribution may be increased by an interest factor or
by dividend equivalents. Until an Award of Stock Units is settled, the number
of such Stock Units shall be subject to adjustment pursuant to Article 10.

8.5 Death of Recipient. Any Stock Units Award that becomes payable
after the recipient's death shall be distributed to the recipient's beneficiary
or beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries

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for this purpose by filing the prescribed form with the Company. A beneficiary
designation may be changed by filing the prescribed form with the Company at
any time before the Award recipient's death. If no beneficiary was designated
or if no designated beneficiary survives the Award recipient, then any Stock
Units Award that becomes payable after the recipient's death shall be
distributed to the recipient's estate.

8.6 Creditors' Rights. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent
an unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Award Agreement.

ARTICLE 9. VOTING AND DIVIDEND RIGHTS.

9.1 Restricted Shares. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders. A Stock Award Agreement, however, may require
that the holders of Restricted Shares invest any cash dividends received in
additional Restricted Shares. Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with respect to
which the dividends were paid. Such additional Restricted Shares shall not
reduce the number of Common Shares available under Article 3.

9.2 Stock Units. The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under the
Plan may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount
equal to all cash dividends paid on one Common Share while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock
Units. Settlement of dividend equivalents may be made in the form of cash, in
the form of Common Shares, or in a combination of both. Prior to distribution,
any dividend equivalents which are not paid shall be subject to the same
conditions and restrictions as the Stock Units to which they attach.

ARTICLE 10. PROTECTION AGAINST DILUTION.

10.1 Adjustments. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a combination
or consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a lesser number of Common Shares, a recapitalization, a spinoff
or a similar occurrence, the Committee shall make such adjustments as it, in
its sole discretion, deems appropriate in one or more of:

(a) The number of Options, SARs, Restricted Shares
and Stock Units available for future Awards under Article 3;

(b) The number of Stock Units included in any prior
Award which has not yet been settled;

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(c) The number of Common Shares covered by each
outstanding Option and SAR; or

(d) The Exercise Price under each outstanding Option
and SAR.

Except as provided in this Article 10, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.

10.2 Reorganizations. In the event that the Company is a party to a
merger or other reorganization, outstanding Options, SARs, Restricted Shares
and Stock Units shall be subject to the agreement of merger or reorganization.
Such agreement may provide, without limitation, for the assumption of
outstanding Awards by the surviving corporation or its parent, for their
continuation by the Company (if the Company is a surviving corporation), for
accelerated vesting and accelerated expiration, or for settlement in cash.

ARTICLE 11. AWARDS UNDER OTHER PLANS.

The Company may grant awards under other plans or programs. Such
awards may be settled in the form of Common Shares issued under this Plan.
Such Common Shares shall be treated for all purposes under the Plan like Common
Shares issued in settlement of Stock Units and shall, when issued, reduce the
number of Common Shares available under Article 3.

ARTICLE 12. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.

12.1 Effective Date. No provision of this Article 12 shall be
effective unless and until the Board has determined to implement such
provision.

12.2 Elections to Receive NSOs or Stock Units. An Outside Director
may elect to receive his or her annual retainer payments and meeting fees from
the Company in the form of cash, NSOs, Stock Units, or a combination thereof.
Such NSOs and Stock Units shall be issued under the Plan. An election under
this Article 12 shall be filed with the Company on the prescribed form and
subject to such filing deadlines and election procedures as shall be
established by the Committee.

12.3 Number and Terms of NSOs. The number of NSOs to be granted to
Outside Directors in lieu of annual retainers and meeting fees that would
otherwise be paid in cash shall be calculated in a manner determined by the
Board. The terms of such NSOs shall also be determined by the Board.

12.4 Number and Terms of Stock Units. The number of Stock Units to
be granted to Outside Directors shall be calculated by dividing the amount of
the annual retainer or the meeting fee that would otherwise be paid in cash by
the arithmetic mean of the Fair Market Values of a Common Share on the ten (10)
consecutive trading days ending with the date

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when such retainer or fee is payable. The terms of such Stock Units shall be
determined by the Board.

ARTICLE 13. LIMITATION ON RIGHTS.

13.1 Retention Rights. Neither the Plan nor any Award granted under
the Plan shall be deemed to give any individual a right to remain an employee,
consultant or director of the Company, a Parent or a Subsidiary. The Company
and its Parents and Subsidiaries reserve the right to terminate the service of
any employee, consultant or director at any time, with or without cause,
subject to applicable laws, the Company's certificate of incorporation and
by-laws and a written employment agreement (if any).

13.2 Stockholders' Rights. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Common Shares covered by his or her Award prior to the issuance of a stock
certificate for such Common Shares. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date when
such certificate is issued, except as expressly provided in Articles 8, 9 and
10.

13.3 Regulatory Requirements. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Award prior to the satisfaction of all legal requirements relating to
the issuance of such Common Shares, to their registration, qualification or
listing or to an exemption from registration, qualification or listing.

ARTICLE 14. LIMITATION ON PAYMENTS.

14.1 Basic Rule. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer
by the Company under the Plan to or for the benefit of a Participant (a
"Payment") would be nondeductible by the Company for federal income tax
purposes because of the provisions concerning "excess parachute payments" in
section 280G of the Code, then the aggregate present value of all Payments
shall be reduced (but not below zero) to the Reduced Amount; provided that the
Committee, at the time of making an Award under this Plan or at any time
thereafter, may specify in writing that such Award shall not be so reduced and
shall not be subject to this Article 14. For purposes of this Article 14, the
"Reduced Amount" shall be the amount, expressed as a present value, which
maximizes the aggregate present value of the Payments without causing any
Payment to be nondeductible by the Company because of section 280G of the Code.

14.2 Reduction of Payments. If the Auditors determine that any
Payment would be nondeductible by the Company because of section 280G of the
Code, then the Company shall promptly give the Participant notice to that
effect and a copy of the detailed calculation thereof and of the Reduced
Amount, and the Participant may then elect, in his or her sole discretion,
which and how much of the Payments shall be eliminated or reduced (as long as
after such election the aggregate present value of the Payments equals the
Reduced Amount)

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<PAGE> 14
and shall advise the Company in writing of his or her election within ten (10)
days of receipt of notice. If no such election is made by the Participant
within such ten (10) day period, then the Company may elect which and how much
of the Payments shall be eliminated or reduced (as long as after such election
the aggregate present value of the Payments equals the Reduced Amount) and
shall notify the Participant promptly of such election. For purposes of this
Article 14, present value shall be determined in accordance with section
280G(d)(4) of the Code. All determinations made by the Auditors under this
Article 14 shall be binding upon the Company and the Participant and shall be
made within sixty (60) days of the date when a Payment becomes payable or
transferable. As promptly as practicable following such determination and the
elections hereunder, the Company shall pay or transfer to or for the benefit of
the Participant such amounts as are then due to him or her under the Plan and
shall promptly pay or transfer to or for the benefit of the Participant in the
future such amounts as become due to him or her under the Plan.

14.3 Overpayments and Underpayments. As a result of uncertainty in
the application of section 280G of the Code at the time of an initial
determination by the Auditors hereunder, it is possible that Payments will have
been made by the Company which should not have been made (an "Overpayment") or
that additional Payments which will not have been made by the Company could
have been made (an "Underpayment"), consistent in each case with the
calculation of the Reduced Amount hereunder. In the event that the Auditors,
based upon the assertion of a deficiency by the Internal Revenue Service
against the Company or the Participant which the Auditors believe has a high
probability of success, determine that an Overpayment has been made, such
Overpayment shall be treated for all purposes as a loan to the Participant
which he or she shall repay to the Company, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code; provided,
however, that no amount shall be payable by the Participant to the Company if
and to the extent that such payment would not reduce the amount which is
subject to taxation under section 4999 of the Code. In the event that the
Auditors determine that an Underpayment has occurred, such Underpayment shall
promptly be paid or transferred by the Company to or for the benefit of the
Participant, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code.

14.4 Related Corporations. For purposes of this Article 14, the
term "Company" shall include affiliated corporations to the extent determined
by the Auditors in accordance with section 280G(d)(5) of the Code.

ARTICLE 15. WITHHOLDING TAXES.

15.1 General. To the extent required by applicable federal, state,
local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any
withholding tax obligations that arise in connection with the Plan. The
Company shall not be required to issue any Common Shares or make any cash
payment under the Plan until such obligations are satisfied.

15.2 Share Withholding. A Participant may satisfy all or part of
his or her withholding or income tax obligations by having the Company withhold
all or a portion of any Common Shares that otherwise would be issued to him or
her or by surrendering all or

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<PAGE> 15
a portion of any Common Shares that he or she previously acquired. Such Common
Shares shall be valued at their Fair Market Value on the date when taxes
otherwise would be withheld in cash. Any payment of taxes by assigning Common
Shares to the Company may be subject to restrictions.

ARTICLE 16. ASSIGNMENT OR TRANSFER OF AWARDS.

16.1 General. Except as provided in Article 15 or the Award
agreement, an Award granted under the Plan shall not be anticipated, assigned,
attached, garnished, optioned, transferred or made subject to any creditor's
process, whether voluntarily, involuntarily or by operation of law. Except as
provided in the Award agreement, an Option or SAR may be exercised during the
lifetime of the Optionee only by him or her or by his or her guardian or legal
representative. This Article 16 shall not preclude a Participant from
designating a beneficiary who will receive any outstanding Awards in the event
of the Participant's death, nor shall it preclude a transfer of Awards by will
or by the laws of descent and distribution.

ARTICLE 17. FUTURE OF THE PLAN.

17.1 Term of the Plan. The Plan, as set forth herein, shall become
effective on September 18, 1996, subject to the approval of the Company's
stockholders within twelve (12) months of September 18, 1996. The Plan shall
remain in effect until it is terminated under Section 17.2, except that no ISOs
shall be granted after September 17, 2006.

17.2 Amendment or Termination. The Board may, at any time and for
any reason, amend or terminate the Plan. An amendment of the Plan shall be
subject to the approval of the Company's stockholders only to the extent
required by applicable laws, regulations or rules. No Awards shall be granted
under the Plan after the termination thereof. The termination of the Plan, or
any amendment thereof, shall not affect any Award previously granted under the
Plan.

ARTICLE 18. DEFINITIONS.

18.1 "Award" means any award of an Option, an SAR, a Restricted
Share or a Stock Unit under the Plan.

18.2 "Board" means the Company's Board of Directors, as constituted
from time to time.

18.3 "Change in Control" shall be deemed to occur upon any "person"
(as defined in Section 13(d) of the Exchange Act), other than the Company, its
Parent or Subsidiary or employee benefit plan or trust maintained by the
Company, its Parent or Subsidiary, becoming the "beneficial owner" (as defined
in Rule 13d-3 of the Exchange Act), directly or indirectly, of more than 25% of
the Common Shares of the Company outstanding at such time, without the prior
approval of the Board.

18.4 "Code" means the Internal Revenue Code of 1986, as amended.

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18.5 "Committee" means a committee of the Board, as described in
Article 2.

18.6 "Common Share" means one share of the common stock of the
Company.

18.7 "Company" means Network Solutions, Inc., a Delaware
corporation, or its successor.

18.8 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

18.9 "Exercise Price," in the case of an Option, means the amount
for which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR Agreement,
which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.

18.10 "Fair Market Value" means the market price of Common Shares,
determined by the Committee as follows:

(a) If the Common Shares were traded over-the-counter on
the date in question but were not classified as a national market
issue, then the Fair Market Value shall be equal to the mean between
the last reported representative bid and asked prices quoted by the
Nasdaq system for such date;

(b) If the Common Shares were traded over-the-counter on
the date in question and were classified as a national market issue,
then the Fair Market Value shall be equal to the last-transaction
price quoted by the Nasdaq system for such date;

(c) If the Common Shares were traded on a stock exchange
on the date in question, then the Fair Market Value shall be equal to
the closing price reported by the applicable composite transactions
report for such date; and

(d) If none of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by independent
appraisals or as otherwise determined by the Committee in good faith
on such basis as it deems appropriate.

Whenever possible, the determination of Fair Market Value by the Committee
shall be based on the prices reported in the Western Edition of The Wall Street
Journal. Such determination shall be conclusive and binding on all persons.

18.11 "ISO" means an incentive stock option described in section
422(b) of the Code.

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18.12 "Key Employee" means (a) a common-law employee of the Company,
a Parent or a Subsidiary, (b) an Outside Director and (c) a consultant or
adviser who provides services to the Company, a Parent or a Subsidiary as an
independent contractor.

18.13 "NSO" means a stock option not described in sections 422 or
423 of the Code.

18.14 "Option" means an ISO or NSO granted under the Plan and
entitling the holder to purchase one Common Share.

18.15 "Optionee" means an individual or estate who holds an Option
or SAR.

18.16 "Outside Director" shall mean a member of the Board who is not
a common-law employee of the Company, a Parent or a Subsidiary.

18.17 "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain. A corporation that attains the status of
a Parent on a date after the adoption of the Plan shall be considered a Parent
commencing as of such date.

18.18 "Participant" means an individual or estate who holds an
Award.

18.19 "Plan" means the Network Solutions, Inc. 1996 Stock Incentive
Plan, as amended from time to time.

18.20 "Restricted Share" means a Common Share awarded under the
Plan.

18.21 "SAR" means a stock appreciation right granted under the Plan.

18.22 "SAR Agreement" means the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to
his or her SAR.

18.23 "Stock Award Agreement" means the agreement between the
Company and the recipient of a Restricted Share or Stock Unit which contains
the terms, conditions and restrictions pertaining to such Restricted Share or
Stock Unit.

18.24 "Stock Option Agreement" means the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.

18.25 "Stock Unit" means a bookkeeping entry representing the
equivalent of one Common Share, as awarded under the Plan.

18.26 "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of

-13-
<PAGE> 18
the total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a
Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.

ARTICLE 19. EXECUTION.

To record the adoption of the Plan by the Board, the Company has
caused its duly authorized officer to affix the corporate name and seal hereto.

NETWORK SOLUTIONS, INC.

By /s/ DONALD N. TELAGE
-------------------------------

Its President
------------------------------

-14-

<PAGE> 19

NETWORK SOLUTIONS, INC.
1996 STOCK INCENTIVE PLAN

NONSTATUTORY STOCK OPTION AGREEMENT

Network Solutions, Inc., a Delaware corporation (the "Company"),
hereby grants an Option to purchase shares of its common stock to the Optionee
named below. The terms and conditions of the Option are set forth in this
cover sheet, in the attachment and in the Company's 1996 Stock Incentive Plan
(the "Plan").

Date of Grant:
---------------------------------------------------------------

Name of Optionee:
------------------------------------------------------------

Optionee's Social Security Number:
-------------------------------------------

Number of Common Shares Covered by Option:
-----------------------------------

Exercise Price per Common Share: $
--------------------------------------------

Vesting Start Date:
----------------------------------------------------------

BY SIGNING THIS COVER SHEET, YOU AGREE TO ALL OF THE TERMS AND
CONDITIONS DESCRIBED IN THE ATTACHED AGREEMENT AND IN THEPLAN, A COPY
OF WHICH IS ALSO ATTACHED.

Optionee:
--------------------------------------------------------------
(Signature)

Company:
--------------------------------------------------------------
(Signature)

Title:
------------------------------------------------------

-1-
<PAGE> 20
NETWORK SOLUTIONS, INC.
1996 STOCK INCENTIVE PLAN

NONSTATUTORY STOCK OPTION AGREEMENT

NONSTATUTORY STOCK OPTION This Option is not intended to be an incentive
stock option under section 422 of the Internal
Revenue Code and will be interpreted
accordingly.

VESTING Your right to exercise this Option vests over a
four year period beginning one year after the
Vesting Start Date as shown on the cover sheet.
This Option vests at a rate of 30%, 30%, 20% and
20%, respectively, of the Common Shares covered
by the Option at the end of the first, second,
third and fourth year, respectively, after the
Vesting Start Date. The number of Common Shares
which may be purchased under this Option by you
at the Exercise Price shall be rounded to the
nearest whole number. No additional Common
Shares will vest after your service has
terminated for any reason.

TERM Your Option will expire in any event at the
close of business at Company headquarters on the
day before the fifth anniversary of the Date of
Grant, as shown on the cover sheet. (It will
expire earlier if your service terminates, as
described below.)

REGULAR TERMINATION If your service terminates for any reason except
death or Disability, your Option will expire at
the close of business at Company headquarters on
the 30th day after your termination date.
During such 30-day period, you may exercise that
portion of your Option that was vested on your
termination date.

DEATH If you die while in service with the Company,
your Option will expire at the close of business
at Company headquarters on the date 12 months
after the date of death. During that 12-month
period, your beneficiary, estate or heirs may
exercise that portion of your Option that was
vested on your date of death.

DISABILITY If your service terminates because of your
Disability, your Option will expire at the close
of business at Company headquarters on the date
90 days after your termination date. During
such 90-day period, you may exercise that
portion of your Option that was vested on your
date of Disability.

"Disability" means that you are unable to engage
in any substantial gainful activity by reason of
any medically determinable physical or mental
impairment.

-2-
<PAGE> 21
LEAVES OF ABSENCE For purposes of this Option, your service does
not terminate when you go on a bona fide leave
of absence that was approved by the Company in
writing, if the terms of the leave provide for
continued service crediting, or when continued
service crediting is required by applicable law.
The Committee determines which leaves count for
this purpose, and when your service terminates
for all purposes under the Plan and this
Agreement. The Committee shall also determine
the extent to which you may exercise the vested
portion of your Option during a leave of
absence.

NOTICE OF EXERCISE When you wish to exercise this Option, you must
notify the Committee by filing the proper
"Notice of Exercise" form at the address given
on the form. Your Notice must specify how many
Common Shares you wish to purchase. Your Notice
must also specify how your Common Shares should
be registered (in your name only, in your and
your spouse's names as community property or as
joint tenants with right of survivorship or in a
trust for your benefit). The Notice will be
effective when it is received by the Committee.
If someone else wants to exercise this Option
after your death, that person must prove to the
Committee's satisfaction that he or she is
entitled to do so.

FORM OF PAYMENT When you submit your Notice of Exercise, you
must include payment of the Exercise Price for
the Common Shares you are purchasing. Payment
may be made in one (or a combination) of the
following forms:

- Your personal check, a cashier's check or a
money order.

- Common Shares which have already been owned
by you for more than six months and which are
surrendered to the Company. The value of the
Common Shares, determined as of the effective
date of the Option exercise, will be applied
to the Exercise Price.

- By delivery (on a form prescribed by the
Committee) of an irrevocable direction to a
securities broker to sell Common Shares and
to deliver all or part of the sale proceeds
to the Company in payment of the aggregate
Exercise Price.

WITHHOLDING TAXES You will not be allowed to exercise this Option
unless you make acceptable arrangements to pay
any withholding or other taxes that may be due
as a result of the option exercise or the sale
of Common Shares acquired upon exercise of this
Option.

-3-
<PAGE> 22
RESTRICTIONS ON RESALE By signing this Agreement, you agree not to sell
any option Shares at a time when applicable laws,
regulations or Company or underwriter trading
policies prohibit a sale. For example, prior to
an initial public offering, the Company may, in
its sole discretion, restrict the transfer of
shares for up to six months from the date of
exercise. In connection with any underwritten
public offering by the Company of its equity
securities pursuant to an effective registration
statement filed under the Securities Act,
including the Company's initial public offering,
you agree not to sell, make any short sale of,
loan, hypothecate, pledge, grant any option for
the purchase of, or otherwise dispose or transfer
for value or agree to engage in any of the
foregoing transactions with respect to any shares
without the prior written consent of the Company
or its underwriters, for such period of time
after the effective date of such registration
statement as may be requested by the Company or
such underwriters.

In order to enforce the provisions of this
paragraph, the Company may impose stop-transfer
instructions with respect to the shares.

You represent and agree that the Shares to be
acquired upon exercising this option will be
acquired for investment, and not with a view to
the sale or distribution thereof.

In the event that the sale of Shares under the
Plan is not registered under the Securities Act
but an exemption is available which requires an
investment representation or other
representation, you shall represent and agree at
the time of exercise that the Shares being
acquired upon exercising this option are being
acquired for investment, and not with a view to
the sale or distribution thereof, and shall make
such other representations as are deemed
necessary or appropriate by the Company and its
counsel.

-4-
<PAGE> 23
THE COMPANY'S RIGHT OF In the event that you propose to sell, pledge or
FIRST REFUSAL otherwise transfer to a third party any Common
Shares acquired under this Agreement, or any
interest in such Common Shares, the Company
shall have the "Right of First Refusal" with
respect to all (and not less than all) of such
Common Shares. If you desire to transfer Common
Shares acquired under this Agreement, you must
give a written "Transfer Notice" to the
Committee describing fully the proposed
transfer, including the number of Common Shares
proposed to be transferred, the proposed
transfer price and the name and address of the
proposed transferee. The Transfer Notice shall
be signed both by you and by the proposed
transferee and must constitute a binding
commitment of both parties to the transfer of
the Common Shares. The Company shall have the
right to purchase all, and not less than all, of
the Common Shares on the terms described in the
Transfer Notice (subject, however, to any change
in such terms permitted in the next paragraph)
by delivery of a notice of exercise of the Right
of First Refusal within 30 days after the date
when the Transfer Notice was received by the
Committee. The Company's rights under this
Subsection shall be freely assignable, in whole
or in part.

If the Company fails to exercise its Right of
First Refusal within 30 days after the date when
the Committee received the Transfer Notice, you
may, not later than 90 days following receipt of
the Transfer Notice by the Company, conclude a
transfer of the Common Shares subject to the
Transfer Notice on the terms and conditions
described in the Transfer Notice. Any proposed
transfer on terms and conditions different from
those described in the Transfer Notice, as well
as any subsequent proposed transfer by you, shall
again be subject to the Right of First Refusal
and shall require compliance with the procedure
described in the paragraph above. If the Company
exercises its Right of First Refusal, the parties
shall consummate the sale of the Common Shares on
the terms set forth in the Transfer Notice within
60 days after the date when the Committee
received the Transfer Notice (or within such
longer period as may have been specified in the
Transfer Notice); provided, however, that in the
event the Transfer Notice provided that payment
for the Common Shares was to be made in a form
other than lawful money paid at the time of
transfer, the Company shall have the option of
paying for the Common Shares with lawful money
equal to the present value of the consideration
described in the Transfer Notice.

-5-
<PAGE> 24
The Company's Right of First Refusal shall inure
to the benefit of its successors and assigns and
shall be binding upon any transferee of the
Common Shares.

The Company's Right of First Refusal shall
terminate in the event that Common Shares are
listed or traded on an established stock
exchange.

RIGHT OF REPURCHASE The Company shall have the right to purchase all
of those Common Shares that you have or will
acquire under this Option at any time and in its
sole discretion. If the Company exercises its
right to purchase such Common Shares, the Company
will consummate the purchase of such Common
Shares within 60 days of the date of its written
notice to you. The purchase price for any Common
Shares repurchased shall be the Fair Market Value
of such Common Shares on the date of purchase and
shall be paid in cash. The Company's right of
repurchase shall terminate in the event that
Common Shares are listed or traded on an
established stock exchange.

TRANSFER OF OPTION Prior to your death, only you may exercise this
Option. You cannot transfer or assign this
Option. For instance, you may not sell this
Option or use it as security for a loan. If you
attempt to do any of these things, this Option
will immediately become invalid. You may,
however, dispose of this Option by beneficiary
designation or in your will.

Regardless of any marital property settlement
agreement, the Company is not obligated to honor
a Notice of Exercise from your spouse or former
spouse, nor is the Company obligated to recognize
such individual's interest in your Option in any
other way.

RETENTION RIGHTS This Agreement does not give you the right to be
retained by the Company in any capacity. The
Company reserves the right to terminate your
service at any time and for any reason.

STOCKHOLDERS RIGHTS You, or your estate or heirs, have no rights as a
stockholder of the Company until a certificate
for the Common Shares acquired upon exercise of
this Option has been issued. No adjustments are
made for dividends or other rights if the
applicable record date occurs before your stock
certificate is issued, except as described in the
Plan.

-6-
<PAGE> 25
ADJUSTMENTS In the event of a stock split, a stock dividend
or a similar change in the Common Shares, the
number of Common Shares covered by this Option
and the Exercise Price per share may be adjusted
pursuant to the Plan. Your Option shall be
subject to the terms of the agreement of merger,
liquidation or reorganization in the event the
Company is subject to such corporate activity.

LEGENDS All certificates representing the Common Shares
issued upon exercise of this Option shall, where
applicable, have endorsed thereon the following
legends:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER
AND OPTIONS TO PURCHASE SUCH SHARES SET FORTH
IN AN AGREEMENT BETWEEN THE COMPANY AND THE
REGISTERED HOLDER, OR HIS OR HER PREDECESSOR
IN INTEREST. A COPY OF SUCH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF THE COMPANY
AND WILL BE FURNISHED UPON WRITTEN REQUEST TO
THE SECRETARY OF THE COMPANY BY THE HOLDER OF
RECORD OF THE SHARES REPRESENTED BY THIS
CERTIFICATE.

APPLICABLE LAW This Agreement will be interpreted and enforced
under the laws of the State of Delaware (without
regard to their choice of law provisions).

THE PLAN AND OTHER The text of the Plan is incorporated in this
AGREEMENTS Agreement by reference. Certain capitalized
terms used in this Agreement are defined in the
Plan.

This Agreement and the Plan constitute the entire
understanding between you and the Company
regarding this Option. Any prior agreements,
commitments or negotiations concerning this
Option are superseded.

BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE
TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

-7-
<PAGE> 26

NETWORK SOLUTIONS, INC.
1996 STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

Date of Grant:
---------------------------------------------------------------

Name of Optionee:
------------------------------------------------------------

Optionee's Social Security Number:
-------------------------------------------

Number of Common Shares Covered by Option:
-----------------------------------

Exercise Price per Common Share: $
--------------------------------------------
[must be at least 100% fair market value on Date of Grant]

Vesting Start Date:
----------------------------------------------------------

Check here if Optionee is a 10% owner (so that exercise price must be
110% of fair market value and term will not exceed 5 years).

BY SIGNING THIS COVER SHEET, YOU AGREE TO ALL OF THE TERMS AND
CONDITIONS DESCRIBED IN THE ATTACHED AGREEMENT AND IN THE PLAN, A COPY
OF WHICH IS ALSO ATTACHED.

Optionee:
--------------------------------------------------------------
(Signature)

Company:
--------------------------------------------------------------
(Signature)

Title:
------------------------------------------------------

-1-

<PAGE> 27
NETWORK SOLUTIONS, INC.
1996 STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

INCENTIVE STOCK OPTION This Option is intended to be an incentive stock
option under section 422 of the Internal Revenue
Code and will be interpreted accordingly.

VESTING Your right to exercise this Option vests
annually over a four year period beginning one
year after the Vesting Start Date as shown on
the cover sheet. This Option vests at a rate of
30%, 30%, 20% and 20%, respectively, of the
Common Shares covered by the Option at the end
of the first, second, third and fourth year,
respectively, after the Vesting Start Date. The
number of Common Shares which may be purchased
under this Option by you at the Exercise Price
shall be rounded to the nearest whole number.
No additional Common Shares will vest after your
service has terminated for any reason.

REGULAR TERMINATION If your service terminates for any reason except
death or Disability, your Option will expire at
the close of business at Company headquarters on
the 30th day after your termination date.
During that 30-day period, you may exercise that
portion of your Option that was vested on your
termination date.

-2-
<PAGE> 28
DISABILITY If your service terminates because of your
Disability, your Option will expire at the close
of business at Company headquarters on the date
90 days after your termination date. During
such 90-day period, you may exercise that
portion of your Option that was vested on the
date of your Disability.

"Disability" means that you are unable to engage
in any substantial gainful activity by reason of
any medically determinable physical or mental
impairment.

LEAVES OF ABSENCE For purposes of this Option, your service does
not terminate when you go on a bona fide leave
of absence that was approved by the Company in
writing, if the terms of the leave provide for
continued service crediting, or when continued
service crediting is required by applicable law.
However, for purposes of this Option being
treated as an ISO, your service will be treated
as terminating 90 days after you went on leave,
unless your right to return to active work is
guaranteed by law or by a contract. Your
service terminates in any event when the
approved leave ends unless you immediately
return to active work. The Committee determines
which leaves count for this purpose, and when
your service terminates for all purposes under
the Plan and this Agreement. The Committee
shall also determine the extent to which you may
exercise the vested portion of your Option
during a leave of absence.

-3-
<PAGE> 29
FORM OF PAYMENT When you submit your Notice of Exercise, you
must include payment of the Exercise Price for
the Common Shares you are purchasing. Payment
may be made in one (or a combination) of the
following forms:

- Your personal check, a cashier's check or a
money order.

- Common Shares which have already been owned
by you for more than six months and which are
surrendered to the Company. The value of the
Common Shares, determined as of the effective
date of the option exercise, will be applied
to the Exercise Price.

WITHHOLDING TAXES You will not be allowed to exercise this Option
unless you make acceptable arrangements to pay
any withholding or other taxes that may be due
as a result of the Option exercise or the sale
of Common Shares acquired upon exercise of this
Option.

RESTRICTIONS ON RESALE By signing this Agreement, you agree not to sell
any option Shares at a time when applicable
laws, regulations or Company or underwriter
trading policies prohibit a sale. For example,
prior to an initial public offering, the Company
may, in its sole discretion, restrict the
transfer of shares for up to six months from the
date of exercise. In connection with any
underwritten public offering by the Company of
its equity securities pursuant to an effective
registration statement filed under the
Securities Act, including the Company's initial
public offering, you agree not to sell, make any
short sale of, loan, hypothecate, pledge, grant
any option for the purchase of, or otherwise
dispose or transfer for value or agree to engage
in any of the foregoing transactions with
respect to any shares without the prior written
consent of the Company or its underwriters, for
such period of time after the effective date of
such registration statement as may be requested
by the Company or such underwriters.

In order to enforce the provisions of this
paragraph, the Company may impose stop-transfer
instructions with respect to the shares.

-4-
<PAGE> 30
You represent and agree that the Shares to be
acquired upon exercising this option will be
acquired for investment, and not with a view to
the sale or distribution thereof.

THE COMPANY'S RIGHT OF In the event that you propose to sell, pledge or
FIRST REFUSAL otherwise transfer to a third party any Common
Shares acquired under this Agreement, or any
interest in such Common Shares, the Company
shall have the "Right of First Refusal" with
respect to all (and not less than all) of such
Common Shares. If you desire to transfer Common
Shares acquired under this Agreement, you must
give a written "Transfer Notice" to the
Committee describing fully the proposed
transfer, including the number of Shares
proposed to be transferred, the proposed
transfer price and the name and address of the
proposed transferee. The Transfer Notice shall
be signed both by you and by the proposed
transferee and must constitute a binding
commitment of both parties to the transfer of
the Common Shares. The Company shall have the
right to purchase all, and not less than all, of
the Common Shares on the terms described in the
Transfer Notice (subject, however, to any change
in such terms permitted in the next paragraph)
by delivery of a Notice of Exercise of the Right
of First Refusal within 30 days after the date
when the Transfer Notice was received by the
Committee. The Company's rights under this
Subsection shall be freely assignable, in whole
or in part.

-5-
<PAGE> 31
If the Company fails to exercise its Right of
First Refusal within 30 days after the date when
the Committee received the Transfer Notice, you
may, not later than 90 days following receipt of
the Transfer Notice by the Committee, conclude a
transfer of the Common Shares subject to the
Transfer Notice on the terms and conditions
described in the Transfer Notice. Any proposed
transfer on terms and conditions different from
those described in the Transfer Notice, as well
as any subsequent proposed transfer by you,
shall again be subject to the Right of First
Refusal and shall require compliance with the
procedure described in the paragraph above. If
the Company exercises its Right of First
Refusal, the parties shall consummate the sale
of the Shares on the terms set forth in the
Transfer Notice within 60 days after the date
the Committee received the Transfer Notice (or
within such longer period as may have been
specified in the Transfer Notice); provided,
however, that in the event the Transfer Notice
provided that payment for the Common Shares was
to be made in a form other than lawful money
paid at the time of transfer, the Company shall
have the option of paying for the Common Shares
with lawful money equal to the present value of
the consideration described in the Transfer
Notice.

The Company's Right of First Refusal shall inure
to the benefit of its successors and assigns and
shall be binding upon any transferee of the
Common Shares.

The Company's Right of First Refusal shall
terminate in the event that Common Shares are
listed or traded on an established stock
exchange.

RIGHT OF REPURCHASE The Company shall have the right to purchase all
of those Common Shares that you have or will
acquire under this Option at any time and in its
sole discretion. If the Company exercises its
right to purchase such Common Shares, the
Company will consummate the purchase of such
Common Shares within 60 days of the date of its
written notice to you. The purchase price for
any Common Shares repurchased shall be the Fair
Market Value of such Common Shares on the date
of purchase and shall be paid in cash. The
Company's right of repurchase shall terminate in
the event that Common Shares are listed or
traded on an established stock exchange.

-6-
<PAGE> 32
TRANSFER OF OPTION Prior to your death, only you may exercise this
Option. You cannot transfer or assign this
Option. For instance, you may not sell this
Option or use it as security for a loan. If you
attempt to do any of these things, this Option
will immediately become invalid. You may,
however, dispose of this Option by beneficiary
designation or in your will.

Regardless of any marital property settlement
agreement, the Company is not obligated to honor
a Notice of Exercise from your spouse or former
spouse, nor is the Company obligated to
recognize such individual's interest in your
Option in any other way.

RETENTION RIGHTS This Agreement does not give you the right to be
retained by the Company in any capacity. The
Company reserves the right to terminate your
service at any time and for any reason.

STOCKHOLDER RIGHTS You, or your beneficiary, estate or heirs, have
no rights as a stockholder of the Company until
a certificate for the Common Shares acquired
upon exercise of this Option has been issued.
No adjustments are made for dividends or other
rights if the applicable record date occurs
before your stock certificate is issued, except
as described in the Plan.

ADJUSTMENTS In the event of a stock split, a stock dividend
or a similar change in the Common Shares, the
number of Common Shares covered by this Option
and the Exercise Price per share may be adjusted
pursuant to the Plan. Your Option shall be
subject to the terms of the agreement of merger,
liquidation or reorganization in the event the
Company is subject to such corporate activity.

-7-
<PAGE> 33
LEGENDS All certificates representing the Shares issued
upon exercise of this Option shall, where
applicable, have endorsed thereon the following
legends:

THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER AND OPTIONS TO PURCHASE SUCH SHARES
SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER, OR HIS OR HER
PREDECESSOR IN INTEREST. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE
OF THE COMPANY AND WILL BE FURNISHED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE
COMPANY BY THE HOLDER OF RECORD OF THE SHARES
REPRESENTED BY THIS CERTIFICATE.

APPLICABLE LAW This Agreement will be interpreted and enforced
under the laws of the State of Delaware (without
regard to their choice of law provisions).

THE PLAN AND OTHER The text of the Plan is incorporated in this
AGREEMENTS Agreement by reference. Certain capitalized
terms used in this Agreement are defined in the
Plan.

This Agreement and the Plan constitute the
entire understanding between you and the Company
regarding this Option. Any prior agreements,
commitments or negotiations concerning this
Option are superseded.

BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE TERMS
AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.

-8-

<PAGE> 1
Exhibit 11.1

Network Solutions, Inc.
Computation of Net Income Per Common and Common Equivalent Share

YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
1996 1996 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
Weighted average common shares outstanding 12,500,000 12,500,000 12,500,000
------------------ ------------------ ------------------

Common stock options, as if converted(1)
Dividend to SAIC (2)
------------------ ------------------ ------------------
Total common equivalent shares
------------------ ------------------ ------------------

Pro forma common and common
equivalent shares
================== ================== ==================

Pro forma Net income $ (1,625,000) $ (1,103,000) $ 516,000
================== ================== ==================

Pro forma Net income per common and common
equivalent share $ $ $
================== ================== ==================
</TABLE>

(1) Common stock options, as if converted issued at prices below the public
offering price during the 12 months immediately preceding the filing of
this intitial Registration Statement and through the effective date of such
Registration Statement have been calculated using the treasury stock method
based upon the estimated initial public offering price and have been
included in all years regardless of whether they are dilutive.

(2)

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
DECEMBER 31, 1996 FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 15,540 12,483
<SECURITIES> 0 0
<RECEIVABLES> 32,430 26,260
<ALLOWANCES> (15,439) (13,464)
<INVENTORY> 0 0
<CURRENT-ASSETS> 56,603 56,940
<PP&E> 5,146 6,443
<DEPRECIATION> (2,880) (3,063)
<TOTAL-ASSETS> 66,118 66,850
<CURRENT-LIABILITIES> 55,241 52,303
<BONDS> 0 0
0 0
0 0
<COMMON> 12 12
<OTHER-SE> 1,425 1,941
<TOTAL-LIABILITY-AND-EQUITY> 66,118 66,850
<SALES> 0 0
<TOTAL-REVENUES> 18,862 8,655
<CGS> 0 0
<TOTAL-COSTS> 14,666 5,294
<OTHER-EXPENSES> 6,464 2,463
<LOSS-PROVISION> 3,597 2,163
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (2,268) 898
<INCOME-TAX> (643) 382
<INCOME-CONTINUING> (1,625) 516
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,625) 516
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>