NETWORK SOLUTIONS INC /DE/, 10-K, 1998-03-31

NETWORK SOLUTIONS INC /DE/
10-K, 1998-03-31
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the Fiscal Year Ended December 31, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)

For the Transition Period from to
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Commission File Number 0-22967
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NETWORK SOLUTIONS, INC.
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(Exact name of registrant as specified in its charter)

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Delaware 52-1146119
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)

505 Huntmar Park Drive, Herndon, Virginia 20170
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(Address of principal executive offices) (Zip Code)

(703) 742-0400
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(Registrant's telephone number,
including area code)
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Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.001 Par Value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days. YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates
of the registrant was approximately $82,025,402.50 on March 13, 1998 based on
the last sale price as reported by the Nasdaq National Market System.

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The aggregate number of outstanding shares of Class A Common Stock,
$.001 par value, of the registrant was 3,813,063 shares as of March 13, 1998.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement for the annual
meeting of shareholders to be held on May 19, 1998, which will be filed with the
Commission within 120 days after the end of the registrant's fiscal year ended
December 31, 1997, are incorporated by reference into Part III of this Form
10-K.

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TABLE OF CONTENTS

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Page
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PART I
ITEM 1. BUSINESS ................................................................................... 4
ITEM 2. PROPERTIES..................................................................................33
ITEM 3. LEGAL PROCEEDINGS...........................................................................33
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................................34

PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS.................................................................36
ITEM 6. SELECTED FINANCIAL DATA.....................................................................38
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............................................40
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK...........................................................................53
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................................53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE..................................................................................53

PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..........................................53
ITEM 11. EXECUTIVE COMPENSATION......................................................................53
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..............................54
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............................................54

PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K............................54

SIGNATURES....................................................................................................56
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PART I

THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS THAT
HAVE BEEN MADE PURSUANT TO THE PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON MANAGEMENT'S
CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS, BELIEFS AND ASSUMPTIONS. WORDS
SUCH AS "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS," "BELIEVES," "SEEKS,"
"ESTIMATES," VARIATIONS OF SUCH WORDS AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE NOT GUARANTEES OF
FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND
ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT; THEREFORE, ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE EXPRESSED OR FORECASTED IN ANY SUCH FORWARD-LOOKING
STATEMENTS. SUCH RISKS AND UNCERTAINTIES INCLUDE THOSE SET FORTH HEREIN UNDER
"BUSINESS-RISK FACTORS" ON PAGES 19 THROUGH 32 AND ELSEWHERE IN THIS FORM 10-K.
UNLESS REQUIRED BY LAW, THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY
ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE. HOWEVER, READERS SHOULD CAREFULLY REVIEW THE FACTORS SET
FORTH IN OTHER REPORTS OR DOCUMENTS THE COMPANY FILES FROM TIME TO TIME WITH THE
SECURITIES AND EXCHANGE COMMISSION, PARTICULARLY THE QUARTERLY REPORTS ON FORM
10-Q AND ANY CURRENT REPORTS ON FORM 8-K.

ITEM 1. BUSINESS.

OVERVIEW

Network Solutions, Inc. (the "Company" or "Network Solutions") is the
leading Internet domain name registration services provider worldwide. The
Company currently acts as the exclusive registrar for second level domain names
within the .com, .org, .net, and .edu top-level domains ("TLDs") pursuant to a
cooperative agreement (the "Cooperative Agreement") with the National Science
Foundation (the "NSF"). The Cooperative Agreement became effective January 1,
1993. It includes a three-month phase-in period, a five-year operational period
(commencing April 1, 1993 and ending March 31, 1998), and a six-month
"flexibility period" through September 30, 1998. By registering Internet domain
names, the Company enables businesses, other organizations and individuals to
establish a unique Internet identity from which to communicate and conduct
commerce. The Company also is responsible for maintaining the .com, .org, .net,
and .edu TLD zone files, which contain the second-level domain name and its
corresponding Internet Protocol ("IP") numeric address. In this capacity, the
Company enables the efficient operation of the Internet by supplying or making
available to the Internet root servers located around the world an identical
copy of the file for all second level domain names registered in these TLDs.

On February 20, 1998, the National Telecommunications and Information
Administration of the Department of Commerce (the "NTIA") published for comment
in the Federal Register a proposed rule which, if issued, would provide, among
other things, (i) that additional companies could act as registrars for second
level domain names within the .com, .org, and .net TLDs and (ii) that
additional TLDs would be permitted to be added to the Internet's root zone

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system. See "Relationship with the NSF; Recent Developments in Internet
Governance" and "Competition."

Through its Consulting Services Division, the Company provides enterprise
network consulting services to large businesses 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 Division's
service offerings have evolved from the Company's Internet pioneering efforts
that date back to 1979 and presently include: (i) network engineering; (ii)
network and systems security; and (iii) network management.

In addition, the Company intends to offer a portfolio of Internet-based
products and services, that will draw upon its position in the registration
business and make proper use of the customer data that the Company collects.

The Company was incorporated in Washington, D.C. in 1979 as Network
Solutions Incorporated. The Company was acquired by Science Applications
International Corporation ("SAIC"), an employee-owned, diversified professional
and technical services company, on March 10, 1995, and was reincorporated as
Network Solutions, Inc. in Delaware in November 1996. The Company completed its
initial public offering ("IPO") of 3,795,000 shares of its Class A common stock,
$.001 par value ("Class A Common Stock"), on October 1, 1997. As of March 13,
1998, SAIC owned 100% of the Company's Class B common stock, $.001 par value
("Class B Common Stock"), representing approximately 75.8% of the Company's
outstanding common stock, $.001 par value ("Common Stock"), and 96.9% of the
combined voting power of the Company's outstanding Class A and Class B Common
Stock. The Company's principal executive offices are located at 505 Huntmar Park
Drive, Herndon, Virginia 20170, its telephone number is (703)742-0400 and its
Class A Common Stock is traded on the Nasdaq National Market under the ticker
symbol NSOL.

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. However, use of
the Internet has now 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.

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) Internet-based products
and services; and (iii) enterprise network consulting services.

Domain Name Registration Services. All communication on the Internet
requires a unique numerical electronic address called an IP address. However,
since IP addresses are hard to remember, the Internet functions through the
establishment of a unique Internet identity (a "domain name") that correlates to
an IP address and the proliferation of such domain names in the global Internet
root servers. Currently, there are 13 root servers, ten of which are located in

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the United States, two of which are located in Europe and one of which is
located in Asia. When communication with a particular domain name is required
and the IP address of that domain name's host is not known locally, the root
servers "point" to a direct or indirect source of the information. See "Risk
Factors - Reliance on Third Parties."

An Internet domain name is made up of a TLD, such as .com, .org, .net or
.edu, 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, .org, .net, .edu and .gov, 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).

The Internet is not bound by geography or lines of business and
coordination and administration services are required for the registration,
allocation and use of TLDs and for the effective operation of the Internet. In
1992, 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.

Internet-Based 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 Internet-based products and
services, such as transaction security services, electronic payment mechanisms
and directory, communications, data and research and identity promotion
services.

Consulting Services. Many businesses are developing enterprise networks
that employ Internet data formats and communications protocols. Internal
enterprise networks ("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,
the Company believes there will be an increasing demand for Intranet development
and enterprise network consulting services. 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,
businesses are increasingly seeking experienced enterprise network consulting
firms to enable all of these services.

PRINCIPAL SERVICES

A. Registration Services. Registration services are the Company's core
business. The Company registers second level domain names in the .com, .org,
.net, and .edu TLDs, enabling registrants to establish a unique identity on the
Internet. The Company's customers apply to register second level domain names
either directly through the Company's web sites or indirectly through Internet
access providers, which are the largest source of customers for the Company.

Prior to September 14, 1995, the Company was reimbursed under the
Cooperative Agreement by the NSF for providing registration services on a cost
reimbursement plus fixed-fee basis. Effective September 14, 1995, the NSF and
the Company amended the Cooperative

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Agreement to authorize the Company to begin charging customers a service fee of
$50 per year for each second level domain name registered. Customers in the
.com, .org and .net TLDs have paid a two-year services fee of $100 for initial
registrations and $50 per year for registration renewals. Under the terms of the
amendment to the Cooperative Agreement, 30% of the services fees collected have
been 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. These
funds have not been recognized as revenue by the Company. With regard to
registrations on or after April 1, 1998, the NSF and the Company have further
amended the Cooperative Agreement to provide that (i) the Company will no longer
charge or set aside a portion of the services fee for the enhancement of the
intellectual infrastructure of the Internet and (ii) the Company's fees will be
reduced to a two-year services fee of $70 for initial registrations and $35 per
year for renewals.

Through the internic web site, Network Solutions provides a domain name
registration process for the registration of second level domain names. The
Company's customers submit registration applications to the Company via e-mail
through the Internet. The Company processes the application and either registers
the requested domain name in the requested TLD or rejects the application. Upon
registration or rejection, the Company notifies the customer via e-mail. For
domain names which are registered, the Company invoices the customers and
permits them to pay the registration services fee after the domain name is
registered. The Company performs internally (i.e., it does not outsource) its
core proprietary automated registration process and associated security
functions.

On December 1, 1997, Network Solutions announced its new WorldNIC(TM)
Services brand, a suite of enhanced domain name registration services geared
toward businesses building their online identities. On January 14, 1998,
Network Solutions unveiled RegistrationPlus(TM), the first service offering
under the WorldNIC(TM) Services brand. RegistrationPlus(TM) is a service that
provides a way for small businesses to establish themselves on the Internet.
RegistrationPlus(TM)'s five step registration process minimizes technical and
procedural barriers for new users seeking to gain an entry point on the
Internet. RegistrationPlus(TM) allows users to register or reserve a second
level domain name in real-time whether or not they have a computer, either
through Network Solutions' WorldNIC(TM) Services web site, or by calling a
toll-free number. As part of RegistrationPlus(TM), the Company offers the
option of reserving a name and activating it later by providing domain name
record hosting. In addition to the Company's two-year services fee for initial
registrations, as of March 13, 1998, RegistrationPlus(TM) customers pay $10 for
the Company's enhanced registration services or, if applicable, $49 for
reservation of a domain name.

The RegistrationPlus(TM) service offering is a web based transaction
process that is 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. To facilitate payment of
registration and renewal fees, the Company, as part of its RegistrationPlus(TM)
service, implemented an electronic payment mechanism through which a user pays
for its domain name via credit or debit card through an Internet-based on-line
payment system. The Company believes that a streamlined registration process
and on-line payment system will make it easier for customers to register a
domain name.

As part of its registration services offering, the Company provides the
following services and support:

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1. Customer Support Services. The Company believes that high quality
customer support is vital to client satisfaction. The domain name registration
services fee provides the customer access to the Company's customer support
services, including a telephone help desk, an on-line processing facility for
account information updates and other services. The Company's customer service
representatives in its Herndon, Virginia facility provide such support services.
As part of its WorldNIC(TM) Services launch, the Company recently outsourced
toll free telephone help desk support for its RegistrationPlus(TM) services to a
large, experienced call center support entity. The outsourcing contractor is
providing 24 hour 7 days a week support with customer service representatives
trained by the Company's training staff. The help desks and on-line processing
facility are important to 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.

At the end of 1996, the Company entered into arrangements to outsource
certain back office operations, including invoicing, check processing and
credit card processing. In addition, in December 1997, the Company introduced a
new Oracle-based billing and accounts receivable system (BARS), an
Internet-based transaction billing system. BARS improves tracking capabilities
for billing information and enhances the speed and accuracy with which the
Company's customer service representatives handle payment inquiries. The
outsourcing efforts, in conjunction with BARS, have improved customer service
and account handling and expanded the Company's capacity to service larger
volumes of registrants.

2. Domain Name Dispute Policy Administration. The Company's established
domain name dispute policy is an integral part of the maintenance and
administration of the Company's domain name registration business. This policy
seeks to take a neutral position with regard to domain name disputes between
trademark owners and domain name holders and is designed to address claims that
a domain name registered by the Company infringes a third party's federal
trademark. As of March 13, 1998, the Company had received over 3,600 written
objections to the registration and use of certain domain names. Of these,
approximately 1,960 were disputes in which the Company's domain name dispute
policy was involved. Although 42 out of these situations have resulted in
litigation involving the Company, as of March 13, 1998, no payments have been
made by the Company to any plaintiff and only four of these cases are pending.
The Company expends considerable management and legal resources in the
development, refinement and administration of its domain name dispute policy.
See "Item 3 - Legal Proceedings."

3. Technical Infrastructure Support. The Company is investing
significant technical and financial resources to improve and to operate its
domain name registration business. A substantial portion of the Company's
software is custom-developed and proprietary. The Company's internally
developed and proprietary software includes an automated registration
capability that currently processes in excess of 90% of all new registration
requests without human intervention. The Company believes that significant
engineering talent is required to create a registration services capability and
that knowledge of Internet domain name system ("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, which is used in the registration services business.
The Company's engineering staff has significant expertise in the 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. See "Operations."

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The Company currently maintains in excess of one and one-half million
unique second level domain name registrations. The Company has realized
significant scale efficiencies throughout its registration process as a result
of its large customer base and technical infrastructure.

B. Consulting Services. The Company delivers enterprise network consulting
services to some of the world's leading businesses that are utilizing Internet
technologies for their internal enterprise networks (i.e., Intranets),
connecting securely with their key partners through Extranets and accessing the
Internet. The Company's engineers have extensive knowledge and experience in
network engineering, network security and network management. The engineers have
a broad base of expertise in such areas as local area network ("LAN")/wide area
network ("WAN") protocols; routing, switching and remote access technologies;
virtual private networks; IP addressing; domain name architecture; and UNIX, NT
and other network operating systems. By leveraging this knowledge and
experience, the Company is able to provide solutions to clients' complex network
needs.

The Company sells and markets its consulting services primarily to large
companies that utilize their enterprise networks for a strategic advantage.
During 1997, the Company provided consulting services to more than 35 individual
companies. Ten of the Consulting Services Division's clients accounted for
approximately 80% of its revenues. Each of these clients was in either the
financial services industry or the oil and gas industry. Companies within these
two industry groups will continue to be a primary focus for future business
opportunities. The Company provides requirements analysis, design and
implementation services within the following service offerings:

1. Network Engineering. The Company offers a line of services to
help develop, optimize, and integrate enterprise network solutions in a manner
tailored to individual clients' needs. All of these services are focused on
building a strong network foundation for the enterprise. This includes service
level analysis of IP address space engineering; DNS and dynamic host
configuration protocol ("DHCP") architecture engineering; routing and switching
architecture engineering; Extranet architecture engineering; virtual private
network architecture engineering; and electronic messaging architecture
engineering.

2. Network Security. The Company provides a range of security
consulting services to allow clients to protect the integrity of their data and
systems. The enterprise network's 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.

3. Network Management. The Company provides a range of services to
allow clients to control their mission-critical network performance. Such
services include developing network capacity plans and performance management
tools, conducting baseline assessments, performing network optimization and
tuning, integrating new technology, and implementing complex network management
centers. The Company also provides planning and analysis to implement disaster
recovery and contingencies for network system failures.

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The Company's consulting services are generally provided to clients 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 consulting services
clients have been developed through direct contact or referrals from SAIC. The
Company intends to continue to rely on its relationship with SAIC and its
subsidiary, Bell Communications Research, Inc. ("Bellcore"), to attempt to
access SAIC's and Bellcore's major customers and strategic partners. The
Company's Consulting Services Division is establishing its own dedicated sales
team with account executives assigned to key clients in regional territories.

In January 1998, Network Solutions and Informatica, Negocios, y
Technologia, S.A. ("INTESA"), a joint venture between Petroleos de Venezuela
S.A. (PDVSA) and SAIC, headquartered in Caracas, Venezuela, entered into an
agreement under which the Company will provide consulting services to INTESA.
The Company will provide expertise in Internet connectivity, messaging services,
network security and wide area network (WAN) re-engineering to INTESA under a
broad umbrella contract. As part of SAIC's joint venture agreement with PDVSA,
the Company is currently subject to a noncompetition arrangement pursuant to
which the Company has agreed to provide, with certain limited exceptions,
consulting services to other companies in the Latin American market solely
through INTESA.

C. Internet-Based and Other Services. The Company intends to offer a portfolio
of Internet-based products and services that will draw upon the Company's
position in the registration business and makes proper use of the customer data
that it collects. These products and services could include directory,
communications, data and research, identity promotion and other services. Some
of these products and services could include distribution of third party
offerings through on-line enrollment for such products and services from the
Company's domain name registration web site. Some of these products and services
are currently in the process of development. See "Risk Factors - Technological
Change and Additional Technology, Products and Services and - Evolving Sales
and Marketing Organization and Distribution Channels."

D. Strategic Acquisitions. The Company will seek to identify and, where
appropriate, pursue acquisition opportunities which would provide businesses,
products, services or technology complementary to the Company's current
business. See "Risk Factors - Uncertainty of Future Acquisitions."

RELATIONSHIP WITH THE NSF; RECENT DEVELOPMENTS IN INTERNET GOVERNANCE

The Internet is not bound by geography or lines of business and
coordination and administrative services are required for the registration,
allocation and use of TLDs and for the effective operation of the Internet. The
Internet historically has been loosely administered by 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. 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.

In 1992, the Company entered into the Cooperative Agreement with the NSF,
which had been funding the Defense Information Systems Agency ("DISA"), to
perform registration services 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 provided by the Company under the Cooperative

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Agreement included second level domain name registration, domain name server
registration and network number assignment, as well as autonomous system number
assignment and IP address mapping and allocation for North and South America,
the Caribbean and parts of Africa.

The Cooperative Agreement became effective January 1, 1993. It includes a
three-month phase-in period, a five-year operational period (commencing April
1, 1993 and ending March 31, 1998), and a six-month "flexibility period"
through September 30, 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. The NSF has stated that it will not be re-awarding a
cooperative agreement at the end of the flexibility period.

On July 1, 1997, as part of the Clinton Administration's "Framework for
Global Electronic Commerce," the President directed the Secretary of Commerce
to privatize, increase competition in, and promote international participation
in the DNS. Accordingly, on July 2, 1997, the NTIA issued a Request for
Comments on administration of Internet domain names, on behalf of an
inter-agency working group previously formed to explore the appropriate future
role of the U.S. government in the DNS. This request appeared in the form of
the Notice of Inquiry ("NOI") in the U.S. Federal Register. The NOI requested
specific input in five broad areas: general principles, general/organizational
framework issues, creation of new TLDs, policy issues for new registrars and
trademark dispute issues. During the comment period, over 430 comments,
including those of the Company, were received by the NTIA.

On January 30, 1998, the NTIA issued a discussion draft, entitled "A
Proposal to Improve Technical Management of Internet Names and Addresses" (the
"Proposed Rule"). The following is a summary of the principal features of the
Proposed Rule, and is not intended to be a complete description thereof. This
summary is subject to and qualified in its entirety by reference to the
Proposed Rule, which was published pursuant to the Administrative Procedures
Act in the U.S. Federal Register on February 20, 1998.

The Proposed Rule provides notice and seeks public comment on a proposal
to transfer over time the administration of the DNS to a new private,
not-for-profit corporation and increase competition in the administration of
TLDs and the registration of second level domain names. The Proposed Rule
states the view that the U.S. government should end its management role in the
Internet number and name address systems in a responsible manner that ensures
the stability of the Internet. The Proposed Rule covers generic TLDs and does
not address country-code TLDs, which are administered by the corresponding
governments or by private entities with the appropriate government's
acquiescence.

Under the new Proposed Rule, administration of the DNS would be transferred
over time to a new private, not-for-profit corporation. After a transition
period, the corporation would have authority: (i) to set policy for and direct
the allocation of IP address number blocks to regional number registries for
the assignment of Internet addresses; (ii) to oversee the operation of the root
server system; (iii) to oversee policy for determining the circumstances under
which new TLDs are added to the root system; and (iv) to coordinate the
development of other technical protocol parameters to maintain universal
connectivity on the Internet.

The Proposed Rule provides that the new corporation would be headquartered
in the United States and incorporated under U.S. law. The Proposed Rule states
that the board of directors of the new corporation should represent membership
associations of key stakeholders, including IP number registries, domain name
registries, domain name registrars, the technical community

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and Internet users (commercial, not-for-profit and individuals). The Proposed
Rule provides that the corporation should hire a Chief Executive Officer with a
background in the corporate sector. The new corporation would be funded by
domain name registries and regional IP registries.

The Proposed Rule provides that the transition would commence as soon as
possible, with operational responsibility moved to the new corporation by
September 30, 1998. The U.S. government would participate in policy oversight to
assure stability until the new corporation is established and stable, phasing
out as soon as possible, but in no event later than September 30, 2000. The
Commerce Department would coordinate the U.S. government policy role.

The Proposed Rule distinguishes between "registries" and "registrars". A
"registry" is responsible for maintaining a TLD's zone files, which contain each
second level domain name in that TLD and the corresponding IP addresses of its
name servers. Each registry would establish minimum dispute resolution and other
procedures relating to trademark considerations and would be required to
indemnify the new corporation for costs incurred in connection with trademark
disputes. A "registrar" acts as an interface between domain-name holders and the
registry, providing registration and value-added services. The registrar submits
zone file information for each of its customers in a single TLD to the registry.
Currently, the Company acts as both the exclusive registry and as the exclusive
registrar for the .com, .net, .org and .edu TLDs.

During the transition to private administration of the DNS, the Proposed
Rule provides for the addition of up to five new registries, each of which, at
least initially, would be limited to a single TLD. During the transition, the
first five entities to meet the technical, managerial and site criteria provided
in the Proposed Rule would be allowed to establish a domain name registry. The
Proposed Rule does not specify whether the pool of eligible applicants would be
unlimited or limited, and, if limited, on what basis. Neutral accounting and
technical consultancy firms would be engaged to evaluate a proposed registry
under the criteria and certify an applicant as qualified. Qualified registries
would, in the order of their qualification, select a TLD from a list of
available TLDs or propose another TLD. The Proposed Rule states that such list
of TLDs would be proposed based on input received and market data. The Proposed
Rule provides that any entity would be permitted to provide registrar services
within a TLD so long as it met certain specified minimum qualifications.
Registries could set additional requirements for registrars with which they
wished to do business. The Proposed Rule provides that if a registry wishes to
act both as registry and registrar for the same TLD, it must do so through
separate subsidiaries, and appropriate accounting and confidentiality safeguards
shall be used to ensure that the registry subsidiary's business is not utilized
in any manner to benefit the registrar subsidiary to the detriment of any other
registrar. Each TLD database will be maintained by only one registry. The
Internet Assigned Number Authority ("IANA"), which is headed by Dr. Jon Postel
of the Information Sciences Institute at the University of Southern California
and which currently provides IP address allocation, would be involved in many of
the functions during the transition period to the new corporation.

The Proposed Rule provides that during the transition period, the new
corporation should evaluate the effects that the addition of new TLDs has on the
operation of the Internet, on users and on trademark holders. After the
transition, the new corporation would determine whether or when the introduction
of additional TLDs was desirable and would have authority over the terms and
conditions for the admission of new TLDs.

The Proposed Rule provides that the U.S. government would phase out the
Cooperative Agreement by the end of

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September 1998. In addition, the Proposed Rule provides that, as the U.S.
government is seeking to end its role in the DNS, the provision in the
Cooperative Agreement requiring allocation of 30% of the registration fee to
the Internet Intellectual Infrastructure Fund should terminate on April 1,
1998, the beginning of the flexibility period. The Proposed Rule provides that
the Company and the U.S. government would negotiate an agreement that should
contain the following terms designed to promote competition in domain name
registration:

(1) the Company would effectively separate and maintain a clear division
between its current "registry" and "registrar" functions;

(2) the Company would continue to operate the .com, .org and .net
registries and to act as a registrar for those TLDs, but other
companies would be permitted to act as registrar for those TLDs;

(3) the .edu TLD would be transferred to a not-for-profit entity;

(4) the Company's registry would treat all registrars on a
nondiscriminatory basis and price registry services according to an
agreed upon formula for a period of time;

(5) as part of the transition, the Company would develop (or license) and
implement the technical capability to share the registrar functions in
the .com, .org, and .net TLDs with competing registrars as soon as
possible, by an agreed upon date;

(6) the Company would provide the U.S. government with "a copy and
documentation of all the data, software, and appropriate licenses to
other intellectual property generated under the Cooperative Agreement,
for use by the new corporation for the benefit of the Internet";

(7) the Company would turn over control of the A-root server and the
management of the root server system when instructed to do so by the
U.S. government; and

(8) the Company would be required to meet the requirements, set forth in
the Proposed Rule, for registrars and registries.

The Proposed Rule also provides that as part of the transition, an
agreement would need to be reached between the U.S. government and IANA on the
transfer of IANA functions to the new corporation.

The formal comment period for the Proposed Rule ended on March 23, 1998.
The NTIA expresses in the Proposed Rule its hope that a reasonable consensus can
be found and that, after appropriate modifications, implementation of a final
rule can begin in April 1998. Numerous comments have been received on the
Proposed Rule, including comments from the Company. Some of the comments are
critical of certain of the Proposed Rule's provisions. The Commerce Department
has indicated that a final rule will be issued shortly after review of the
comments received. It is impossible to predict at this time whether or when a
final rule will be issued and, if issued, the timing of its implementation, the
exact nature of its provisions or of any terms negotiated by the U.S.
government and the Company or the precise effect of such provisions or terms on
the Company. In addition, any final rule that is issued or any negotiated terms
could be challenged by persons or entities who disagree therewith.

See "Risk Factors - Uncertainty of Internet Governance and Regulation."

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On October 1, 1997, the Company, pursuant to the NSF's directive,
transferred its registration functions for the .gov TLD to the General Services
Administration ("GSA"). The Company was released from all of its obligations
under the Cooperative Agreement relating to the .gov TLD upon such transfer. On
December 22, 1997, the Company, pursuant to the NSF's directive, transferred the
allocation and administration of IP addresses for North and South America, the
Caribbean and parts of Africa to a not-for-profit organization named the
American Registry for Internet Numbers ( "ARIN"). 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 to the
ARIN in the first quarter of 1998 will not be material.

MARKETING AND DISTRIBUTION

The Company has designed its marketing and distribution strategy to
increase the use of the .com, .net and .org TLDs worldwide and to address the
particular requirements of its diverse international customer base. The Company
has begun and intends to continue to promote the use of the .com, .net and .org
TLDs.

The Company is working to expand its domain name registration business by:
(i) building on relationships with Internet access providers; (ii) developing
co-marketing programs with channel partners; (iii) working with major platform
providers to provide the registration function; (iv) increasing its advertising
and direct sales efforts; (v) establishing international alliances; (vi) working
with server software application providers to develop an automated registration
function; and (vii) establishing relationships with Internet-based product and
service providers.

Strategic Agreements with Internet Access Providers. The Company has
entered into agreements to provide specialized services to certain Internet
access providers, including Internet service providers ("ISPs"), who register a
significant number of second-level domain names with the Company on behalf of
such providers' customers. This Premier Domain Registration Services Program
("Premier Program") provides such Internet access providers with customized
registration services, personalized account management, customized billing and
financial reports, private e-mail boxes and other customized features and
provides the Company with a multi-year registration stream from such providers.
As of March 13, 1998, the Company had entered into agreements with 49 companies,
including: MCI, Inc., America Online, Incorporated (PrimeHost Division), TABNet,
MindSpring Enterprises, Inc., BBN Corporation (a subsidiary of GTE
Internetworking), Earthlink Network, Inc., NETCOM Interactive, UUNET
Technologies, Inc., Sprint Communications Company L.P. and Rapidsite, Inc.
(Hiway). The Company intends to build upon its current relationships with
certain Internet access providers that have agreed to participate in the Premier
Program and intends to pursue relationships with additional Internet access
providers. Through these relationships, the Company seeks to deliver enhanced
registration services and identify additional opportunities to expand its
registration services business.

Marketing Agreements with Channel Partners. The Company has developed
co-marketing programs with channel partners designed to take advantage of their
complementary marketing capabilities. In January 1998, the Company entered into
strategic agreements with Dun & Bradstreet Corporation ("D&B") and Inc. Online
("Inc.") for the marketing and development of products and services to meet the
future needs of the business marketplace. The agreement with D&B makes it
possible for businesses to register an Internet domain name and apply for a D&B
D-U-N-S(R) Number from either the D&B web site or the Company's WorldNIC(TM)
Services web site. As part of the agreement, Network Solutions and D&B placed a
hyper link on each other's Internet

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<PAGE> 15

home page that will allow businesses and individuals registering for a domain
name to complete that task and then apply for their D&B D-U-N-S(R) Number or
vice versa.

The Company's agreement with Inc. is intended to help small businesses
establish a unique identity and grow a brand on the Internet. Network Solutions
is sponsoring Inc.'s "Guide to the Internet" web site. In the "Guide to the
Internet," Inc. helps small-to-midsize companies navigate through the
information and decisions needed to choose systems, tie them together, get
employees to embrace them and apply them to strategic goals. From Inc.'s web
site, small businesses and individuals can hyper link to the Company's
WorldNIC(TM) Services web site where they can register or reserve a domain name
within minutes using the Company's RegistrationPlus(TM) services.

See "International Alliances."

Agreements with Major Platform Providers to Provide the Registration
Function. The Company intends to seek to expand its registration services
business through agreements with major platform providers (i.e., operating
system manufacturers or hardware vendors who provide bundled operating system
software) to provide an automated registration function through a
"point-and-click" interface directly into the software installation procedures.

Advertising. In December 1997, the Company launched a targeted print and
on-line advertising campaign for its registration services with the
announcement of its new corporate logo and its WorldNIC(TM) Services brand.
This, the Company's first significant marketing campaign, is focused on small
businesses and their need to establish their own unique identity and to grow a
brand on the Internet. The Company is currently developing additional campaigns
in this and other market segments.

Direct Sales. The Company's services are marketed and distributed directly
through its Internet home pages. In addition, the Company is continuing to
develop its product management, marketing and sales force to target channel and
distribution partners to offer the Company's registration services
electronically through existing Internet web sites and through other direct
channels, such as direct mail and telemarketing. The Company is seeking to
expand the number of registrations in targeted customer segments both
domestically and internationally. The Company is targeting customer segments
such as small business users, individuals, holders of trademarks, service marks
and product marks and event sponsors.

International Alliances. The Company intends to establish distribution
alliances for registration services in selected international countries. These
could include remarketing agreements with channel partners. In addition, the
Company intends to offer "ease of use" solutions for entities worldwide for
registration in the various TLDs, including country code TLDs.

Agreements with Server Software Application Providers. The Company has
entered into an agreement with Microsoft Corporation ("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.

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Agreements with Internet-Based Product and Services Providers. The Company
has entered into an agreement with VeriSign, Inc. ("VeriSign") pursuant to which
the Company provides 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 may enter into other agreements
designed to allow the Company to build upon its strategy of becoming an
Internet-based 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 sells and markets its consulting services to large companies
that utilize their enterprise network for a strategic advantage, including
financial services companies, banks, oil and gas companies and
telecommunications companies. The Company believes that these organizations have
a substantial installed base of enterprise networks and additional requirements
for network engineering, network security and network management consulting
services. In addition, the Company intends to continue to rely on its
relationship with SAIC and Bellcore to attempt to access SAIC's and Bellcore's
major customers and strategic partners. The Company's Consulting Services
Division is also establishing a direct sales force with account executives
assigned to key customers in regional territories. See "Competition."

See "Risk Factors - Evolving Sales and Marketing Organization and
Distribution Channels and - Technological Change and Additional Technology,
Products and Services."

OPERATIONS

On June 16, 1997, the Company leased 31,247 square feet of a 53,136 square
foot facility to support its domain name registration business operations.
Effective February 1, 1998, the Company leased an additional 9,059 square feet
in the same facility to expand its 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 provides the
environment and tools that are essential for quality customer support.

To register a domain name within the .com, .org, .net, and .edu TLDs, the
Company's customer or the customer's Internet access provider (i) completes a
registration application which is submitted to the Company via e-mail or (ii)
submits a web-based registration application through the Company's
WorldNIC(TM) Services web site. Once the customer is registered, the Company
loads the domain name into the A-root zone server, which contains the Internet's
definitive global listing of addresses and which Network Solutions manages under
authority from the NSF. It is from the A-root zone server that the Internet root
server administrators obtain their nightly updates of the zone files maintained
by the Company. In January 1998, the Company installed a back-up facility in
Charlotte, North Carolina to provide redundancy and enhanced reliability for its
Internet root zone administration.

Seven T1 and one T3 (high-speed data communications line) links connected
to five ISPs support the Company's registration services. The aggregate capacity
of the Company's T1 links is 10.5 megabits per second and the capacity of the T3
link is 45 megabits per second. Thus the aggregate capacity of the T1 and T3
links is 55.5 megabits per second. By connecting to five different ISPs, the
Company seeks redundancy to ensure constant access to the Internet should

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<PAGE> 17

any given ISP or link develop complications. The Company believes its current
network is adequate and that any additional capacity will be available in the
future as needed.

Substantial portions of the Company's internally developed registration
software have been custom-developed and are proprietary. The Company's
internally developed registration software includes an automated registration
capability that currently processes in excess of 90% of all new registration
requests without human intervention.

The Company has a capital lease/purchase process for its computer equipment
that allows the Company to use the latest technology within its operating
infrastructure. The Company has over 300 NT workstations providing customer
service and approximately 150 UNIX servers running a variety of applications to
evenly distribute operational load. 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. The Company is in the process of implementing a
state-of-the-art network management technology that will improve overall
operational efficiencies and customer quality.

RESEARCH AND DEVELOPMENT

All research and development expenses incurred in 1995 were reimbursed to
the Company by direct charges to contracts, including the Cooperative Agreement.
In 1996, research and development expenses were $680,000 or 3.6% of net revenue.
In 1997, research and development expenses were $1,653,000 or 3.6% 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.

COMPETITION

The Company currently is the leading provider of domain name registration
services. It currently is the exclusive registry and registrar for second level
domain names within the .com, .org, .net, and .edu TLDs. The Company currently
faces competition in the domain name registration business from registries for
country code TLDs, 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.

On July 1, 1997, President Clinton directed the Commerce Department to
privatize, increase competition in, and promote international participation in
the DNS. On February 20, 1998, the NTIA published the Proposed Rule in the
Federal Register for comment. The Proposed Rule, if issued, would provide,
among other things, (i) that additional companies could act as registrars for
second level domain names within the .com, .org and .net TLDs and (ii) that
additional TLDs would be permitted to be added to the Internet's root zone
system.

The Company believes that additional competition will be forthcoming in the
domain name registration services business. The exact timing and nature of that
competition is, at this time, however, uncertain. Additional competition could
result through the emergence of competing

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registrars in the .com, .org and .net TLDs and/or the emergence of additional
registries with responsibility for new TLDs. In the event that a final rule is
issued that results in additional competition in the DNS business or additional
competition is introduced through some other means, there could be a material
adverse effect on the Company's business, financial condition and results of
operations.

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 is
a growing contingent of domain name resellers.

In addition, the Company's revenue and registration fees could be reduced
due to increased competition or pricing pressures. For example, other registrars
may bundle domain name registrations with other products or services,
effectively providing such registration services for free.

The Company believes that competition in the domain name registration
services business is in the best interests of the Internet community. The
Company believes that it is well positioned to be successful in a competitive
environment by virtue of (i) its existing customer base; (ii) global recognition
of the .com, .net and .org TLDs; (iii) its agreements with Internet access
providers; (iv) its established technical infrastructure; (v) its experience in
the administration of a domain name dispute policy; and (vi) its skilled
technical personnel who are experienced in the domain name registration
business. In addition, a substantial portion of the Company's registration
software has been custom-developed and is proprietary. Additionally, the
Company's internally-developed registration software includes an automated
registration capability that currently processes in excess of 90% of all new
registration requests without human intervention.

See "Relationship With the NSF; Recent Developments in Internet
Governance."

Companies with Internet expertise are current or potential competitors to
the Company's consulting services business. 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
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 the
network to which the router should send the data it receives. A number of these
competitors and potential competitors have longer operating histories and
greater name recognition and significantly greater financial, technical,
marketing, distribution and other resources than the Company. There can be no
assurance that the Company will be able to successfully compete in the
consulting services business. Failure by the Company to successfully compete in
the consulting services business 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-based 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 or sells. Many of the Company's

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potential competitors have longer operating histories, greater name recognition
and significantly greater financial, technical, marketing, distribution and
other resources 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."

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 service 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 businesses are in the public domain or
are otherwise available to the Company's competitors. The Company also 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 certain ownership rights in this database and
intends to protect such rights. The Company's engineers have in-depth technical
knowledge and unique processes that are critical to the Company's consulting
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 enterprise networks. The Company has no
patents but its proprietary materials are protected by trade secret laws. The
Company also has registered copyrights in certain of its proprietary software
and the Company owns several trademarks. See "Risk Factors - Intellectual
Property Rights."

EMPLOYEES

As of December 31, 1997, the Company had approximately 260 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.

RISK FACTORS

IN ADDITION TO OTHER INFORMATION IN THIS FORM 10-K, THE FOLLOWING RISK
FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND ITS
BUSINESS BECAUSE SUCH FACTORS CURRENTLY HAVE A SIGNIFICANT IMPACT OR MAY HAVE A
SIGNIFICANT IMPACT ON THE COMPANY'S BUSINESS, OPERATING RESULTS OR FINANCIAL
CONDITION. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FORM 10-K AS A RESULT OF THE
FOLLOWING RISK FACTORS SET FORTH BELOW AND ELSEWHERE IN THIS FORM 10-K.

Limited Operating History. Prior to September 14, 1995, the Company was
paid directly by the NSF for providing registration services on a cost
reimbursement plus fixed fee basis. 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.

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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 consulting services since its inception,
due to the rapidly evolving nature of Internet technologies, the Company's
consulting 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 obtain renewals from a
significant portion of its customers.

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, financial condition and
results of operations. 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, financial condition and results of operations will be
materially and adversely affected.

Uncertainty of Internet Governance and Regulation. The Internet
historically has been loosely administered by 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 U.S. government has issued the Proposed Rule to provide notice and seek
public comment on a proposal to transfer over time the administration of the DNS
to a private, U.S. not-for-profit corporation and increase competition in the
administration of TLDs and the registration of second level domain names. The
Proposed Rule states that the "U.S. government seeks as much consensus as
possible before acting." See "Relationship with the NSF; Recent Developments in
Internet Governance."

Comments on the Proposed Rule have revealed substantial differences
regarding how the DNS should evolve and competing proposals concerning DNS
management to those set forth in the Proposed Rule have been advanced from time
to time. There is a risk that failure to achieve consensus could, among other
things, prevent or delay the issuance of a final rule. In addition, any rule
that is issued could be challenged by persons or entities who disagree with its
provisions. Any of such events could have a material adverse effect on the
Company's business, financial condition and results of operations through
continued uncertainty about

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future Internet governance or a disruption to the administration, effective
operation or maintenance and expansion of the Internet, in general, or the DNS,
in particular. Additionally, any final rule could be different, perhaps
substantially, from the Proposed Rule. Any final rule or any terms negotiated by
the U.S. government and the Company could contain provisions which are not
favorable to the Company or not consistent with the Company's current or future
plans. It is impossible to predict at this time whether or when a final rule
will be issued and, if issued, the timing of its implementation, the exact
nature of its provisions or any terms negotiated by the U.S. government and the
Company or the precise effect of such provisions or terms on the Company. It is
possible that certain provisions of any final rule or certain of such terms
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Competition."

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 could result in the Company being subject
to direct regulation by other U.S. regulatory agencies, such as the Federal
Communications Commission (the "FCC"). For example, the Company is aware of
certain industry requests to 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. 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 regulation will occur; however, such regulation could
have a material adverse effect on the Company's business, financial condition
and results of operations.

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 registrars to prevent trademark
infringement and other legal issues is uncertain. See "Item 3 - Legal
Proceedings."

Costs incurred or decisions rendered as a result of government actions,
including enactment of new laws or adoption of new regulations, 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.

Competition. The Company currently is the exclusive registrar for second
level domain names in the .com, .org., .net and .edu TLDs. Multiple registrars
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 is
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

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competitors, many of which have longer operating histories and significantly
greater name recognition and greater financial, technical, marketing,
distribution and other resources than the Company. In addition, the Company's
revenue and registration fees could be reduced due to increased competition or
pricing pressures. For example, other entities may bundle domain name
registrations with other products or services, effectively providing such
registration services for free.

Various governmental technical and Internet groups have been discussing for
some time ways of introducing more competition into the domain name
registration business. On February 20, 1998, the NTIA published the Proposed
Rule in the Federal Register to provide notice and seek public comment on a
proposal to increase competition in the administration of TLDs and the
registration of domain names. Under the Proposed Rule, the Company would
continue to operate the .com, .org, and .net registries and to act as a
registrar for those TLDs, but other companies would be permitted to act as
registrar for those TLDs. The Proposed Rule also provides for additional new
TLDs. The Company believes that it is well positioned to succeed in a more
competitive environment. However, the adoption of the Proposed Rule or a
similar rule or the introduction of additional competition into the domain name
registration business in some other manner could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Relationship with the NSF; Recent Developments in Internet Governance" and
"Competition."

In addition, the Company faces substantial competition in its consulting
services business and in the development and distribution of future products and
services for the Internet-based services markets. See "Competition."

Reliance on Third Parties. Reliable communications over the Internet are
dependent upon the Internet root servers, which serve as the authoritative
source of Internet locations and which allow the resolution of IP addresses from
domain names on the Internet. Currently, there are 13 root servers, ten of which
are located in the United States, two of which are located in Europe and one of
which is located in Asia. Nine of the root servers currently are populated with
the domain names registered by the Company, while these nine and the other four
also contain information with respect to other TLDs, including country TLDs.
When communication with a particular domain name is required and the IP address
of that domain name's host is not known locally, the root servers "point" to a
direct or indirect source of the information. Multiple root servers are required
for purposes of load balancing and redundancy.

The location and control of these root servers has been determined by
consensus of various members of the Internet community. The Company currently
controls only one of these root servers and temporarily administers one other
root server. The other eleven 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 could have a material adverse
effect on the Company's business, financial condition and results of
operations.

Further, no single organization or entity currently has formal authority
over all aspects of the root zone system. Some volunteer root server operators
have questioned which organization or entity has the legal authority to direct
where the root servers are to be pointed. The operators of the root servers have
historically taken guidance from the IANA. Therefore, it is possible that IANA
could direct the root servers not to accept information updates from the Company
or that the operators of the root servers could choose to no longer carry the
Company's information. In the event that the root servers were changed to
exclude the information maintained by the Company, all domain names registered
by the Company in

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TLDs for which the Company acts as the registry would no longer be accessible by
other users of the Internet. This could cause widespread disruption 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 Proposed Rule provides that a new corporation would be established to
oversee the operation of an authoritative root server system. Under the Proposed
Rule, IANA and the U.S. government, in cooperation with the Company, the
Internet Architecture Board and other relevant organizations, would undertake a
review of the root server system to recommend means to increase the security and
professional management of the system. However, no assurance can be given that
this provision will be part of any final rule or that, if this provision is
adopted, it would eliminate the risks in this area.

The Company's success and ability to compete also are dependent upon the
relationships between the Company and 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.

Year 2000. Network Solutions, like many other companies, is in the process
of assessing its computer software applications and systems to ensure their
functionality with respect to the "Year 2000" millenium change. At this time,
the Company believes that the remediation costs, if any, needed to make all of
its internal applications and systems Year 2000 compliant are not material.

Although the Company believes that its internal mission critical systems
are Year 2000 compliant, the failure of the software applications or internal
systems of other companies on which the Company's systems rely or to which they
are connected or of other Internet-related companies, including Internet web
hosting companies, Internet access providers, or Internet root server operators,
none of which the Company controls, to be Year 2000 compliant upon January 1,
2000 could have a material adverse effect on the operation of the Internet
and/or a material adverse effect on the Company's business, financial condition
and results of operations.

Litigation. The Company is involved in several legal proceedings as
described in "Item 3 - Legal Proceedings." As of March 13, 1998, the Company was
a defendant in 6 lawsuits involving domain name disputes between trademark
owners and domain name holders in which

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the Company has been named as a defendant. On March 20, 1997, PG Media, Inc., a
New York-based corporation, filed a lawsuit (the "PG Media suit"), alleging that
the Company had restricted access to the Internet by not adding PG Media's
requested TLDs in violation of the Sherman Act. On October 17, 1997, a group of
six plaintiffs filed a lawsuit (the "Thomas suit") against the Company and the
NSF challenging the legality of fees defendants charge for the registration and
renewal of domain names on the Internet and seeking restitution of fees
collected from domain name registrants in an amount in excess of $100 million,
damages, and injunctive and other relief. The plaintiffs allege violations of
the Administrative Procedures Act, the Independent Offices Appropriations Act,
the Sherman Act and the U.S. Constitution. In each of these cases, the Company
believes it has meritorious defenses and intends to defend itself vigorously.
While the Company cannot reasonably estimate the potential impact of the claims
advanced in the PG Media or Thomas suits, a successful claim against the
Company in either of these proceedings could have a material adverse effect on
the Company's business, financial condition and results of operations.

In addition, on June 27, 1997, SAIC received a Civil Investigative Demand
from the U.S. Department of Justice issued in connection with an investigation
to determine whether there is, has been, or may be an antitrust violation under
the Sherman Act relating to Internet registration products and services. The
Company cannot reasonably estimate the potential impact of the investigation nor
can it predict whether a civil action will ultimately be filed by the Department
of Justice. 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 imposed as a
result of any settlement. Any such relief could have a material adverse effect
on the Company's business, financial condition and results of operations.

Litigation in which the Company is involved has resulted and likely will
result 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.

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 reasonably protect its systems
against interruption from fire, natural disaster, sabotage, power loss,
telecommunication failure, human error or similar events. The vast majority of
the Company's computer and telecommunications equipment is located in a single
facility. Although the Company has established back-up facilities at its
Charlotte, North Carolina site, this measure 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 and standard
operating procedures, the Company's infrastructure may also be vulnerable to
computer viruses, hackers, human error or similar disruptive problems caused by
its employees, 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.

On July 17, 1997, during a routine update of the root server domain name
files, the Company inadvertently released corrupted database files for the .com
and .net TLDs, causing disruption throughout the Internet. The original problem,
which was caused by a database error, was compounded when the normal quality
control mechanisms used to validate the .com and

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<PAGE> 25

.net TLD files were incorrectly overridden by Company personnel and the
corrupted files were released. As a result, certain Internet users were unable
to access certain web sites. The database error was subsequently fixed and the
corrected files were regenerated and re-released by the Company within four
hours, although the length of time during which certain Internet users
experienced disruption in accessing the Internet varied.

The Company has taken several steps to avoid any future occurrences of this
or similar problems, including, but not limited to, adding software code to make
it more difficult to transmit a problematic file and additional quality checks
by a senior level person prior to each file transmission. There can be no
assurance, however, that the Company's standard operating procedure or the
additional measures implemented by the Company will prevent or mitigate a
similar occurrence in the future.

Separately, in July 1997, an entity which offers competing registration
services using other TLDs exploited a security vulnerability in the Berkeley
Internet Name Domain ("BIND") software, a third-party Internet name server
software used by Internet companies' Unix systems, to redirect traffic intended
for the Company's web site. The Company's systems were not impacted by the
exploitation. However, Internet users that were relying on systems that had not
upgraded to a more current version of BIND were redirected from the Company's
web site which impacted the Company's business.

If any of these or similar problems should recur or occur in the future, it
could result in, among other things, damage to the Company's reputation and
credibility, increased intervention by governmental entities or reduced customer
confidence, which could in turn materially and adversely affect the Company's
business, financial condition and results of operations.

Uncollectible Receivables; Modifications to Billing Practices. Currently,
the Company invoices a majority of its customers and permits them to pay the
services 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
registrations at a profit. The Company's experience has been that such resellers
have a greater tendency than other customers to default on their services fees.
The Company has established a provision for uncollectible accounts that it
believes to be adequate to cover anticipated uncollectible receivables; however,
actual results could differ from the Company's estimate and could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 4 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 Consulting Services for Substantially All Revenue. The Company's
domain name registration services and consulting services businesses have in the
past generated substantially all of the Company's revenue from 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

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<PAGE> 26

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 leading 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 consulting services business. In 1997, ten clients of
the Company's Consulting Services Division accounted for 80% of the division's
revenues. There is no guarantee that the Company will be able to maintain or
expand its consulting services business.

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 become competing registrars more easily. RWhois is also
the protocol that the Company may utilize for any global directory services that
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.

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 consulting 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 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 products and service
opportunities and develop and bring to market in a timely manner new
technologies, products or services, or that technologies, products or services
developed by others will not render those of the Company 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

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<PAGE> 27

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
changes in government regulation. The lack of Internet governance or changes in
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.

Intellectual Property Rights. If it were determined that the Company does
not have ownership rights in its database of information relating to customers
in its registration business or if the Company is unable to protect such rights
in this database or is required to share the database with potential
competitors, there could be a material adverse effect on the Company's
business, financial condition and results of operations. The Proposed Rule
would require the Company to provide the U.S. government with "a copy and
documentation of all the data, software, and appropriate licenses to other
intellectual property generated under the [C]ooperative [A]greement, for use by
the new corporation for the benefit of the Internet." If certain of the
Company's software and data generated which is proprietary to the Company were
to be provided to the new corporation under the Proposed Rule and in turn
provided to competing registries or registrars, the Company's business,
financial condition and results of operations could be materially and adversely
affected.

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 that 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.

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<PAGE> 28

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, developments in Internet
governance, the announcement of additional competing registries, 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 developing or providing domain
name registration or other services, litigation costs, results of litigation,
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 the Company recognizes consulting services revenue only when
engineers are engaged on client projects, the relative utilization of engineers
directly affects the Company's operating results. In addition, a majority of
the Company's consulting services operating expenses, particularly personnel
and related costs, depreciation and rent, are substantially fixed in advance of
any particular quarter. As a result, any under-utilization of 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 consulting services business or failure to obtain additional
contracts in its consulting services business could have a material adverse
effect on the Company's business, financial condition and results of operation.
See "Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Uncertainty of Future Acquisitions. The Company evalutes potential
acquisitions on an ongoing basis. No assurance can be given as to the Company's
ability to compete successfully for available acquisition candidates or to
complete future acquisitions or as to the financial effect on the Company of
any acquired businesses. Future acquisitions by the Company may involve
significant cash expenditures and may result in decreased operating income,
either of which could have a material adverse effect on the Company's business,
financial condition and results of operations. Should the Company be unable to
implement successfully its acquisition strategy, its business, financial
condition and results of operations could be materially and adversely affected.

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. 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. 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 consulting services will depend in large
part on its ability to hire, train and retain 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 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

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personnel.

Evolving Sales and Marketing Organization and Distribution Channels. The
Company has had 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 manage
and grow its new sales and marketing organization. There can be no assurance
that the Company will be able to successfully manage this organization or
identify, attract and retain experienced sales and marketing personnel with
relevant 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 develop third party distribution channels, develop its own
capabilities to distribute services using the Internet or that any such
development will result in an increase in revenue.

Any failure by the Company to manage and grow its new sales and marketing
organization, develop and 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.

Control by SAIC. As of March 13, 1998, SAIC owned 100% of the Company's
outstanding Class B Common Stock, representing approximately 75.8% of the
outstanding Common Stock of the Company and approximately 96.9% of the combined
voting power of the Company's outstanding Common Stock. The Class B Common Stock
is convertible into Class A Common Stock, subject to certain limitations set
forth in the Company's Second Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation"). As a result, SAIC effectively controls all
matters requiring approval by the stockholders of the Company, including the
election of members of the Company's Board of Directors, changes in the size and
composition of the Board of Directors and a change in control of the Company.
SAIC does not have an agreement with the Company restricting its rights to
convert, distribute or sell its shares of the Company's Common Stock and there
can be no assurance that SAIC will maintain its ownership of the Company's Class
B Common Stock.

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 80%
of each class of nonvoting capital stock of the Company in order for SAIC to be
able to effect a tax-free spin-off of the Company under the Code. As of March
13, 1998, SAIC owned approximately 96.9% of the total voting power of the
Company. Because SAIC may seek to maintain its beneficial ownership 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.

Reliance on SAIC for Certain Corporate Services. SAIC and the Company have
entered into certain intercompany agreements, including an agreement pursuant to
which SAIC will

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<PAGE> 30

provide various corporate services to the Company that may be material to the
conduct of the Company's business (the "Corporate Services Agreement"). These
services include certain routine and ordinary corporate services, including
business insurance, accounting systems, employee benefits, payroll, tax and
legal services as well as assistance in government relations and corporate
quality assurance services as described in 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. If SAIC's ownership of the Company's
Common Stock drops below 50% of the Company's issued and outstanding Common
Stock, the Corporate Services Agreement will be terminable by either party upon
180 days' prior written notice. Certain individual services are also terminable
by either party upon 180 days' prior written notice, regardless of SAIC's stock
holdings. 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.

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") entered into between the Company and SAIC, SAIC will
effectively control all of the Company's tax decisions for taxable periods
during which SAIC and the Company file, for federal purposes, a consolidated
income tax return or, for state and local purposes, a consolidated, combined or
unitary tax return. Under the Tax Sharing Agreement, SAIC has 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. Upon completion of the IPO, the Company is no longer part of
SAIC's consolidated group for federal income tax purposes. Given the Company's
past participation in SAIC's consolidated group for tax purposes and pursuant
to the terms of the Tax Sharing Agreement, upon such deconsolidation, the
Company's ability to recognize a benefit for future tax losses it may incur is
subject to SAIC's approval. SAIC may also choose to contest, compromise or
settle any adjustment or deficiency proposed by taxing authorities 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. Accordingly, during the period in which the Company
was 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.

Potential Conflicts of Interest. Various conflicts of interest between the
Company and SAIC could arise 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, and Donald N. Telage, the
Company's Senior Vice President, Internet Relations and one of the Company's
directors, also serves as a Group Senior Vice President 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, J. Dennis
Heipt, a director of the Company, is also the Senior Vice President -
Administration of SAIC and William A. Roper, Jr., a director of the Company, is
also Senior Vice President and Chief Financial Officer of

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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 the executive officer 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
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. The enforceability under Delaware corporate law of
such provisions which eliminate certain rights that might have been available to
stockholders under Delaware law had such provisions not been included has not
been established. The Company's Certificate of Incorporation provides that any
person purchasing or acquiring an interest in shares of capital stock of the
Company shall be deemed to have consented to the provisions in the 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 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.

Under the Company's 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.

International Operations. The Company's revenues from sources outside the
U.S. have increased significantly and may continue to increase in the future. As
a result, the Company will increasingly be subject to the risks of 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 geo-political
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.

Shares Eligible for Future Sale. SAIC owns 100% of the Company's
outstanding Class B Common Stock, which, as of March 13, 1998, represented
approximately 75.8% of the outstanding Common Stock of the Company. 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 (the "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

31
<PAGE> 32

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
has agreed to indemnify SAIC in connection with any such registration.

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, could materially and adversely affect the market price
of the Class A Common Stock.

Possible Volatility of Stock Price. The market price of the shares of Class
A Common Stock at times has been 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, developments
in Internet governance, announcement of additional competing registries,
registrars or TLDs, litigation costs, results of litigation, 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.

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 Certificate of Incorporation. 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.

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<PAGE> 33

ITEM 2. PROPERTIES.

The Company's principal executive office is located in 45,000 square feet
of a facility in Herndon, Virginia, under a space usage arrangement with SAIC.
SAIC's lease for this facility expires in November 2002. The Company also
leases an additional 40,306 square feet in a facility in Herndon, Virginia
under a lease expiring in July 2002. The Company also has offices located in a
10,000 square foot facility, also in Herndon, under a space usage arrangement
with SAIC. SAIC's lease for this facility expires in October 1999.
Additionally, the Company has offices located in approximately 9,300 square
feet in a facility in Charlotte, North Carolina, under two space usage
arrangements with SAIC. SAIC's two leases with respect to this facility
expire 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.

ITEM 3. LEGAL PROCEEDINGS

As of March 13, 1998, the Company was a defendant in 6 lawsuits involving
domain name disputes between trademark owners and domain name holders. 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. Although 42 out of approximately 3,600 of these
situations have resulted in litigation involving the Company, as of March 13,
1998, no payments have been made by the Company to any plaintiff and only four
of these cases are pending. The Company believes that it has meritorious
defenses and intends to vigorously defend itself against these 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, or may be an antitrust
violation 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. The Company cannot reasonably
estimate the potential impact of the investigation nor can it predict whether a
civil action will ultimately be filed by the DOJ. 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 imposed as a result of any settlement. 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 PG Media's requested TLDs in violation of
the Sherman Act. In its complaint, PG Media has, in addition to requesting
damages, asked that the Company be ordered to include reference to PG Media's
TLDs and name servers in the root zone file administered by the Company under
the Cooperative Agreement. The Company has answered the complaint, but no
motions are pending. In addition, in June 1997, the Company 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 zone until the NSF provides further
guidance. On September 17, 1997, PG Media filed a Second Amended Complaint
adding the NSF as a defendant. The Company believes that it has

33
<PAGE> 34

meritorious defenses and intends to vigorously defend itself against the claims
of PG Media. Although the Company cannot reasonably estimate the potential
impact of 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.

On October 17, 1997, a group of six plaintiffs filed a lawsuit (the "Thomas
suit") against the Company and the NSF in the United States District Court,
District of Columbia, challenging the legality of fees defendants charge for the
registration and renewal of domain names on the Internet and seeking restitution
of fees collected from domain name registrants in an amount in excess of $100
million, damages, and injunctive and other relief. Plaintiffs originally alleged
violations of the Competition in Contracting Act ("CICA"), the Sherman Act and
the U.S. Constitution. Following the filing of motions to dismiss by the
defendants, the plaintiffs filed an amended complaint on January 30, 1998,
dropping the cause of action based upon CICA, but adding alleged violations of
the Administrative Procedures Act and the Independent Offices Appropriations
Act. The plaintiffs also filed a motion for preliminary injunctive relief
against the NSF concerning the "Intellectual Infrastructure Fund." On February
2, 1998, the United States District Court, District of Columbia, issued an order
granting the plaintiffs' motion for a preliminary injunction, enjoining the NSF
from spending any of the money collected by the Company for the Intellectual
Infrastructure Fund. On February 10, 1998, the plaintiffs filed a motion for
preliminary injunction against the Company seeking several items of relief. On
February 24, 1998, the Company and the NSF filed motions to dismiss the amended
complaint. Also on February 24, the plaintiffs filed a motion for partial
summary judgment concerning the Intellectual Infrastructure Fund. The
plaintiffs' motion for preliminary injunction against the Company and partial
summary judgment against the NSF, and both motions to dismiss were heard before
the Court on March 17, 1998 and the Court has taken the matters under
advisement. The Company believes that it has meritorious defenses and intends
to vigorously defend itself against the claims in the Thomas suit. While the
Company cannot reasonably estimate the potential impact of such claims, a
successful claim under the plaintiffs' theories could have a material adverse
effect on the Company's business, financial condition and results of
operations.

The Company is involved in various other investigations, claims and
lawsuits arising in the normal conduct of its business, none of which, in the
opinion of the Company's management, will have a material adverse effect on its
financial position, results of operations, cash flows or its ability to conduct
business.

See "Item 1 - Business - Risk Factors - Litigation."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders during the fourth
quarter of 1997.

EXECUTIVE OFFICERS OF THE REGISTRANT

Pursuant to General Instruction G(3) of the General Instructions to Form
10-K, the following information is included as an unnumbered Item in Part I of
this Form 10-K. Set forth below is a list of the names and ages (as of March 30,
1998) of all executive officers of Network Solutions, all positions and offices
with the Company held by each such person and

34
<PAGE> 35

each such person's principal occupation or employment during at least the past
five years. All such persons have been appointed to serve until their successors
are appointed or until their earlier resignation or retirement.

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Gabriel A. Battista 53 Chief Executive Officer and Director
Bruce L. Chovnick 38 Senior Vice President and General Manager,
Consulting Services

David H. Holtzman 41 Senior Vice President, Engineering
Robert J. Korzeniewski 41 Chief Financial Officer
Donald N. Telage 53 Senior Vice President, Internet Relations and
Director
Douglas L. Wolford 36 Senior Vice President, Marketing
</TABLE>

Gabriel A. Battista has served as a director of the Company since November
1996 and as Chief Executive Officer of the Company since October 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 B.S.E.E. from Villanova
University, a M.S.E.E. from Drexel University and an M.B.A. from Temple
University.

Bruce L. Chovnick has served as Senior Vice President and General Manager,
Consulting Services of the Company since October 1997. From October 1993 until
September 1997, he served as Vice President of Global Internet Solutions for
General Electric Information Services, Inc., an electronic commerce company.
Prior to that he was a Senior Manager of IBM Corporation, a computer systems,
software, networking systems and storage devices manufacturer, from January 1984
to September 1993. Mr. Chovnick received a B.S. in Computer Science from the
University of Florida.

David H. Holtzman has served as Senior Vice President, Engineering of the
Company since February 1997. From September 1995 until January 1997, he served
as Chief Scientist, IBM Internet Information Technology (InfoMarket) group, a
computer systems, software, networking systems and storage devices manufacturer.
Prior thereto, from May 1992 to 1994, he served as a Senior Associate at
Booz-Allen & Hamilton, a management consulting firm. Mr. Holtzman received a
B.A. in Philosophy from the University of Pittsburgh and a B.S. in Computer
Science from the University of Maryland.

Robert J. Korzeniewski has served as Chief Financial Officer of the Company
since March 1996. From 1987 until October 1997, Mr. Korzeniewski held a variety
of senior financial positions with SAIC and served as a Corporate Vice President
for Administration of SAIC from 1989 until 1997. Mr. Korzeniewski is a Certified
Public Accountant and received a B.S. in Business Administration from Salem
State College.

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<PAGE> 36

Donald N. Telage has served as a director of the Company since May 1995 and
as Senior Vice President, Internet Relations of the Company since February 1997.
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.

Douglas L. Wolford has served as Senior Vice President, Marketing of the
Company since December 1997. From December 1994 to November 1997, Mr. Wolford
was General Manager, Marketing for General Electric Information Services, Inc.,
an electronic commerce company. Prior thereto, he served as Director,
Development and Public Affairs for the National Academy of Engineering, from
March 1989 to December 1994. Mr. Wolford received a B.S. from North Carolina
State University, a Certificat de Langue Francaise from Sorbonne University and
an M.B.A. in Marketing from the University of Maryland.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company's Registration Statement on Form S-1 (Registration No.
333-30705) was declared effective on September 25, 1997 by the Securities and
Exchange Commission. The Class A Common Stock of the Company began trading
publicly on the Nasdaq National Market on September 26, 1997 under the symbol
NSOL. Prior to that date, there was no public market for the Class A Common
Stock. The Company registered and sold 3,220,000 shares for its own account at
an aggregate price of $57,960,000 and the selling stockholder (SAIC) registered
and sold 575,000 shares for its account at an aggregate price of $10,350,000,
for a combined total of 3,795,000 shares at an aggregate price of $68,310,000.
The offering is now completed. After subtracting expenses incurred for the
Company's account in connection with the offering, the Company's net offering
proceeds were $52,405,000. On October 1, 1997, the Company received the offering
proceeds, from which a $10,000,000 dividend was paid to SAIC. The remaining
proceeds have been invested in short-term investment grade government discount
notes and commercial paper. With the exception of the $10,000,000 dividend paid
to SAIC on October 1, 1997, the Company has neither declared nor paid cash
dividends on its Common Stock. The Company currently intends to retain its
earnings, if any, for future growth and does not anticipate paying any dividends
in the foreseeable future. Its Board of Directors will determine the Company's
future dividend policy on the basis of various factors, including the Company's
results of operations, financial condition, capital requirements and investment
opportunities.

The following table provides the high and low sale prices of the Class A
Common Stock on the Nasdaq National Market for the period from September 26,
1997 through December 31, 1997.

High Low
---- ---

$26.75 $11.75

As of March 20, 1998, there were 47 holders of record of Network Solutions
Class A Common Stock. Because many of the Company's shares of Common Stock are
held by brokers and other institutions on behalf of beneficial stockholders,
the Company is unable to determine the exact number of beneficial stockholders
represented by these record holders.

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<PAGE> 37

Since January 1, 1995, the Company has issued and sold (without payment of
any selling commission to any person) the unregistered securities described
below:

1. From October 14, 1996 to December 31, 1997, the Company granted
incentive stock options to purchase an aggregate of 100,900 shares of the
Company'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. All of these options vest over a period of time
following their respective dates of grant pursuant to the Company's 1996
Stock Incentive Plan.

2. From October 14, 1996 to December 31, 1997, the Company granted
nonstatutory stock options to purchase an aggregate of 1,725,325 shares of the
Company's Class A Common Stock to employees, officers and directors of the
Company under its 1996 Stock Incentive Plan at exercise prices ranging form
$11.25 to $14.875 per share. All of these options vest over a period of time
following their respective dates of grant pursuant to the Company'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 Company.

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<PAGE> 38
ITEM 6. SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1993 1994 1995 (1) 1996 1997
-------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue $ 4,369 $ 5,029 $ 6,486 $ 18,862 $ 45,326
Cost of revenue 2,924 3,073 5,704 14,666 25,798
-------- -------- -------- -------- --------
Gross profit 1,445 1,956 782 4,196 19,528

Research and development expenses - - - 680 1,653
Selling, general and administrative expenses 1,401 1,544 2,394 6,280 12,268
Interest expense (income), net 120 109 61 (496) (2,095)
-------- -------- -------- -------- --------

Income (loss) from continuing
operations before income taxes and
cumulative effect of a change in
accounting principle (76) 303 (1,673) (2,268) 7,702
Provision (benefit) for income taxes 34 114 (239) (643) 3,471
-------- -------- -------- -------- --------

Income (loss) from continuing operations (110) 189 (1,434) (1,625) 4,231

Loss from discontinued
operations, net of income taxes (2) (936) (1,169) (1,403) - -
Cumulative effect of change in accounting
for income taxes 660 - - - -
-------- -------- -------- -------- --------

Net income (loss) $ (386) $ (980) $ (2,837) $ (1,625) $ 4,231
======== ======== ======== ======== ========

Basic earnings per share:
- -------------------------

Income (loss) from continuing operations $ (0.10) $ 0.18 $ (0.14) $ (0.13) $ 0.32
Loss from discontinued operations (0.90) (1.12) (0.13) - -
Cumulative effect of accounting change 0.63 - - - -
-------- -------- -------- -------- --------
Net income (loss) $ (0.37) $ (0.94) $ (0.27) $ (0.13) $ 0.32
======== ======== ======== ======== ========

Weighted average shares 1,048 1,042 10,335 12,500 13,305

Diluted earnings per share:
- ---------------------------

Income (loss) from continuing operations $ (0.10) $ 0.18 $ (0.14) $ (0.13) $ 0.31
Loss from discontinued operations (0.90) (1.12) (0.13) - -
Cumulative effect of accounting change 0.63 - - - -
-------- -------- -------- -------- --------
Net income (loss) $ (0.37) $ (0.94) $ (0.27) $ (0.13) $ 0.31
======== ======== ======== ======== ========

Weighted average shares 1,048 1,047 10,335 12,500 13,483
</TABLE>

38
<PAGE> 39

Less: Registrations not renewed - - (1) (39) (46)
------ ------ ------ ------ ------

Net registrations as of year end 13 37 177 627 1,541
====== ====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ - $ 136 $ 5 $15,540 $ 41,146
Working capital (4) (179) (1,340) (559) 1,362 50,947
Total assets (5) 3,124 2,448 11,748 66,118 149,620
Deferred revenue, net 73 137 3,346 29,352 61,451
Long-term obligations,
excluding current portion 344 81 1,353 9,440 18,743
Total stockholders' equity 1,221 252 3,062 1,437 47,655
</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
Notes 1 and 11 of Notes to Financial Statements for a discussion of the
presentation for each of these periods.

(2) See Note 13 of Notes to Financial Statements for a discussion of
discontinued operations.

(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 an 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) Working capital calculation includes $73, $137, $1,993, $19,912 and
$43,789 of current deferred revenue as of December 31, 1993, 1994,
1995, 1996 and 1997, respectively.

(5) Total assets include $0, $0, $1,408, $17,453 and $25,873 of restricted
assets as of December 31, 1993, 1994, 1995, 1996 and 1997,
respectively.

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<PAGE> 40

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with
"Item 6 -- Selected Financial Data" and the Company's accompanying financial
statements and notes thereto. Certain information in this Form 10-K contains
forward-looking statements. For this purpose, any statements contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. Statements regarding the intent, belief or current expectations of
the Company are intended to be forward-looking statements which may involve
risk and uncertainty. There are a number of factors that could cause the
Company's actual results to differ materially from those indicated by such
forward-looking statements, including, but not limited to, those discussed in
"Factors Affecting Operating Results" as well as those discussed elsewhere in
this Form 10-K and the Company's subsequent SEC filings.

OVERVIEW

The Company. The Company currently acts as the exclusive registrar of
Internet domain names within the .com, .org, .net, and .edu TLDs pursuant to a
Cooperative Agreement with the NSF. Domain names are used to identify a unique
site or presence on the Internet. As registrar to these TLDs, the Company
registers new domain names and is responsible for the maintenance and
dissemination of the master file of domain names through daily updates to the
Internet. The Company also provides enterprise network consulting services,
focusing on network engineering, network and systems security and network
management solutions for commercial customers.

Cumulative net registrations (gross registrations less management's
estimate of uncollectible registrations and of non-renewals) within the TLDs
maintained by the Company increased by 146% from 627,000 domain names registered
at December 31, 1996 to 1,541,000 domain names registered at December 31, 1997.
Net registrations in the .com TLD represent 87% of the Company's total net
registrations at December 31, 1997. Out of the 1,541,000 cumulative net
registrations at December 31, 1997, 598,000 registrations will be up for annual
renewal during 1998 based upon their respective anniversaries of initial
registration. International registrations continued to increase as a percentage
of net new registrations, averaging 27% during 1997 with fourth quarter 1997
international registrations at 34% of net new registrations as compared to 18%
in the same quarter of 1996. Net revenue from registration services accounted
for 85.6% of the Company's net revenue for the year ended December 31, 1997.

The Company's consulting services division delivers full life cycle network
engineering and consulting for a broad range of companies including
multinational oil and gas corporations and major financial institutions. A
pioneer in Internet technology since 1979, the Company has built an
international reputation in enterprise network engineering, network and systems
security, and network operations center deployment. Net revenue from consulting
services accounted for 14.4% of the Company's net revenue for the year ended
December 31, 1997.

Registration Services. In December 1992, the Company entered into the
Cooperative Agreement with the NSF under which the Company was to provide
Internet domain name registration services for five TLDs: .com, .org, .net, .edu
and .gov. These "registration

40
<PAGE> 41

services" include domain name registration and renewal, and throughout the
registration term, maintenance of and unlimited modifications to individual
domain name records and dissemination of records through updates to the
Internet. The Cooperative Agreement became effective January 1, 1993. It
includes a three-month phase-in period, a five-year operational period
(commencing April 1, 1993 and ending March 31, 1998), and a six-month
"flexibility period" through September 30, 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. The NSF has stated that it will not be
re-awarding a cooperative agreement at the end of the flexibility period.

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 require
the Company to begin charging end users a services fee of $50 per year for each
domain name in the .com, .org and .net TLDs. Registrants pay a services fee of
$100 for two years of domain name services upon each initial registration and
an annual renewal fee of $50 per year thereafter (collectively "registration
fees"). The NSF paid the registration fees for domain names within the .edu and
.gov TLDs through March 31, 1997. Commencing April 1, 1997, the Company agreed
with the NSF to provide domain name services within the .edu and .gov TLDs free
of charge. As of October 1, 1997, the Company no longer registers or
administers domain names in the .gov TLD. Historical registrations in the .edu
and .gov TLDs represent less than 0.1% of cumulative net registrations at
December 31, 1997 and less than 0.1% of net new registrations during the period
from April 1, 1997 to December 31, 1997, and did not have a significant impact
on the Company's net revenues or costs of services.

Under the terms of the September 14, 1995 amendment to the Cooperative
Agreement, 30% of the registration fees collected by the Company is required to
be set aside for the enhancement of the intellectual infrastructure of the
Internet and, as such, is not recognized as revenue by the Company. The Company
has reflected 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. This restricted cash at December
31, 1996 and 1997 was approximately $13,049,000 and $23,512,000, respectively.
The set aside funds, plus any interest earned, are intended to be disbursed at
the direction of the NSF. In November 1997, the Company disbursed $23 million
out of the fund to the NSF at its direction. Future collection or disbursement
of these set aside funds will have no significant effect on the Company's
business, net financial position or results of operations.

On March 12, 1998, the NSF and the Company amended the Cooperative
Agreement to eliminate the 30% set aside requirement effective April 1, 1998 and
to reduce the registration fees by a corresponding amount. Initial registrations
on and after April 1, 1998 will be charged $70 for two years of registration
services and an annual renewal fee of $35 per year thereafter. This amendment
will have no effect on the revenue currently recognized on each registration
($70 for initial registrations and $35 for renewals), since the Company
previously did not recognize revenue on the 30% set aside funds. Accordingly,
while the revenue to the Company on a per registration basis does not change,
the amount charged to customers will decline. The impact of this price change on
new registrations during the first quarter of 1998 is not expected to be
material and the potential increase in demand for domain names for the remainder
of 1998 due to the lower price point is uncertain.

In order to provide prompt access to new domain names on the Internet,
the Company invoices customers and permits them to pay their registration fees
after their domain names are registered. The Company's experience has been
that, for the period from September 1995 to

41
<PAGE> 42

December 1997, approximately 30% of registrations have ultimately been
deactivated for non-payment. The Company believes that this level of
uncollectible receivables is 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. Such resellers have a
greater tendency than other customers to default on their registration fees. As
a consequence, the Company has recorded a comparable provision for uncollectible
accounts in determining net registration revenue. This 30% provision has been
consistently applied for the period from September 1995 to December 1997 and is
considered adequate by the Company.

Registration fees charged to end users for registration services, net of
the 30% set aside funds, are recognized as revenue evenly over the registration
term. Accordingly, the Company recognizes $70 ($100 fee less $30 set aside) on a
straight-line basis over the two-year services period for each initial domain
name registration, equivalent to $35 per year. Renewals of domain name
registrations are recorded as revenue based upon $35 ($50 fee less $15 set
aside) recognized on a straight-line basis over the one-year services period.
This "subscription-based" model defers revenue recognition until the Company
provides the registration services, including daily updates to the Internet and
maintenance of and unlimited modifications to individual domain name records,
over the respective registration terms. At December 31, 1997, the Company had
net deferred revenue of $61.5 million, of which $43.8 million will be recognized
as revenue in 1998.

Consulting Services. Substantially all of the Company's consulting services
revenue is derived from professional services which are generally provided to
clients on a "time and expense" basis and is recognized as services are
performed.

NationsBanc Services, Inc. ("NationsBanc") is the Company's largest
consulting services customer and accounted for 29% of the Company's consulting
services revenue for the year ended December 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 1997, task orders for a number of services the Company 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. There can be no assurance that the Company will obtain any
additional task orders under the NationsBanc contract.

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. See Notes 1 and 9 to the Company's Financial Statements
for a discussion of transactions with SAIC.

42
<PAGE> 43

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 Statements 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 relations
with other periods is limited primarily as a result of the goodwill
amortization, corporate services agreements and interest expense related to
outstanding debt balances.

<TABLE>
<CAPTION>
Percentage of Net Revenue
-------------------------------
Fiscal Year
Ended December 31,
-------------------------------
1995 1996 1997
------- ------- ------
<S> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0%
Cost of revenue 87.9 77.8 56.9
------- ------- ------
Gross profit 12.1 22.2 43.1

Research and development expenses - 3.6 3.6
Selling, general and administrative expenses 36.9 33.3 27.1
Interest expense (income), net 0.9 (2.7) (4.6)
------- ------- ------

Income (loss) from continuing operations (25.7) (12.0) 17.0

Provision (benefit) for income taxes (3.6) (3.4) 7.7
------- ------- ------

Income (loss) from continuing operations,
net of income taxes (22.1%) (8.6%) 9.3%
======= ======= ======
</TABLE>

43
<PAGE> 44

COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1997

Net Revenue. Net revenue increased 140% from $18.9 million in 1996 to $45.3
million in 1997. This increase in net revenue was primarily attributable to the
increase in the number of domain name registrations, principally in the .com
TLD. Net revenue from registration services increased 246% from $11.2 million in
1996 to $38.8 million in 1997. Net new registrations increased 96% from 489,000
during 1996 to 960,000 during 1997. Growth in registrations has been driven by
the widespread use and adoption by businesses of the Internet and Intranets on a
global basis. Cumulative net registrations as of December 31, 1996 were 627,000
as compared to 1,541,000 as of December 31, 1997, for a 146% increase.

Net revenue from consulting services decreased 16% from $7.7 million in
1996 to $6.5 million in 1997. This decrease was primarily attributable to a
decrease in business from NationsBanc. NationsBanc, the Company's largest
consulting services client, accounted for $3.7 million or 20% of the Company's
total net revenue in 1996 and $1.9 million or 4% of the Company's total net
revenue in 1997. The Company believes NationsBanc will continue to be a
significant customer of its consulting services business, but to a lesser extent
than in previous years, both in terms of dollars and as a percentage of the
Company's total net revenue.

Cost of Revenue. Cost of revenue consists primarily of salaries and
employee benefits, fees paid to subcontractors for work performed in connection
with revenue producing projects, depreciation, lease costs of the operations
infrastructure and the associated operating overhead. Cost of revenue increased
76% from $14.7 million in 1996 to $25.8 million in 1997. The increase was
primarily driven by the growth of the Company's registration business which
experienced additional labor costs of $4.2 million and additional outsourcing
costs of $1.6 million in support of the Company's invoicing, collection and
processing activities. In June 1997, the Company opened a 31,200 square foot
facility to support its Internet business operations and in January 1998, the
Company signed an agreement to lease an additional 9,100 square feet at the
same location. This leased facility is designed to meet current registration
services customer support needs as well as to provide expansion capability for
future business. The Company continues to invest in improvements to the back
office component of its domain name registration business including investments
in additional hardware, software, staffing and facilities 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 77.8% in
1996 to 56.9% in 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 partially offset future 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. Research and development expenses
increased 150% from $680,000 in 1996 to $1.7 million in 1997. To date, all of
the Company's research and 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 as the Company
invests in developing new product and service offerings. As a percentage of net
revenue, research and development expenses were 3.6% for both 1996 and 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of salaries of business development,
general management,

44
<PAGE> 45

administrative and financial personnel, corporate services from SAIC, legal
costs and amortization of goodwill associated with the Company's acquisition by
SAIC. Selling, general and administrative expenses increased 95% from $6.3
million in 1996 to $12.3 million in 1997. The increase is primarily
attributable to increased management and administrative labor expenses of $1.8
million, business development expenses of $1.3 million and an increase in legal
costs of $1.0 million.

As a percentage of net revenue, selling, general and administrative
expenses decreased from 33.3% in 1996 to 27.1 % in 1997. The decrease in
percentage of net revenue reflects economies the Company has begun to achieve
due primarily to the growth of its domain name registration business. The
Company expects that the level of selling, general and administrative expenses
will increase significantly in the near future in terms of absolute dollars as
operations continue to expand. In particular, sales, marketing and business
development expenses will increase as the Company introduces new enhanced
registration and other services and begins to actively promote the use of the
.com TLD.

Interest Income, Net. The Company had net interest income of $496,000 in
1996 as compared to $2.1 million in 1997. The increase is attributable to the
investment of the net proceeds of the Company's stock offering as well as
improved cash flow resulting from the increase in domain name registrations.

Income Taxes (Benefit). The income tax benefit was $643,000 in 1996 as
compared to an income tax expense of $3.5 million in 1997. The effective tax
rate changed from 28% in 1996 to 45% in 1997. The difference between the
effective rates is principally attributable to the relative impact that
non-deductible goodwill had on pretax operating income or loss for the year.
Goodwill is being amortized by the Company over five years and is associated
with the acquisition of the Company by SAIC in 1995.

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 registrations, principally in the .com
TLD, as well as the Company's shift to a subscription-based pricing model. Net
revenue from registration services increased 600% from $1.6 million in 1995 to
$11.2 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 new registrations
increased 247% from 141,000 during the year ended December 31, 1995 to 489,000
during the year ended December 31, 1996. Cumulative net registrations increased
254% from 177,000 at December 31, 1995 to 627,000 at December 31, 1996.

Net revenue from consulting 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 consulting services customer, which increased
42% from $2.6 million in 1995 to $3.7 million in 1996. This 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 consulting services customers, many of which were obtained through
subcontracting with and utilizing leads from SAIC.

NationsBanc accounted for 19.6% of total net revenue in 1996. NationsBanc
accounted for 40.0% 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

45
<PAGE> 46

more than 7.1% 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 an
increase in the cost of labor of $3.7 million 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
established and continued 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. A principal benefit of
outsourcing was to increase the capacity and efficiency of its back office
operations; however, such action alone did not significantly impact operating
margins.

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 domain name 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. Through December 31, 1996, all of
the Company's research and 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. This increase was primarily attributable to increases in management,
administrative and business development staff, as well as increased legal costs
associated with the administration of the Company's domain name dispute policy.
Selling, general and administrative expenses include $237,000 in 1995 and
$822,000 in 1996 of expenses allocated from SAIC in accordance with the then
current intercompany agreement. If the expenses were based on the fee of 2.5% of
net revenue under the intercompany agreement in effect during 1997, such
expenses would have been $133,000 and $472,000, respectively.

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 domain name 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 and
consulting services. This transfer was effective as of February 1996. November
1995 was the

46
<PAGE> 47

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 uncollectible 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

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 and consulting services contract awards, 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, updates systems and infrastructure, expands its facilities, develops
new distribution channels and broadens its customer support capabilities. While
no individual expenditure is anticipated to have a material impact on the
Company's operating results, the combined effect could be significant and cannot
be reasonably estimated at this time. To the extent that such expenses precede
or are not subsequently followed by an increase in revenue, the Company's
business, financial condition and results of operations 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,
developments in Internet governance, increased competition, through the
introduction of competing TLDs or competing registrars in .com, .org or .net or
otherwise, 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,
costs associated with providing domain name registration services, litigation
costs, adverse results of litigation, termination or completion of contracts in
the Company's consulting services business or failure to obtain additional
contracts in its consulting 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 in the market for domain name
registrations or a failure to maintain existing or obtain anticipated contracts
in its consulting services business. Because the 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 "Item 1 - Business - Risk Factors - Potential
Fluctuations in Quarterly Results."

47
<PAGE> 48

On February 20, 1998, the U.S. government published in the Federal
Register the Proposed Rule to provide notice and seek public comment on a
proposal to transfer over time the administration of the Internet domain name
system from the U.S. government and the NSF to a new private, not-for-profit
corporation and to increase competition in the administration of TLDs and the
registration of second level domain names. Comments on the Proposed Rule have
revealed substantial differences regarding how the DNS should evolve and
competing proposals concerning DNS management to those set forth in the Proposed
Rule have been advanced from time to time. There is a risk that failure to
achieve consensus could, among other things, prevent or delay the issuance of a
final rule. In addition, any rule that is issued could be challenged by persons
or entities who disagree with its provisions. Any of such events could have a
material adverse effect on the Company's business, financial condition and
results of operation through continued uncertainty about future Internet
governance or a disruption to the administration, effective operation or
maintenance and expansion of the Internet, in general, or the domain name
registration system, in particular. Additionally, any final rule could be
different, perhaps substantially, from the Proposed Rule. Any final rule or any
terms negotiated thereunder by the U.S. government and the Company could contain
provisions which are not favorable to the Company or not consistent with the
Company's current or future plans. It is impossible to predict at this time
whether or when a final rule will be issued and, if issued, the exact nature of
its provisions or of any such terms, the timing of implementation or the precise
effect of such provisions or terms on the Company. It is possible that certain
provisions of any final rule or certain of such terms could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Item 1-Business-Relationship with the NSF; Recent Developments
in Internet Governance and -Risk Factors-Uncertainty of Internet Governance and
Regulation."

Under the Proposed Rule, the Company would continue to operate the .com,
.org and .net registries and to act as a registrar for those TLDs, but other
companies would be permitted to act as registrar for those TLDs. The Proposed
Rule also provides for additional new TLDs. The Company believes that it is well
positioned to succeed in a more competitive environment. However, the adoption
of the Proposed Rule or a similar rule or the introduction of additional
competition into the domain name registration business in some other manner
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Item 1-Business-Competition and -Risk
Factors-Competition."

The Company's operations are dependent upon its ability to maintain its
computer and telecommunications equipment in effective working order and to
reasonably protect its systems against damage from fire, natural disaster,
sabotage, power loss, telecommunication failure, human error or similar events.
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.

The Company is a party in a number of legal proceedings. While the
Company cannot reasonably estimate the potential impact of the claims advanced
in the PG Media or Thomas suits, a successful claim against the Company in
either of these proceedings could have a material adverse effect on the
Company's business, financial condition and results of operation. In addition,
while the Company cannot predict what relief, if any, might be sought, awarded
or imposed as a result of any civil action filed by the Department of Justice
arising from its investigation regarding Internet registration products and
services, any such relief could have a material adverse effect on the Company's
business,

48
<PAGE> 49

financial condition and results of operation. Moreover, litigation in which the
Company is involved has resulted and likely will result in, and any future
litigation can be expected to result in, substantial legal and other expenses to
the Company and a diversion of the Company's personnel. See "Item 3 - Legal
Proceedings."

The Company is in the process of assessing its computer software
applications and systems to ensure their functionality with respect to the
"Year 2000" millenium change. At this time, the Company believes that the
remediation costs, if any, needed to make all of its internal applications and
systems Year 2000 compliant are not material. Although the Company believes
that its internal mission critical systems are Year 2000 compliant, the failure
of the software applications or internal systems of other companies on which
the Company's systems rely or to which they are connected or of other
Internet-related companies, including Internet web hosting companies, Internet
access providers, or Internet root server operators, none of which the Company
controls, to be Year 2000 compliant upon January 1, 2000 could have a material
adverse effect on the operation of the Internet and/or a material adverse
effect on the Company's business, financial condition and results of operation.
See "Item 1-Business-Risk Factors - Year 2000."

SELECTED QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited quarterly financial
information for 1996 and 1997. In the opinion of management, this information
has been presented on the same basis as the audited financial statements and all
necessary adjustments (consisting only of normal recurring adjustments) have
been included in the amounts stated below to present fairly the selected
unaudited quarterly results when read in conjunction with the audited financial
statements of the Company and notes thereto. The results of operations for any
quarter are not necessarily indicative of results for any future periods.

49
<PAGE> 50

<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------------------------------------------------
Mar. 31, Jun. 30, Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30, Dec. 31,
1996 1996 1996 1996 1997 1997 1997 1997
-------- -------- -------- -------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue $ 2,333 $ 4,496 $ 5,180 $ 6,853 $ 8,655 $ 10,069 $ 12,172 $ 14,430
Cost of revenue 2,950 3,571 3,719 4,426 5,294 6,141 7,033 7,330
-------- -------- -------- -------- -------- -------- -------- --------

Gross profit (617) 925 1,461 2,427 3,361 3,928 5,139 7,100

Research and development
expenses - 58 226 396 311 407 377 558
Selling, general and
administrative expenses 921 1,449 1,932 1,978 2,301 2,487 3,105 4,375
Interest expense (income), net - (86) (288) (122) (149) (335) (570) (1,041)
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss)
before income taxes (1,538) (496) (409) 175 898 1,369 2,227 3,208

Provision (benefit) for income (436) (140) (116) 49 382 629 995 1,465
taxes -------- -------- -------- -------- -------- -------- -------- --------

Net income (loss) $ (1,102) $ (356) $ (293) $ 126 $ 516 $ 740 $ 1,232 $ 1,743
======== ======== ======== ======== ======== ======== ======== ========

Basic and diluted EPS(1) $ (0.09) $ (0.03) $ (0.02) $ 0.01 $ 0.04 $ 0.06 $ 0.10 $ 0.11
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>

(1) Since there are changes in the weighted average number of shares outstanding
each quarter, the sum of the quarterly basic and diluted EPS amounts may not
equal the basic and diluted EPS for calendar years 1996 and 1997.

50
<PAGE> 51

<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------------
Mar. 31, Jun. 30, Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30, Dec. 31,
1996 1996 1996 1996 1997 1997 1997 1997
-------- -------- -------- -------- -------- -------- -------- --------
(as a percentage of revenue)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue 126.4 79.4 71.8 64.6 61.2 61.0 57.8 50.8
----- ----- ----- ----- ----- ----- ----- -----
Gross profit (26.4) 20.6 28.2 35.4 38.8 39.0 42.2 49.2

Research and development
expenses - 1.3 4.4 5.8 3.5 4.0 3.1 3.9
Selling, general and
administrative expenses 39.5 32.2 37.3 28.9 26.6 24.7 25.5 30.3
Interest expense (income), net - (1.9) (5.6) (1.8) (1.7) (3.2) (4.7) (7.2)
----- ----- ----- ----- ----- ----- ----- -----
Income (loss)
before income taxes (65.9) (11.0) (7.9) 2.5 10.4 13.5 18.3 22.2

Provision (benefit) for income
taxes (18.7) (3.1) (2.2) 0.7 4.4 6.2 8.2 10.1
----- ----- ----- ----- ----- ----- ----- -----

Net income (loss) (47.2)% (7.9)% (5.7)% 1.8% 6.0% 7.3% 10.1% 12.1%
===== ===== ===== ===== ===== ===== ===== =====

</TABLE>

The Company has experienced quarterly fluctuations in operating results and
anticipates that such fluctuations will continue. These fluctuations may be
caused by, among other things, increases in legal and marketing expenses,
market acceptance of new products, competitive pricing pressures and general
economic conditions. As a result of the foregoing and other factors, the
Company believes that period-to-period comparisons of its results of operations
are not necessarily meaningful and should not be relied on as indications of
future performance. See "Factors Affecting Operating Results" and "Item 1 -
Business - Risk Factors - Potential Fluctuations in Quarterly Results."

The Company's net revenue increased each quarter presented primarily due to
an increase in the number of cumulative net registrations in each of those
quarters. The Company currently expects registration services revenue for the
first quarter of 1998 to show continued growth based upon its existing
registration base and net new registrations during the quarter. However, there
can be no assurance that net registration revenue will continue to increase at
historical rates, or at all, or not decrease in the future, especially when the
Cooperative Agreement is terminated or if there is a change in the Company's
status as the exclusive registrar for domain names in the .com TLD, particularly
as a significant portion of the Company's net revenue is attributable to
registrations in the .com TLD. Notwithstanding the $61.5 million of deferred
revenue at December 31, 1997, of which $43.8 million will be recognized as
revenue in 1998, the Company's revenue is dependent in large part on the
continued growth of the Internet, the Company's ability to maintain its position
as the leading Internet domain name registration service provider worldwide and
the evolving nature of the Company's services, products and other factors.

Operating expenses have generally increased in absolute dollars in each
quarter shown as the Company has increased staffing and related infrastructure
costs in its back office, selling and marketing, and administrative functions.
Quarter-to-quarter growth in cost of revenue was primarily attributable to
increased staffing levels and increased outsourcing costs which are a function
of the number of registrants. Quarter-to-quarter growth in selling, general and
administrative expenses are attributable to increased staffing at the management
level, continuing legal expenses and marketing costs associated with the
introduction of new services and products.

51
<PAGE> 52

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 December 31, 1997, the Company's cumulative net obligation to SAIC for
intercompany activity was $1.3 million, a decrease of $14.0 million for the year
then ended. Intercompany activity is primarily comprised of corporate income tax
payments made by SAIC on behalf of the Company in accordance with the companies'
tax sharing arrangement and salaries and benefits paid by SAIC on behalf of the
Company. Effective with the second quarter of 1997, corporate taxes were paid to
SAIC on a quarterly basis, with all other intercompany balances between SAIC and
the Company paid on a monthly basis. Pursuant to the Tax Sharing Agreement dated
September 26, 1997, the Company will now generally remit income tax payments
directly to tax authorities as it no longer is part of SAIC's consolidated group
for federal income tax purposes.

The Company completed its initial public offering on October 1, 1997,
raising $52.4 million for the Company. From these net proceeds, the Company
paid a $10 million dividend to SAIC on October 1, 1997.

Cash provided by operations was $41.1 million in 1997. This amount is
principally attributed to net income plus the increase in deferred revenue
reflecting cash collected in advance of registration services revenue
recognition ratably over the two- and one-year registration terms. Partially
offsetting this amount is an increase in deferred tax assets resulting from
accelerated revenue recognition for tax purposes and the subsequent tax
liabilities. The net repayment of $14.0 million to SAIC during 1997 effectively
reduces the cash provided by operations to $27.1 million.

Investing activities used $43.4 million in 1997, of which $40.2 million was
net purchases of short-term investments, primarily commercial short-term
investment grade securities. Purchases of furniture and equipment of $3.2
million for 1997 represents an increase of $1.3 million from 1996. In addition,
the Company acquired $2.4 million of equipment through a capital lease
transaction. The majority of current and anticipated future capital acquisitions
are to support growth in the domain name registration business and are expected
to be acquired through capital purchases as well as financed under various
operating and capital lease agreements ranging from 24 to 36 months.

The Company believes that the net proceeds from its IPO, combined with its
existing cash balance, short-term investments and cash flows expected from
future operations, will be sufficient to meet the Company's capital requirements
for at least the next 12 to 18 months.

52
<PAGE> 53

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements required by this item are set forth in a separate
section of this Annual Report on Form 10-K as indicated in the "Index to
Financial Information" appearing on page F-1 and is incorporated herein by
reference.

The supplementary data required by this item are set forth under the
"Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations" beginning on page 40 hereof and are incorporated herein
by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

As permitted by General Instruction G(3) to Form 10-K, the information
relating to nominees for election as directors of Network Solutions set forth
under the caption "Election of Directors" in Network Solutions' definitive Proxy
Statement for the annual meeting of stockholders to be held on May 19, 1998,
which Proxy Statement will be filed with the Commission within 120 days after
the end of the Company's fiscal year ended December 31, 1997, is incorporated by
reference.

The information on executive officers set forth under the caption
"Executive Officers of the Registrant" beginning on page 34 hereof is
incorporated herein by reference.

The information relating to compliance with Section 16(a) of the Securities
Exchange Act of 1934, as amended, set forth under the caption "Security
Ownership of Certain Beneficial Owners and Management - Section 16(a) Beneficial
Ownership Reporting Compliance" in Network Solutions' definitive Proxy Statement
for the annual meeting of stockholders to be held on May 19, 1998, which Proxy
Statement will be filed with the Commission within 120 days after the end of the
Company's fiscal year ended December 31, 1997, is incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION.

As permitted by General Instruction G(3) to Form 10-K, the information
called for by this Item is incorporated by reference from the Sections entitled
"Proposal Number 1 - Election of Directors - Compensation of Directors,"
"Executive Compensation" and "Compensation Committee Interlocks and Insider
Participation" in Network Solutions' definitive Proxy Statement for the annual
meeting of stockholders to be held on May 19, 1998, which Proxy Statement will
be filed with the Commission within 120 days after the end of the Company's
fiscal year ended December 31, 1997.

53
<PAGE> 54

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

As permitted by General Instruction G(3) to Form 10-K, the information
called for by this Item is incorporated by reference from the Section entitled
"Security Ownership of Certain Beneficial Owners and Management" in Network
Solutions' definitive Proxy Statement for the annual meeting of stockholders to
be held on May 19, 1998, which Proxy Statement will be filed with the Commission
within 120 days after the end of the Company's fiscal year ended December 31,
1997.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

As permitted by General Instruction G(3) to Form 10-K, the information
called for by this Item is incorporated by reference from the Section entitled
"Relationship with SAIC and Certain Transactions" in the Company's definitive
Proxy Statement for the annual meeting of stockholders to be held on May 19,
1998, which Proxy Statement will be filed with the Commission with 120 days
after the end of the Company's fiscal year ended December 31, 1997.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) Documents filed as part of this report

1. Financial Statements.

The list of financial statements set forth under the caption
"Index to Financial Information" on page F-1 is incorporated herein by
reference.

2. Financial Statement Schedules.

The list of financial statement schedules set forth under the
caption "Index to Financial Information" on page F-1 is incorporated herein by
reference. All other schedules have been omitted, as the required information is
inapplicable or the information is presented in the financial statements or
related notes.

3. Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------ -----------------------
<S> <C>
3(i)* Second Amended and Restated Certificate of Incorporation.
3(ii) Bylaws of Network Solutions, Inc., as amended February 9, 1998.
4.1* Form of Common Stock Certificate.
4.2* Reference is made to Exhibits 3(i) and 3(ii).
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.
</TABLE>

54
<PAGE> 55

<TABLE>
<S> <C>
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.
10.9*+ Letter Agreement dated September 16, 1996 between the Company and
Gabriel A. Battista, as amended as of September 23, 1996.
10.10* Science Applications International Corporation Employee Stock Ownership Plan
and amendments thereto.
10.11* Science Applications International Corporation 1995 Stock Option Plan.
10.12* Letter dated September 13, 1995 regarding Amendment No. 4 to the Cooperative
Agreement.
10.13* Asset Transfer Agreement between Network Solutions, Inc. and Science
Applications International Corporation.
10.14* Amendment No. 6 to the Cooperative Agreement dated June 23, 1997.
10.15**+ 1997 Employee Stock Purchase Plan.
10.16 Amendment No. 7 to the Cooperative Agreement dated December 3, 1997.
10.17 Amendment No. 8 to the Cooperative Agreement dated February 20, 1998.
10.18 Amendment No. 9 to the Cooperative Agreement dated March 12, 1998.
10.19+ Form of Indemnification Agreement entered into by the Company and each of its
directors and officers at the Vice President level or above.
10.20 Deed of Lease By and Between Sugarland Business Park Limited Partnership and
Network Solutions, Inc. dated May 30, 1997 ("Lease Agreement").
10.21 Amendment No. 1 to Lease Agreement dated January 31, 1998.
23.1 Consent of Price Waterhouse LLP.
27.1 Financial Data Schedule (in electronic format only).
27.2 Restated Financial Data Schedule (in electronic format only).
* Incorporated by reference from Network Solutions, Inc.'s Registration Statement on
Form S-1 (Registration No. 333-30705).
** Incorporated by reference from Network Solutions, Inc.'s Registration Statement on
Form S-8 (Registration No. 333-43821).
+ Executive Compensation Plans and Arrangements.
</TABLE>

WorldNIC(TM) and RegistrationPlus(TM) are trademarks of the Company.

(b)Reports on Form 8-K

No reports on Form 8-K were filed during the last quarter of fiscal
year 1997.

55
<PAGE> 56

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

Dated: March 31, 1998

NETWORK SOLUTIONS, INC.

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

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on the dates set forth below.

<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ GABRIEL A. BATTISTA
- -------------------------- Chief Executive Officer and Director March 31, 1998
Gabriel A. Battista
/s/ ROBERT J. KORZENIEWSKI
- -------------------------- Chief Financial Officer (Principal March 31, 1998
Robert J. Korzeniewski Financial Officer)
/s/ MICHAEL G. VOSLOW
- -------------------------- Vice President, Finance and Treasurer March 31, 1998
Michael G. Voslow (Principal Accounting Officer)
/s/ MICHAEL A. DANIELS
- -------------------------- Chairman of the Board March 31, 1998
Michael A. Daniels
/s/ J. ROBERT BEYSTER
- -------------------------- Director March 31, 1998
J. Robert Beyster
/s/ CRAIG I. FIELDS
- -------------------------- Director March 31, 1998
Craig I. Fields
/s/ JOHN E. GLANCY
- -------------------------- Director March 31, 1998
John E. Glancy
/s/ J. DENNIS HEIPT
- -------------------------- Director March 31, 1998
J. Dennis Heipt
/s/ WILLIAM A. ROPER, JR.
- -------------------------- Director March 31, 1998
William A. Roper, Jr.
/s/ STRATTON D. SCLAVOS
- -------------------------- Director March 31, 1998
Stratton D. Sclavos
</TABLE>

56
<PAGE> 57

<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Donald N. Telage
- -------------------------- Director March 31, 1998
Donald N. Telage
</TABLE>

57
<PAGE> 58

INDEX TO FINANCIAL INFORMATION

<TABLE>
<CAPTION>
Page
Reference
---------
<S> <C>
Report of Independent Accountants......................................................... F-2, F-3

1. Financial Statements:

Statements of Financial Position as of December 31, 1996 and 1997................ F-4

Statements of Operations for the Periods from January 1, 1995 to March
10, 1995 and March 11, 1995 to December 31, 1995, and for the Years
Ended December 31, 1996 and 1997................................................. F-5

Statements of Changes in Stockholders' Equity for the Periods from
January 1, 1995 to March 10, 1995 and March 11, 1995 to December 31,
1995, and for the Years Ended December 31, 1996 and 1997......................... F-6

Statements of Cash Flows for the Periods from January 1, 1995 to March
10, 1995 and March 11, 1995 to December 31, 1995, and for the Years
Ended December 31, 1996 and 1997................................................. F-7

Notes to Financial Statements.................................................... F-8

2. Financial Statement Schedule:

Valuation and Qualifying Accounts and Reserves................................... F-24
</TABLE>

F-1
<PAGE> 59
REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion, the financial statements listed in the index appearing on page
F-1 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 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 audit. We conducted our audit 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 audit provides 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 are
presented on the Company's previous basis of accounting.

/s/ PRICE WATERHOUSE LLP

PRICE WATERHOUSE LLP

Falls Church, VA
February 6, 1998

F-2
<PAGE> 60

REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion, the financial statements listed in the index appearing on page
F-1 present fairly, in all material respects, the financial position of Network
Solutions, Inc. (a majority-owned subsidiary of Science Applications
International Corporation) at December 31, 1997 and 1996, and the results of its
operations and cash flows for the year ended December 31, 1997 and 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.

/s/ PRICE WATERHOUSE LLP

PRICE WATERHOUSE LLP

Falls Church, VA
February 6, 1998

F-3

<PAGE> 61

NETWORK SOLUTIONS, INC.
STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 15,540,000 $ 41,146,000
Short-term investments - 40,200,000
Accounts receivable, net 12,587,000 5,792,000
Prepaids and other assets 936,000 1,005,000
Deferred tax asset 10,087,000 20,153,000
Restricted assets 17,453,000 25,873,000
------------- -------------
Total current assets 56,603,000 134,169,000

Furniture and equipment, net 2,266,000 6,146,000
Deferred tax asset 4,968,000 8,128,000
Goodwill, net 2,281,000 1,177,000
------------- -------------
Total Assets $ 66,118,000 $ 149,620,000
============= =============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities $ 2,581,000 $ 6,426,000
Due to parent 15,295,000 1,250,000
Income taxes payable - 5,042,000
Current portion of capital lease obligations - 842,000
Deferred revenue, net 19,912,000 43,789,000
Internet fund liability 17,453,000 25,873,000
------------- -------------
Total current liabilities 55,241,000 83,222,000

Capital lease obligations - 1,081,000
Long-term deferred revenue, net 9,440,000 17,662,000
------------- -------------
Total liabilities 64,681,000 101,965,000

Commitments and contingencies

Stockholders' equity:
Preferred stock, $.001 par value, authorized 10,000,000 shares;
none issued and outstanding in 1996 and 1997
Class A common stock, $.001 par value; authorized 100,000,000 shares;
3,795,000 issued and outstanding in 1997 - 4,000
Class B common stock, $.001 par value; authorized 30,000,000 shares;
12,500,000 and 11,925,000 issued and outstanding in 1996 and 1997 12,000 12,000
Additional paid-in capital 4,468,000 56,451,000
Accumulated deficit (3,043,000) (8,812,000)
------------- -------------
Total stockholders' equity 1,437,000 47,655,000
------------- -------------
Total Liabilities and Stockholders' Equity $ 66,118,000 $ 149,620,000
============= =============
</TABLE>

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

F-4
<PAGE> 62

NETWORK SOLUTIONS, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------- --------------------------------------------------
JANUARY 1, 1995 MARCH 11, 1995 YEAR ENDED YEAR ENDED
TO MARCH 10, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
--------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Net revenue $ 1,177,000 $ 5,309,000 $ 18,862,000 $ 45,326,000
Cost of revenue 884,000 4,820,000 14,666,000 25,798,000
------------ ------------ ------------ ------------
Gross profit 293,000 489,000 4,196,000 19,528,000

Research and development expenses - - 680,000 1,653,000
Selling, general and administrative expenses 280,000 2,114,000 6,280,000 12,268,000
Interest income - - (496,000) (2,211,000)
Other expenses 9,000 52,000 - 116,000
------------ ------------ ------------ ------------

Income (loss) before income taxes 4,000 (1,677,000) (2,268,000) 7,702,000

Provision (benefit) for income taxes 48,000 (287,000) (643,000) 3,471,000
------------ ------------ ------------ ------------

Income (loss) from continuing operations (44,000) (1,390,000) (1,625,000) 4,231,000

Loss from discontinued operations,
net of income taxes (1,375,000) (28,000) - -
------------ ------------ ------------ ------------

Net income (loss) $ (1,419,000) $ (1,418,000) $ (1,625,000) $ 4,231,000
============ ============ ============ ============

BASIC EARNINGS PER SHARE:
- -------------------------

Income (loss) from continuing operations $ (0.04) $ (0.11) $ (0.13) $ 0.32
Loss from discontinued operations (1.32) - - -
------------ ------------ ------------ ------------
Net income (loss) $ (1.36) $ (0.11) $ (0.13) $ 0.32
============ ============ ============ ============
DILUTED EARNINGS PER SHARE:
- ---------------------------

Income (loss) from continuing operations $ (0.04) $ (0.11) $ (0.13) $ 0.31
Loss from discontinued operations (1.32) - - -
------------ ------------ ------------ ------------
Net income (loss) $ (1.36) $ (0.11) $ (0.13) $ 0.31
============ ============ ============ ============
</TABLE>

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

F-5
<PAGE> 63
NETWORK SOLUTIONS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK TREASURY STOCK
--------------------------- -------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------------------------- -------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR
Balance, December 31, 1994 1,159,000 $ 12,000 110,000 $ (628,000)

Purchase of treasury stock - - 7,000 (30,000)

Net loss for the period from
January 1 to March 10, 1995 - - - -
---------- ----------- ---------- -----------
Balance, March 10, 1995 1,159,000 $ 12,000 117,000 $ (658,000)
========== =========== ========== ===========

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

COMPANY
Purchase of outstanding common
stock by SAIC on March 10, 1995 - - 12,500,000 $ 12,000

Net loss for the period from
March 11 to December 31, 1995 - - - -
---------- ----------- ---------- ----------

Balance, December 31, 1995 - - 12,500,000 12,000

Net loss for the year ended
December 31, 1996 - - - -
---------- ----------- ---------- ----------

Balance, December 31, 1996 - - 12,500,000 12,000

Declaration of Class B dividend - - - -

Conversion of Class B Common Stock 575,000 - (575,000) -

Issuance of Class A Common Stock 3,220,000 $ 4,000 - -

Net income for the year ended
December 31, 1997 - - - -
---------- ----------- ---------- ----------

Balance, December 31, 1997 3,795,000 $ 4,000 11,925,000 $ 12,000
========== =========== ========== ==========
</TABLE>

ADDITIONAL RETAINED TOTAL
PAID-IN EARNINGS STOCKHOLDERS'
CAPITAL (DEFICIT) EQUITY
----------- ----------- -------------
<S> <C> <C> <C>
PREDECESSOR
Balance, December 31, 1994 $ 1,241,000 $ (373,000) $ 252,000

Purchase of treasury stock - - (30,000)

Net loss for the period from
January 1 to March 10, 1995 - (1,419,000) (1,419,000)
----------- ----------- -----------
Balance, March 10, 1995 $ 1,241,000 $(1,792,000) $(1,197,000)
=========== =========== ===========

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

COMPANY
Purchase of outstanding common
stock by SAIC on March 10, 1995 $ 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 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 4,468,000 (3,043,000) 1,437,000

Declaration of Class B dividend - (10,000,000) (10,000,000)

Conversion of Class B Common Stock - - -

Issuance of Class A Common Stock 51,983,000 - 51,987,000

Net income for the year ended
December 31, 1997 - 4,231,000 4,231,000
----------- ----------- -----------

Balance, December 31, 1997 $56,451,000 $(8,812,000) $47,655,000
=========== =========== ===========
</TABLE>

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

F-6
<PAGE> 64

NETWORK SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------- --------------------------------------------
JANUARY 1, 1995 MARCH 11, 1995 YEAR ENDED YEAR ENDED
TO MARCH 10, TO DECEMBER 31 DECEMBER 31, DECEMBER 31,
1995 1995 1996 1997
--------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,419,000) $ (1,418,000) $ (1,625,000) $ 4,231,000
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Net loss from discontinued operations 1,376,000 28,000 - -
Depreciation and amortization 68,000 765,000 1,417,000 2,432,000
Provision for uncollectible accounts receivable - 124,000 3,597,000 8,082,000
Deferred income taxes - (2,221,000) (12,834,000) (13,226,000)
Change in operating assets and liabilities: - - - -
Increase in accounts receivable (161,000) (3,385,000) (12,144,000) (1,287,000)
(Increase) decrease in prepaids and other assets (36,000) 45,000 (925,000) (69,000)
(Increase) decrease in deposits (49,000) 1,053,000 - -
Increase in accounts payable and accrued liabilities 233,000 282,000 1,226,000 3,845,000
Increase (decrease) in other liabilities 8,000 (89,000) - -
Increase in income taxes payable - - - 5,042,000
Increase (decrease) in deferred revenue (30,000) 3,239,000 26,006,000 32,099,000
------------ ------------ ------------ ------------
Net cash provided by (used in) operating activities (10,000) (1,577,000) 4,718,000 41,149,000
------------ ------------ ------------ ------------

Cash flows from investing activities:
Purchase of furniture and equipment (134,000) (518,000) (1,901,000) (3,240,000)
Purchase of short-term investments - - - (40,200,000)
Net investment in net assets of discontinued operations 331,000 563,000 (208,000) -
------------ ------------ ------------ ------------
Net cash provided by (used in) investing activities 197,000 45,000 (2,109,000) (43,440,000)
------------ ------------ ------------ ------------

Cash flows from financing activities:
Repayment of bank borrowings (293,000) (834,000) - -
Dividend paid - - - (10,000,000)
Capital lease obligations - - - (463,000)
Proceeds from issuance of common stock - - - 52,405,000
Purchase of treasury stock (30,000) - -
Net transactions with SAIC - 2,371,000 12,926,000 (14,045,000)
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities (323,000) 1,537,000 12,926,000 27,897,000
------------ ------------ ------------ ------------

Net increase (decrease) in cash and cash equivalents (136,000) 5,000 15,535,000 25,606,000

Cash and cash equivalents, beginning of period 136,000 - 5,000 15,540,000
------------ ------------ ------------ ------------
Cash and cash equivalents, end of period $ - $ 5,000 $ 15,540,000 $ 41,146,000
============ ============ ============ ============
</TABLE>

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

F-7
<PAGE> 65

Network Solutions, Inc.
Notes to Financial Statements

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Network Solutions, Inc. ("the Company") currently acts as the exclusive
registrar of Internet domain names within the .com, .org, .net, and .edu top
level domains ("TLDs") pursuant to a Cooperative Agreement with the National
Science Foundation ("NSF") (Note 3). Domain names are used to identify a unique
site or presence on the Internet. As registrar to these TLDs, the Company
registers new domain names and is responsible for the maintenance and
dissemination of the master file of domain names through daily updates to the
Internet. The Company also provides enterprise network consulting services,
focusing on network engineering, network and systems security and network
management solutions for commercial customers.

The Company was acquired by Science Applications International Corporation
("SAIC") on March 10, 1995 (the "acquisition"). 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 partially upon the Company's then
minority-owned status. The contracts which had been awarded to the Company based
partially on the Company's then minority-owned status were transferred into a
separately-owned entity 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 and consulting
services. This transfer was effective as of February 1996. The operating results
of both the minority-based government contract business and the remaining
government-based business, are reflected as discontinued operations in the
financial statements of the Company for all periods presented (Note 13). The
commercial operations, as defined, are reflected as continuing operations in the
financial statements of the Company for all periods presented.

The financial statements for periods subsequent to March 10, 1995 are presented
on the new basis of accounting arising from the acquisition (Note 9). The
financial statements for the period from January 1, 1995 to March 10, 1995 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 8, 9 and 12). Only costs directly attributable to the Company's
government-based business that were not incurred by the Company subsequent to
the transfer of this business to SAIC have been included in discontinued
operations.

F-8
<PAGE> 66

NOTE 2 - RECAPITALIZATION AND INITIAL PUBLIC OFFERING

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 holders of Class A 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. Each share of Class B common stock is convertible at the holder's
option into one share of Class A common stock.

On October 1, 1997, the Company completed an initial public offering (the "IPO")
of 3,795,000 shares of its $.001 par value Class A common stock, including
495,000 shares resulting from the exercise of certain overallotment provisions.
The Company's net proceeds from the IPO, including overallotment, were $52.4
million based on the Company's direct sale of 3,220,000 shares of Class A common
stock.

Prior to the offering, the Company was a wholly-owned subsidiary of SAIC. In
conjunction with the IPO, SAIC converted 575,000 shares (including 75,000
overallotment shares) of Class B common stock into 575,000 shares of Class A
common stock and directly sold the shares as a selling stockholder. Upon
completion of the offering, SAIC owned 100% of the outstanding Class B common
stock representing 75.9% of the Company's equity and 96.9% of the combined
voting power of the Company's outstanding Class B and Class A common stock.

On August 21, 1997, the Company's Board of Directors declared a $10,000,000
dividend to be paid to SAIC upon consummation of the IPO. This dividend was paid
to SAIC on October 1, 1997.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NSF Cooperative Agreement

In December 1992, the Company entered into the Cooperative Agreement with the
NSF under which the Company was to provide Internet domain name registration
services for five TLDs: .com, .org, .net, .edu and .gov. These "registration
services" include domain name registration and renewal, and throughout the
registration term, maintenance of and unlimited modifications to individual
domain name records and dissemination of records through updates to the
Internet. The Cooperative Agreement became effective January 1, 1993. It
includes a three-month phase-in period, a five-year operational period
(commencing April 1, 1993 and ending March 31, 1998), and a six-month
"flexibility period" through September 30, 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. The NSF has stated that it will not be
re-awarding a cooperative agreement at the end of the flexibility period.

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 require
the Company to begin charging end users a services fee of $50 per year for each
domain name in the .com, .org and .net TLDs. Registrants pay a services fee of
$100 for two years of domain name services upon each initial registration and
an annual renewal fee of $50 per year thereafter (collectively "registration
fees"). The NSF paid the registration fees to the Company for domain names
within the .edu and .gov TLDs through March 31, 1997. Commencing April 1, 1997,
the Company agreed with the NSF to provide domain name services within the .edu
and .gov TLDs free of charge. As of October 1, 1997, the Company no longer
registers or administers domain names in the .gov TLD.

F-9
<PAGE> 67

Under the terms of the September 14, 1995 amendment to the Cooperative
Agreement, 30% of the registration fees collected by the Company is required to
be set aside for the enhancement of the intellectual infrastructure of the
Internet ("set aside funds") and, as such, is not recognized as revenue by the
Company. The Company has reflected these set aside funds, along with the
appropriate percentage of net accounts receivable (Note 4), 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. This restricted cash at December 31, 1996 and 1997 was approximately
$13,049,000 and $23,512,000, respectively. The set aside funds, plus any
interest earned, are intended to be disbursed at the direction of the NSF. In
November 1997, the Company disbursed $23 million out of this fund to the NSF at
its direction.

Future collection or disbursement of these set aside funds will have no
significant effect on the Company's business, net financial position, or results
of operations (Note 15). For purposes of the Company's statements of cash
flows, amounts relating to these 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 cost plus allowable indirect costs and the
earned portion of the fee. Since September 14, 1995, registration fees charged
to end users for registration services provided by the Company have been
recognized on a straight-line basis over the life of the registration term, two
years for initial registrations and one year for renewals. The Company records
revenue net of an estimated provision for uncollectible accounts receivable
(Note 4).

Substantially all of the Company's consulting services revenue is derived from
professional services which are generally provided to clients on a "time and
expense" basis and is recognized as services are performed.

Net revenue from two customers approximated 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 NSF, whose impact on the above percentages of
revenue was reflective of activity prior to the September 14, 1995 amendment of
the Cooperative Agreement. During the year ended December 31, 1997, there were
no customers which individually represented more than 5% of net revenues.

Deferred Revenue

Deferred revenue primarily represents the unearned portion of revenue related to
the unexpired term of registration fees, net of an estimate for uncollectible
accounts receivable (Note 4).

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of
ninety days or less to be cash equivalents.

F-10
<PAGE> 68

Financial Instruments

The recorded value of the Company's financial instruments, which include
short-term investments, accounts receivable and accounts payable, approximates
market value. Concentration of credit risks 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. Equipment under capital
leases is amortized using a declining-balance method over the shorter of the
assets' useful lives or lease term, ranging from two to three years. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term or the estimated useful 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. Amortization expense of $580,000, $715,000 and $686,000
for the period from March 11, 1995 to December 31, 1995, and the years ended
December 31, 1996 and 1997, respectively, was included in selling, general and
administrative expenses.

Software Development Costs

Effective January 1, 1996, research and development costs are expensed as
incurred. Research and development costs incurred for all periods presented
prior to January 1, 1996 were reimbursed to the Company by direct charges to
contracts and are included in cost of revenue for those periods.

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 any significant software development
costs as of December 31, 1997.

Income Taxes

Deferred taxes are accounted for under SFAS No. 109 "Accounting for Income
Taxes," whereby deferred tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between financial
statement reporting and income tax purposes. 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.

For the period from the acquisition until the IPO, the Company filed tax returns
as part of SAIC's consolidated tax group. Tax expense during this period has
been determined as if the Company was a separate taxpayer and was charged to the
Company by SAIC. Effective October 1, 1997, the Company is no longer part of
SAIC's consolidated tax group for federal income tax purposes and will prepare
its income tax returns as a separate entity.

F-11
<PAGE> 69

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 12).
The Company expects to continue to account for its employee stock plans in
accordance with the provisions of APB No. 25.

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.

Newly Issued Accounting Standards

Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings per
Share", which replaces the presentation of primary earnings per share ("EPS")
with a presentation of basic EPS and necessitates the dual presentation of basic
and diluted EPS on the face of the statement of operations. In addition, during
February 1998, the Company adopted Securities and Exchange Staff Accounting
Bulletin ("SAB") No. 98, which, among other things, rescinded SAB No. 83 and
thus eliminates the impact of common share equivalents granted by the Company at
prices below the IPO offering price during the twelve months preceding the
initial IPO filing and through the filing's effective date. All prior period EPS
data have been restated as required by SFAS No. 128 and SAB No. 98. See Note 11
for the reconciliation of the numerator and denominator used in the basic and
diluted EPS computations.

In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" was issued. SFAS No. 131 establishes standards for
reporting information about operating segments in annual and interim financial
statements issued to stockholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
SFAS No. 131 is effective for fiscal years beginning after December 15, 1997 and
will have no impact on the Company's results of operations, financial position
or cash flows.

NOTE 4 - ACCOUNTS RECEIVABLE

Accounts receivable consist of the following amounts as of December 31:

<TABLE>
<CAPTION>
1996 1997
----------------- -----------------
<S> <C> <C>
Billed $ 27,430,000 $24,483,000
Unbilled 5,000,000 1,526,000
----------------- -----------------
Total accounts receivable before allowances 32,430,000 26,009,000
Less - Allowance for doubtful accounts (15,439,000) (17,856,000)
- Accounts receivable allocable to 30% NSF
set aside (Note 3) (4,404,000) (2,361,000)
----------------- -----------------

Accounts receivable, net $ 12,587,000 $ 5,792,000
================= =================
</TABLE>

F-12
<PAGE> 70

Unbilled receivables consist of registration fees and time and material contract
costs which have been incurred but which have not yet been billed. Under the
Cooperative Agreement, 30% of collected registration fees will be set aside for
disbursement at the direction of the NSF.

In accounting for registration fees, the Company initially records the gross
amount of the registration fee to accounts receivable and deferred revenue. The
allowance for estimated uncollectible accounts is recorded against both accounts
receivable and deferred revenue balances (see Note 3 for treatment of the 30%
NSF set aside). From the net deferred revenue balance, the Company records
revenue on a straight-line basis over the registration term.

The provision for uncollectible accounts receivable, which is recorded on a
straight-line basis over the registration term and deducted from gross
registration fees in determining net registration revenue, was $124,000 for the
period from March 11, 1995 to December 31, 1995 and $3,597,000 and $7,782,000,
respectively, for the years ended December 31, 1996 and 1997. An additional
$300,000 of bad debt expense was recorded in 1997 for the write-off of
consulting services receivables. The Company's allowance for uncollectible
accounts receivable is associated solely with its registration services
business. The Company believes it has been necessary to establish its provision
for uncollectible accounts receivable due to the large number of individuals and
corporations that have registered multiple domain names with the intention of
reselling such names at a profit. The Company's experience has been that, in
contrast to other registrants, such resellers have a higher tendency of default
on their registration fees.

NOTE 5 - FURNITURE AND EQUIPMENT

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

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Furniture and office equipment $ 879,000 $ 476,000
Computer equipment 4,033,000 8,619,000
Leasehold improvements 234,000 288,000
----------- -----------
Furniture and equipment, at cost 5,146,000 9,383,000
Less: Accumulated depreciation and amortization (2,880,000) (3,237,000)
----------- -----------
Furniture and equipment, net $ 2,266,000 $ 6,146,000
=========== ===========
</TABLE>

The above table includes $2,386,000 of computer equipment acquired during 1997
under capital lease agreements. Amortization expense related to capital leases
totaled $915,000 in 1997. Total depreciation and amortization expense for the
periods from January 1, 1995 to March 10, 1995 and March 11, 1995 to December
31, 1995 and the years ended December 31, 1996 and 1997 was $68,000, $185,000,
$702,000 and $1,746,000, respectively.

F-13
<PAGE> 71

NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Accounts payable $1,054,000 $1,896,000
Accrued expenses 1,412,000 2,384,000
Accrued payroll 115,000 2,146,000
---------- ----------

Total accounts payable and accrued expenses $2,581,000 $6,426,000
========== ==========
</TABLE>

NOTE 7 - LEASES

Future minimum lease payments, including fixed escalation increases, for office
space and equipment under capital and operating leases with initial or remaining
noncancelable lease terms in excess of one year as of December 31, 1997 are:

<TABLE>
<CAPTION>
Capital Operating
Year Ending December 31: Leases Leases
- ------------------------------------------------------------------------------------------------
<C> <C> <C>
1998 $ 957,000 $ 3,437,000
1999 885,000 3,438,000
2000 252,000 2,806,000
2001 - 1,818,000
2002 - 1,427,000
----------- -----------
Total minimum lease payments 2,094,000 $12,926,000
===========
Less: Amounts representing interest (171,000)
-----------
Present value of minimum lease payments 1,923,000
Less: Current portion (842,000)
-----------
Long-term portion of capital lease obligations $ 1,081,000
===========
</TABLE>

In December 1992, the Company entered into a lease agreement for the Company's
headquarters in Herndon, Virginia. Subsequent to the acquisition, SAIC
re-negotiated the lease with the landlord whereby SAIC posted a $1,000,000
letter of credit and then subleased the facilities to the Company under a lease
expiring November 2002. During 1997, the Company leased a second facility in
Herndon whose lease term expires in July 2002.

Lease expense related to the continuing operations for the periods from January
1, 1995 to March 10, 1995 and March 11, 1995 to December 31, 1995, and for the
years ended December 31,1996 and 1997 was $36,000, $342,000, $924,000 and
$2,188,000, respectively. Lease expense incurred by the discontinued operations
for the periods from January 1, 1995 to March 10, 1995 and March 11, 1995 to
December 31, 1995 was $208,000 and $328,000, respectively. Subsequent to March
10, 1995, the Company generated rental income from subleases in 1995 of
$135,000, and $187,000 and $291,000 for the years ended December 31, 1996 and
1997, respectively.

F-14
<PAGE> 72

NOTE 8 - INTEREST EXPENSE AND INCOME

Interest expense reflected in continuing operations and discontinued operations
for the period January 1, 1995 to March 10, 1995 was $9,000 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. 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 income of $496,000
was allocated by SAIC based upon the cost of capital calculation. 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, the
SAIC cost of capital formula provided 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 was no longer subject to SAIC's cost of
capital calculation in connection with the Company fulfilling its own treasury
function. Interest paid for the periods from January 1, 1995 to March 10, 1995
and March 11, 1995 to December 31,1995 and for the years ended December 31, 1996
and 1997 was $0, $103,000, $0 and $116,000, respectively.

NOTE 9 - TRANSACTIONS WITH SAIC

Under the terms of the acquisition agreement, the Company 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
the Company 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 financial statements as of and for the period from March 11, 1995 to
December 31, 1995 and for the years ended December 31, 1996 and 1997 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 SAIC
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. Through August 9, 1996, the amounts allocated by
SAIC to the Company included both administrative and overhead costs which are
included in selling, general and

F-15
<PAGE> 73

administrative expenses and cost of revenue, respectively. Effective August 10,
1996, SAIC stopped allocating costs based generally upon pro rata labor and
began assessing the Company for corporate services provided by SAIC at a fee
equal to 2.5% of annual net revenue. The agreement 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 the years ended
December 31, 1996 and 1997 were $516,000, $1,196,000 and $1,126,000,
respectively, and are principally included in selling, general and
administrative expenses. Additionally, certain interest charges/credits were
allocated by SAIC to the Company (Note 8).

Sales as a subcontractor to SAIC for the period from March 11, 1995 to December
31, 1995 and the years ended December 31, 1996 and 1997 were $509,000,
$1,505,000 and $2,445,000, respectively. In addition, because the Company was
included in SAIC's consolidated tax returns for periods from acquisition until
the IPO, the Company was obligated to make payment for its tax liability to SAIC
in accordance with the tax sharing arrangement (Note 10). The due to parent
balance represents the cumulative net activity of all transactions between the
Company and SAIC. The Company reflects this activity in the statement of cash
flows on a net basis because of the quick turnover, the large amounts and the
short maturities of these related party cash transactions.

NOTE 10 - PROVISION FOR INCOME TAXES

The results of the Company since its acquisition by SAIC until its IPO are to
be included in SAIC's consolidated tax returns. The tax expense allocation is
set forth in Note 3. Subsequent to the IPO, the Company is no longer part of
SAIC's consolidated tax group for federal income tax purposes and will prepare
its income tax returns as a separate entity.

The provision for (benefit) from income taxes charged to continuing operations
consists of the following:

For the Period
1995
------------------------------ Year Ended Year Ended
January 1 to March 11 to December 31, December 31,
March 10 December 31 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Current:
Federal $ 40,000 $ 1,521,000 $ 10,171,000 $ 13,931,000
State 8,000 311,000 2,020,000 2,766,000
------------ ------------ ------------ ------------
Total current provision 48,000 1,832,000 12,191,000 16,697,000
------------ ------------ ------------ ------------
Deferred:
Federal - (1,759,000) (10,716,000) (11,035,000)
State - (360,000) (2,118,000) (2,191,000)
------------ ------------ ------------ ------------
Total deferred (benefit) - (2,119,000) (12,834,000) (13,226,000)
------------ ------------ ------------ ------------
Provision for (benefit) from income
taxes $ 48,000 $ (287,000) $ (643,000) $ 3,471,000
============ ============ ============ ============
</TABLE>

F-16
<PAGE> 74

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

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Deferred Revenue $13,846,000 $26,295,000
Provision for uncollectible
accounts receivable 1,091,000 1,841,000
Other 118,000 145,000
----------- -----------

Total deferred tax asset $15,055,000 $28,281,000
=========== ===========
</TABLE>

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.

Although the Company had a past history of net losses, it has not established a
current valuation allowance for its deferred tax assets since, in the opinion of
management, it is more likely than not that all of the deferred tax assets will
be realized. The deferred tax assets relate primarily to registration fees which
are taxable upon initial registration but are recognized in the financial
statements over the next 12 to 24 months, the registration term.

A reconciliation of the provision for income taxes to the amount computed by
applying the statutory federal income tax rate to income before income taxes is
provided below. The statutory federal income tax rate used was 34% for the
periods during 1995 and 35% for the years ended December 31, 1996 and 1997.

For the period
1995
---------------------------- Year ended Year ended
January 1 to March 11 to December 31, December 31,
March 10 December 31 1996 1997
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Federal tax at statutory rate $ 1,000 $ (570,000) $ (794,000) $2,696,000
State income taxes, net of Federal
tax benefit - (68,000) (96,000) 374,000
Nondeductible goodwill amortization - 348,000 281,000 240,000
Other 1,000 3,000 (34,000) 161,000
Valuation allowance 46,000 - - -
---------- ---------- ---------- ----------

Provision for (benefit) from income taxes $ 48,000 $ (287,000) $ (643,000) $3,471,000
========== ========== ========== ==========
</TABLE>

The Company paid income taxes of $119,000 for the period from January 1, to
March 10, 1995.

F-17
<PAGE> 75

NOTE 11 - COMPUTATION OF EARNINGS (LOSS) PER SHARE

The following is a reconciliation of the numerator and denominator used in the
basic and diluted EPS computations for continuing operations:

<TABLE>
<CAPTION>
Income (Loss) Shares Per Share
(Numerator) (Denominator) Amount
------------- ------------- ----------
<S> <C> <C> <C>
January 1, 1995 to March 10, 1995
- ---------------------------------
Loss Per Share:
- ---------------

Basic $ (44,000) 1,046,000 $ (0.04)
=========
Dilutive securities:
Outstanding options - -
----------- -----------
Diluted $ (44,000) 1,046,000 $ (0.04)
=========== =========== =========

March 11, 1995 to December 31, 1995
- -----------------------------------
Loss Per Share:
- ---------------

Basic $(1,390,000) 12,500,000 $ (0.11)
=========
Dilutive securities:
Outstanding options - -
----------- -----------
Diluted $(1,390,000) 12,500,000 $ (0.11)
=========== =========== =========

1996 Loss Per Share:
- --------------------

Basic $(1,625,000) 12,500,000 $ (0.13)
=========
Dilutive securities:
Outstanding options - -
----------- -----------
Diluted $(1,625,000) 12,500,000 $ (0.13)
=========== =========== =========

1997 Earnings Per Share:
- ------------------------

Basic $ 4,231,000 13,305,000 $ 0.32
=========
Dilutive securities:
Outstanding options - 178,000
----------- -----------
Diluted $ 4,231,000 13,483,000 $ .031
=========== =========== =========
</TABLE>

Common shares issued are weighted for the period the shares were outstanding and
incremental shares assumed issued under the treasury stock method for dilutive
EPS are weighted for the period the underlying options were outstanding. Options
outstanding in 1995 and 1996 are not reflected in the computation of diluted EPS
because the effects are antidilutive and would increase diluted EPS.

F-18
<PAGE> 76

NOTE 12 - EMPLOYEE BENEFIT PLANS

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, stock appreciation rights,
and stock options (including incentive stock options ("ISOs") and nonstatutory
stock options ("NSOs")). A total of 2,306,250 shares of Class A Common Stock
have been initially reserved for issuance under the Incentive Plan. The number
of shares are increased by 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 limit of 1,000,000 shares. Through December 31, 1997, an additional
564,400 shares were eligible for issuance and have subsequently been reserved
for a combined total of 2,870,650 eligible shares under the Incentive Plan.

Following is a summary of activity pursuant to the Company's Incentive Plan:

<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
---------- ----------------
<S> <C> <C>
Balance at December 31, 1995 - -
Granted 1,225,725 $12.97
Exercised - -
Cancelled - -
----------
Balance at December 31, 1996 1,225,725 $12.97
Granted 600,500 $14.21
Exercised - -
Cancelled (36,500) $14.00
----------
Balance at December 31, 1997 1,789,725 $13.36
==========
</TABLE>

Granted stock options generally 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. The number of options exercisable at December 31,
1997 are 360,821 with an exercise price range of $11.25 to $14.00 and a weighted
average exercise price of $12.95. The weighted average contractual life of all
options outstanding at December 31, 1997 is 4.10 years. All options granted to
date have been NSOs except for 100,900 ISOs granted in 1996. No restricted
shares, stock units or SARs have been granted to date.

Employee Stock Purchase Plan

Effective January 7, 1998, the Company adopted an Employee Stock Purchase Plan
to provide substantially all full time employees an opportunity to purchase
shares of its Class A common stock through payroll deductions of up to 10% of
eligible compensation. Semiannually, on June 30 and December 31, participant
account balances are used to purchase stock at the lesser of 85 percent of the
fair market value on the trading day before the participation period starts or
the trading day preceding the day on which the participation period ends. A
total of 250,000 shares are available for purchase under the plan.

SAIC Benefit Plans

Employees of the Company participate in various SAIC benefit plans, including
stock, bonus and retirement 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).

F-19
<PAGE> 77

SAIC has one principal Cash or Deferred Arrangement ("CODA") which allows
eligible participants to defer a portion of their income through payroll
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 also has an SAIC
Employee Stock Purchase Plan which allows eligible employees to purchase shares
of SAIC's Class A common stock, with SAIC currently contributing 10% of the
existing fair market value.

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. The Company participated in this plan during the period from acquisition
until December 31, 1996.

During the period from March 11, 1995 to December 31, 1995 and during the years
ended December 31, 1996 and 1997, a total of 24,450, 53,040 and 11,450 SAIC
options were granted to the Company's employees, respectively, with exercise
prices ranging from $15.72 to $17.79, $19.33 to $22.83 and $25.96 to $34.78 per
share, respectively, with a weighted average price of $16.17, $20.51 and $28.13,
respectively. These options were granted under the SAIC 1995 Stock Option Plan
to purchase SAIC Class A common stock and vest 20%, 20%, 20% and 40% on each
anniversary date of grant and have a term of five years.

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 years ended December 31, 1996
and 1997 under the SAIC Bonus Compensation Plan were estimated at $3.66, $4.30
and $7.56, respectively, and $2.76 and $4.68, respectively, for the options
granted during the years ended December 31, 1996 and 1997 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>
SAIC Stock Options Company Stock Options
----------------------------------------------------- ----------------------------------
March 11,
1995 to Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31, December 31,
1995 1996 1997 1996 1997
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Expected life (years) 4.0 4.0 5.0 4.0 4.0
Risk-free interest rate 6.45% 5.91% 6.30% 5.98% 6.25%
Volatility 0.00% 0.00% 0.00% 0.00% 20.79%
Dividend yield 0.00% 0.00% 0.00% 0.00% 0.00%
</TABLE>

F-20
<PAGE> 78

Under the above models, the total value of SAIC stock options granted during
1995, 1996 and 1997 was approximately $89,000, $228,000 and $87,000,
respectively, and $3,379,000 and $2,809,000, respectively, for the Company's
stock options granted in 1996 and 1997, all of which would be amortized ratably
on a pro forma basis over their respective option terms. Had the Company
recorded compensation costs for these plans in accordance with SFAS No. 123, the
Company's pro forma income (loss) would have been ($1,430,000) for the period
March 11,1995 to December 31,1995 and ($1,763,000) and $3,510,000, respectively
for the years ended December 31,1996 and 1997. Pro forma basic earnings (loss)
per share would have been ($0.14) and $0.26, respectively, for the years ended
December 31,1996 and 1997.

NOTE 13 - 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 the Company to focus on
the growth of the commercial business. Such transfer was substantially completed
as of February 1996. Prior to SAIC's acquisition of the Company, 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 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.

Summary operating results of the discontinued operations were as follows:

<TABLE>
<CAPTION>
For the Period
1995
----------------------------
January 1 to March 11 to
March 10 December 31
------------ -----------
<S> <C> <C>
Revenues $ 4,270,000 $ 7,882,000
Costs and expenses (5,478,000) (7,773,000)
----------- -----------
(Loss) income from discontinued
operations before income taxes (1,208,000) 109,000

Provision for income taxes 167,000 137,000
=========== ===========
Loss from discontinued operations,
net of income taxes $(1,375,000) $ (28,000)
=========== ===========
</TABLE>

NOTE 14 - COMMITMENTS AND CONTINGENCIES

As of December 31, 1997, the Company was a defendant in 5 lawsuits involving
domain name disputes between trademark owners and domain name holders. 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. Although 41 of

F-21
<PAGE> 79

these objections have resulted in litigation involving the Company, as of
December 31, 1997, no damages have been awarded against the Company to any
plaintiff in the 36 cases that have been resolved. The Company believes that it
has meritorious defenses and intends to vigorously defend itself against these
claims.

On October 17, 1997, a group of six plaintiffs filed a lawsuit (the "Thomas
suit") against the Company and the NSF in the United States District Court,
District of Columbia, challenging the legality of fees defendants charge for the
registration and renewal of domain names on the Internet and seeking restitution
of fees collected from domain name registrants in an amount in excess of $100
million, damages, and injunctive and other relief. Plaintiffs originally alleged
violations of the Competition in Contracting Act ("CICA"), the Sherman Act and
the U.S. Constitution. Following the filing of motions to dismiss by the
defendants, the plaintiffs filed an amended complaint on January 30, 1998,
dropping the cause of action based upon CICA, but adding alleged violations of
the Administrative Procedures Act and the Independent Offices Appropriations
Act. The plaintiffs also filed a motion for preliminary injunctive relief
against the NSF concerning the "Intellectual Infrastructure Fund." On February
2, 1998, the United States District Court, District of Columbia, issued an order
granting the plaintiffs' motion for a preliminary injunction, enjoining the NSF
from spending any of the money collected by the Company for the Intellectual
Infrastructure Fund. The Company believes that it has meritorious defenses and
intends to vigorously defend itself against the claims in the Thomas suit. While
the Company cannot reasonably estimate the potential impact of such claims, a
successful claim under the plaintiffs' theories could have a material adverse
effect on the Company's business, financial condition and results of operations.
See Note 15.

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 an antitrust violation 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. The Company cannot reasonably estimate the
potential impact of the investigation nor can it predict whether a civil action
will ultimately be filed by the DOJ. 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 imposed as a result of any settlement. 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 PG Media's requested TLDs in violation of the Sherman
Act. In its complaint, PG Media has, in addition to requesting damages, asked
that the Company be ordered to include reference to PG Media's TLDs and name
servers in the root zone file administered by the Company under the Cooperative
Agreement. The Company has answered the complaint. In addition, in June 1997,
the Company 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 zone until
the NSF provides further guidance. On September 17, 1997, PG Media filed a
Second Amended Complaint adding the NSF as a defendant. No motions are pending
as of December 31, 1997. The Company believes that it has meritorious defenses
and intends to vigorously defend itself against the claims of PG Media. Although
the Company cannot reasonably estimate the potential impact of 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.

F-22
<PAGE> 80
The Company is involved in various other investigations, claims and lawsuits
arising in the normal conduct of its business, none of which, in the opinion of
the Company's management, will have a material adverse effect on its financial
position, results of operations, cash flows or its ability to conduct business.

NOTE 15 - SUBSEQUENT EVENTS (UNAUDITED)

Proposed Rule

On January 30, 1998, the National Telecommunications and Information
Administration of the Department of Commerce issued a discussion draft,
entitled "A Proposal to Improve Technical Management of Internet Names and
Addresses" which was published in the U.S. Federal Register on February 20,
1998 (the "Proposed Rule"). The Proposed Rule provides notice and seeks public
comment on a proposal to, among other things, increase competition in the
administration of TLDs and the registration of domain names. The Company
supports the transition of domain name services toward a self-regulatory
commercial environment. It is impossible to predict at this time whether or
when a final rule will be issued and, if issued, the exact nature of its
provisions or the precise effect of such provisions on the Company.

Litigation

On February 10, 1998, the plaintiffs in the Thomas suit filed a motion for
preliminary injunction against the Company seeking several items of relief. On
February 24, 1998, the Company and the NSF filed motions to dismiss the amended
complaint. Also on February 24, the plaintiffs filed a motion for partial
summary judgment concerning the set aside fund. The plaintiffs' motion for
preliminary injunction against the Company and partial summary judgment against
the NSF and both motions to dismiss were heard before the Court on March 17,
1998 and the Court has taken the matters under advisement.

NSF Cooperative Agreement

Pursuant to an amendment to the Cooperative Agreement, on March 12, 1998, the
NSF directed the Company to begin charging end users $70 upon each initial
registration for domain names registered April 1, 1998 or later and $35 for each
renewal with an anniversary date of April 1, 1998 or later. In conjunction with
this amendment to the Cooperative Agreement, the Company will no longer set
aside 30% of the collected registration fees for the enhancement of the
intellectual infrastructure of the Internet. This amendment does not alter the
Company's existing revenue per net registration since the 30% set aside funds
were previously not recognized as revenue.

F-23
<PAGE> 81

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>
For the period from January 1, 1995 to
March 10, 1995
Allowance for uncollectible
accounts, included in net assets
(liabilities) of discontinued
operations...................... 809,000 344,000 -- -- 1,153,000
Deferred tax valuation allowance,
continuing operations........... 56,000 46,000 -- -- 102,000(1)
Deferred tax valuation allowance,
discontinued operations......... 512,000 276,000 -- -- 788,000(1)
- ----------------------------------------------------------------------------------------------------------------

For the period from March 11, 1995 to
December 31, 1995
Allowance for uncollectible
accounts, continuing
operations...................... $ -- $ 124,000 $ 1,994,000(2) $ -- $ 2,118,000
Allowance for uncollectible
accounts, included in net assets
(liabilities) of discontinued
operations...................... 1,153,000 465,000 -- -- 1,618,000
Year ended December 31, 1996
Allowance for uncollectible
accounts, continuing
operations...................... 2,118,000 3,597,000 19,270,000(2) 9,546,000(3) 15,439,000
Allowance for uncollectible
accounts, included in net assets
(liabilities) of discontinued
operations...................... 1,618,000 -- -- 1,618,000(4) --
Year ended December 31, 1997
Allowance for uncollectible
accounts, continuing
operations...................... 15,439,000 8,082,000 35,368,000(2) 41,033,000(3) 17,856,000
</TABLE>

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

(1) In connection with the acquisition purchase accounting, a determination
was made that the tax valuation allowances were no longer required. (See
Note 10 of Notes to Financial Statements.)

(2) Charged to allowance for deferred revenue (See Notes 3 and 4 of Notes to
Financial Statements).

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

(4) Disposition associated with discontinued operations (See Note 13 of Notes to
Financial Statements).

F-24
<PAGE> 82

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3(ii) Bylaws of Network Solutions, Inc., as amended February 9, 1998.
10.16 Amendment No. 7 to the Cooperative Agreement dated December 3, 1997.
10.17 Amendment No. 8 to the Cooperative Agreement dated February 20, 1998.
10.18 Amendment No. 9 to the Cooperative Agreement dated March 12, 1998.
10.19 Form of Indemnification Agreement entered into by the Company and each of its
directors and officers at the Vice President level or above.
10.20 Deed of Lease By and Between Sugarland Business Park Limited Partnership and
Network Solutions, Inc. dated May 30, 1997 ("Lease Agreement").
10.21 Amendment No. 1 to Lease Agreement dated January 31, 1998.
23.1 Consent of Price Waterhouse LLP.
27.1 Financial Data Schedule (in electronic format only).
27.2 Restated Financial Data Schedule (in electronic format only).
</TABLE>

<PAGE> 1

AMENDED AND RESTATED

B Y - L A W S

NETWORK SOLUTIONS, INC.

(a Delaware corporation)

Effective as of February 9, 1998

<PAGE> 2

TABLE OF CONTENTS

Page
----
<S> <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 Officers 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
5.8 The President................................................ 11
5.9 The Vice President........................................... 12
</TABLE>

-i-
<PAGE> 3

<TABLE>
<S> <C>
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

ARTICLE 10 Idemnification............................................... 16
10.1 Actions, Etc., Other than By or In The Right of the
Corporation................................................. 16
10.2 Actions, Etc., By or In The Right of the Corporation......... 17
10.3 Determination of Right of Indemnification.................... 17
10.4 Idemnification Against Expenses of Successful Party.......... 18
10.5 Advances of Expenses......................................... 18
10.6 Right to Indemenification Upon Application; Procedure
Upon Application............................................ 18
10.7 Idemnification of Employees and Agents of the Corporation.... 19
10.8 Other Rights and Remedies.................................... 19
10.9 Insurance.................................................... 19
10.10 Constituent Corporation...................................... 19
10.11 Other Enterprises, Fines and Serving at Corporation's
Request..................................................... 20
10.12 Savings Clause............................................... 20
</TABLE>

-ii-
<PAGE> 4

B Y - L A W S

NETWORK SOLUTIONS, INC.

(a Delaware corporation)

ARTICLE I

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 the direction of the
Board, or otherwise properly brought before the meeting by a stockholder. In
addition to any other appli-

-1-
<PAGE> 5

cable 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 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

-2-
<PAGE> 6

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 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

-3-
<PAGE> 7

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 stockholder 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

-4-
<PAGE> 8

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 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

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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 Commonwealth of Virginia 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 Commonwealth of Virginia; and designate
any place within or without the Commonwealth of Virginia for the holding
of any stockholders 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;

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<PAGE> 10

(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) 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

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<PAGE> 11

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 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,

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<PAGE> 12

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 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

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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
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

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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 powers and duties as may be
assigned to him from time to time by the Board. He or she shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors. If
there is no President, the Chairman of the Board, if such an officer be elected,
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 or these By-Laws to the Chairman of the Board, if
there be such an officer, the President shall be the Chief Executive Officer of
the Corporation and shall, in the absence of the Chairman of the Board or if
there be none, preside at all meetings of the stockholders and 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

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<PAGE> 15

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 designation, 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 designa-

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tion, 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 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

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<PAGE> 17

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
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

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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 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.

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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.

ARTICLE 10

Indemnification

10.1 Actions, Etc., Other Than By or In The Right of the Corporation.
The Corporation shall indemnify and hold harmless to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended, other applicable law, if any, the Certificate of
Incorporation of the Corporation, or these By-Laws, any person who was or is a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise (hereinafter an "indemnitee"), against expenses (including
attorneys' fees), judgments, fines, amounts paid in settlement and all other
charges against which such person may be indemnified and held harmless that are
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and with

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respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, that he had reasonable cause
to believe that his conduct was unlawful.

10.2 Actions, Etc., By or In The Right of the Corporation. The
Corporation shall indemnify and hold harmless to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended, other applicable law, if any, the Certificate of
Incorporation of the Corporation, or these By-Laws, any person who was or is a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees) and all other charges against which such person may be
indemnified and held harmless that are actually and reasonably incurred by him
in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless such indemnification is authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended, the Certificate of
Incorporation of the Corporation or these By-Laws, or unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnification for such expenses which the
Court of Chancery or other such court shall deem proper.

10.3 Determination of Right of Indemnification. Any indemnification
under Section 1 or Section 2 (unless ordered by a court) shall be made by the
Corporation unless a determination is reasonably and promptly made (a) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (b) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors
so directs, by independent legal

-17-
<PAGE> 21

counsel in written opinion, or (c) by the stockholders, that such person acted
in bad faith and in a manner that such person did not believe to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal proceeding, that such person believed or had reasonable cause to
believe that his conduct was unlawful.

10.4 Indemnification Against Expenses of Successful Party.
Notwithstanding the other provisions of this Article, to the extent that an
indemnitee has been successful on the merits or otherwise, including the
dismissal of an action without prejudice, in defense of any proceeding or in
defense of any claim, issue or matter therein, such person shall be
indemnified against all expenses incurred in connection therewith.

10.5. Advances of Expenses. Except as limited by Section 6 of this
Article expenses incurred in any proceeding shall be paid by the
Corporation in advance of the final disposition of such proceeding, if the
indemnitee shall undertake to repay such amount in the event that it is
ultimately determined, as provided herein, that such person is not entitled to
indemnification. Notwithstanding the foregoing, no advance shall be made by
the Corporation if a determination is reasonably and promptly made by the
Board by a majority vote of a quorum of disinterested directors or, if such a
quorum is not obtainable or, even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that,
based upon the facts known to the Board or independent legal counsel at the
time such determination is made, such person acted in bad faith and in a manner
that such person did not believe to be in or not opposed to the best interests
of the Corporation, or, with respect to any criminal proceeding, that such
person believed or had reasonable cause to believe his conduct was unlawful.
In no event shall any advance be made in instances where the Board or
independent legal counsel reasonably determine that such person deliberately
breached his duty to the Corporation or its shareholders.

10.6 Right to Indemnification Upon Application; Procedure Upon
Application. Any indemnification under Sections 1, 2, 3 and 4, or advance
under Section 5 of this Article, shall be made promptly, and in any event
within ninety days, upon the written request of the indemnified person, unless
with respect to applications under Sections 1, 2, 3, or 5, a determination is
reasonably and promptly made by the Board by a majority vote of a quorum of
disinterested directors that such person acted in a manner set forth in such
Sections as to justify the Corporation's not indemnifying or making an advance.
In the event a quorum of disinterested directors is not obtainable, the Board
shall promptly direct that independent legal counsel shall decide whether the
person acted in the manner set forth in such Sections as to

-18-
<PAGE> 22

justify the Corporation's not indemnifying or making an advance. The right to
indemnification or advance as granted by this Article shall be enforceable by
the indemnitee in any court of competent jurisdiction if the Board or
independent legal counsel denies the claim, in whole or in part, or if
disposition of such claim is not made within ninety days. The indemnitee's
expenses incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.

10.7 Indemnification of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the Board, grant
rights to indemnification, and to the advancement of expenses to any employee or
agent of the Corporation to the fullest extent of the provisions of this Article
with respect to the indemnification and advancement of expenses of directors and
officers of the Corporation.

10.8 Other Rights and Remedies. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person. All rights to indemnification
under this Article shall be deemed to be provided by a contract between the
Corporation and the director, officer, employee or agent who serves in such
capacity at any time while these By-Laws and other relevant provisions of the
Delaware General Corporation Law and other applicable law, if any, are in
effect. Any repeal or modification thereof shall not affect any rights or
obligations then existing.

10.9 Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article.

10.10 Constituent Corporation. For the purposes of this Article,
references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation, so that any person who is or was a director, officer,

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<PAGE> 23

employee or agent of such a constituent corporation or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under the provisions of this
Article with respect to the resulting or surviving corporation as he would if
he had served the resulting or surviving corporation in the same capacity.

10.11 Other Enterprises, Fines, and Serving at Corporation's Request.
For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.

10.12 Savings Clause. If this Article or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then
the Corporation nevertheless shall indemnify each director and officer of the
Corporation and may indemnify each employee and agent as to expenses (including
attorneys' fees), judgments, fines, amounts paid in settlement and any and all
other charges against which such person may be indemnified and held harmless as
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended, other applicable law, if any, the Certificate of
Incorporation of the Corporation, or these By-Laws, with respect to any action,
suit or proceeding, whether civil, criminal, administrative or investigative,
and an action by or in the name of the Corporation, to the fullest extent
permitted by any applicable portion of this Article that shall not have been
invalidated or by any other applicable law.

-20-

<PAGE> 1
NATIONAL SCIENCE FOUNDATION
4201 WILSON BOULEVARD
ARLINGTON, VIRGINIA 22230

December 3, 1997

Mr. David M. Graves
Director, Business Affairs
Network Solutions, Inc.
505 Huntmar Park Drive

Herndon, VA 22070

Cooperative Agreement No. NCR-9218742
Amendment No. 07

Dear Mr. Graves:

The National Science Foundation understands that on December 1, 1997, or 14 days
after the date this amendment is signed, whichever is later, and concurrent with
the transfer of ten employees from Network Solutions, Inc. to The American
Registry for Internet Numbers (ARIN) on the same date, Network Solutions, Inc.
will transfer responsibility for the IP Number assignment, Autonomous System
Number assignment, and IN-ADDR.ARPA tasks to ARIN.

By this amendment, effective December 1, 1997, or 14 days after the date this
amendment is signed, whichever is later, and concurrent with the transfer of ten
employees from Network Solutions, Inc. to the American Registry for Internet
Numbers (ARIN), the National Science Foundation fully and finally relieves,
releases, and discharges Network Solutions, Inc. from any responsibility for the
IP Number assignment, Autonomous System Number assignment, and INADDR.ARPA tasks
being performed under Cooperative Agreement No. NCR- 9218742.

Nothing in this amendment releases Network Solutions, Inc. from the
responsibilities for the items entitled Office Space; Internet Connectivity;
Furniture and Equipment; Staffing; Database; Facilities; and Initial and Interim
Financing Operational Support described on pages 13 and 14 of the Year 5 Program
Plan as approved by Amendment 06 to Cooperative Agreement No. NCR-9218742.
Network Solutions, Inc. will remain responsible for completion of each item, and
for reporting to the National Science Foundation the completion of each as it
occurs.

Except as modified by this amendment, all other Agreement terms and conditions
remain unchanged.

Sincerely,

/ s / Karen L. Sandberg

Karen L. Sandberg
Grants and Agreements Officer

<PAGE> 1

NATIONAL SCIENCE FOUNDATION
4201 WILSON BOULEVARD
ARLINGTON, VIRGINIA 22230

February 20, 1998

Mr. David M. Graves
Director, Business Affairs
Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, VA 22070

Cooperative Agreement No. NCR-9218742
Amendment No. 08

Dear Mr. Graves:

Whereas, since the late 1980s, the Federal Networking Council has had authority
over administration and management of the Internet top level domain .GOV; and

Whereas, on July 18, 1997, the Federal Networking Council delegated to the U.S.
General Services Administration (GSA) the authority for management and
administration of the Internet top-level domain .GOV; and

Whereas, consistent with their newly delegated authority, the GSA determined to
(itself) provide management and administration for the Internet top-level
domain .GOV; and

Whereas, GSA requested that Network Solutions, Inc. continue to provide
registration services for the Internet top-level domain .GOV through September
30, 1997, while the transition to GSA management and administration and
provision of registration took place; and

Whereas, Network Solutions, Inc. and GSA completed the transition from Network
Solutions, Inc. to GSA on September 30, 1997; and

Whereas, on October 1, 1997, Mr. Jack L. Finley, the director of GSA's Center
for Electronic Messaging Technologies, accepted on behalf of GSA and the United
States Government full and complete responsibility for all tasks associated
with the .GOV top-level domain, including all registry administration
functions; and

Whereas, Network Solutions, Inc., by letter of October 10, 1997, furnished the
Foundation with a copy of GSA's acceptance of full and complete responsibility
for all tasks associated with the .GOV top-level domain, and requested that NSF
relieve and release Network Solutions, Inc. from responsibilities for tasks
related to the .GOV top-level domain under this cooperative agreement:
<PAGE> 2
NOW THEREFORE, by this amendment, the Foundation fully and finally relieves,
releases, and discharges Network Solutions, Inc. from any responsibility for
the administration and maintenance of Internet registration services for the
.GOV top-level domain previously performed under Cooperative Agreement No.
NCR-9218742.

Sincerely,

/ s / Karen L. Sandberg

Karen L. Sandberg
Grants and Agreements Officer

<PAGE> 1
NATIONAL SCIENCE FOUNDATION
4201 WILSON BOULEVARD
ARLINGTON, VIRGINIA 22230

Mr. David M. Graves
Director, Business Affairs
Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, VA 20170

Cooperative Agreement No. NCR-9218742
Amendment No. 09

Dear Mr. Graves:

Whereas, since September 14, 1995, pursuant to Amendment No. 04 to Cooperative
Agreement No. NCR-9218742, Network Solutions, Inc. has charged user fees for the
registration services Network Solutions, Inc. performs for its domain name
registrants; and

Whereas, since September 14, 1995, pursuant to Amendment No. 04, Network
Solutions, Inc. has deposited 30% of the funds collected into a separate
interest-bearing account, to be used for the preservation and enhancement of the
"Intellectual Infrastructure" of the Internet; and

Whereas, to date, there has not been a final decision about appropriate
disbursements from the "Intellectual Infrastructure" account; and

Whereas, to date, no funds have been withdrawn from the account with the
exception of the one instance of transferring $23M to the National Science
Foundation pursuant to P.L. 105-65, the 1998 Appropriations Bill for the
National Science Foundation; and

Whereas, the Department of Commerce's draft paper entitled A Proposal to Improve
Technical Management of Internet Names and Addresses states, "we believe the
provision in the cooperative agreement regarding allocation of a portion of the
registration fee to the Internet Intellectual Infrastructure Fund should
terminate on April 1, 1998."

NOW, THEREFORE, by this amendment, the National Science Foundation eliminates
the charging of the "Intellectual Infrastructure" portion of the registration
services fees, effective 11:59 p.m., March 31, 1998. By this amendment, the
National Science Foundation eliminates the requirement to deposit into the
"Intellectual Infrastructure" account an amount equal to 30% of the monies
collected with respect to second-level domain names registered and renewed by
Network Solutions, Inc on and after 12:00 a.m., April 1, 1998.

1
<PAGE> 2
The Agreement, as amended, is hereby further amended as follows:

1. Section G, ARTICLE 8. FUNDING is hereby amended to read:

G. Funding and Compensation:

1. Funding contained in the original cooperative agreement, and
as amended by Amendments No. 1, 2, and 3, shall apply for
the period January 1, 1993 through September 13, 1995.

2. The compensation provisions contained in Amendment 4 shall
apply for the period September 14, 1995 through March 31,
1998.

3. Effective April 1, 1998, the following compensation
provisions will apply:

a) In consideration of all work performed under
this Agreement, Awardee is authorized to impose
a user fee of $35/year per second level domain
name in .COM, ORG, NET, and .EDU. (The specifics
of the user fee charges include an initial
charge of $70 for new registrations, and $35 per
year payable on the anniversary date of the
original registration beginning at the end of
the second year and for every year thereafter.)

b) The funds collected by reason of charging the
user fee will be considered "Program Income"
under the terms of the Agreement, and all will
be available to Network Solutions, Inc. as
consideration for the services provided.

2. Effective April 1, 1998, ARTICLE 15.REVENUES FROM REGISTRATION FEES is
superseded and replaced by the following:

ARTICLE 15. REVENUES FROM REGISTRATION FEES

A. All income generated by user fees charged for registration
services shall be considered "Program Income" under the
terms of this Agreement, and will be available to Network
Solutions, Inc. as consideration for the services provided.

All other provisions of the Cooperative Agreement, as amended, remain in effect.

Please indicate your acceptance of this amendment by having it signed by an

2
<PAGE> 3
authorized official of your organization and returning one copy to me as soon
as possible.

Sincerely,

/s/ Karen L. Sandberg

Karen L. Sandberg
Grants and Agreements Officer

Accepted

/s/ D. M. Graves
- ----------------------------
Signature

Director, Business Affairs
- ----------------------------
Name and Title

March 12, 1998
- ----------------------------
Date

<PAGE> 1

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT is made and entered into as of the
__th day of February, 1998 (the "Agreement"), by and between Network Solutions,
Inc., a Delaware corporation (the "Company"), and _________________________ (the
"Indemnitee"), with reference to the following facts:

A. The Company desires the benefits of having Indemnitee
serve as an officer and/or director secure in the knowledge that any expenses,
liability and/or losses incurred by him in his good faith service to the Company
will be borne by the Company or its successors and assigns;

B. Indemnitee is willing to serve in his position with the
Company only on the condition that he be indemnified for such expenses,
liability and/or losses;

C. The Company and Indemnitee recognize the increasing
difficulty in obtaining liability insurance for directors, officers and agents
of a corporation at reasonable cost; and

D. The Company and Indemnitee recognize that there has been
an increase in litigation against corporate directors, officers and agents.

NOW, THEREFORE, the parties hereby agree as follows:

1. Definitions. For purposes of this Agreement:

1.1 "Agent" shall mean any person who (a) is or
was a director, officer, employee or agent of the Company or a
subsidiary of the Company whether serving in such capacity or as a
director, officer, employee, agent, fiduciary or other official of
another corporation, joint venture, trust or other enterprise at
the request of, for the convenience of, or to represent the
interests of the Company or a subsidiary of the Company or (b) was
a director, officer, employee or agent of Network Solutions
Incorporated, a District of Columbia corporation and the
predecessor by merger to the Company (the "Predecessor
Corporation"), whether serving in such capacity or as a director,
officer, employee, agent, fiduciary or other official of another
corporation, joint venture, trust or other enterprise at the
request of, for the convenience of, or to represent the interests
of such Predecessor Corporation.

<PAGE> 2

1.2 "Change of Control" shall mean the
occurrence of any of the following events after the date of this
Agreement:

(a) A change in the composition of the board
of directors of the Company (the "Board"), as a result
of which fewer than two-thirds of the incumbent
directors are directors who either (a) had been
directors of the Company 24 months prior to such change
or (b) were elected, or nominated for election, to the
Board with the affirmative votes of at least a majority
of the directors who had been directors of the Company
24 months prior to such change and who were still in
office at the time of the election or nomination; or

(b) Any "person" (as such term is used in
sections 13(d) and 14(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), as amended) through the
acquisition or aggregation of securities is or becomes
the beneficial owner, directly or indirectly, of
securities of the Company representing 20 percent or
more of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from rights
accruing under special circumstances) having the right
to vote at elections of directors (the "Capital Stock");
provided, however, that any change in ownership of the
Company's securities by any person resulting solely from
a reduction in the aggregate number of outstanding
shares of Capital Stock, and any decrease thereafter in
such person's ownership of securities, shall be
disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial
ownership of any securities of the Company.

1.3 "Disinterested Director" shall mean a
director of the Company who is not and was not a party to the
Proceeding in respect of which indemnification is being sought by
Indemnitee.

1.4 "Expenses" shall be broadly construed and
shall include, without limitation, (a) all direct and indirect costs
incurred, paid or accrued, (b) all attorneys' fees, retainers, court
costs, transcripts, fees of experts, witness fees, travel expenses,
food and lodging expenses while traveling, duplicating costs,
printing and binding costs, telephone charges, postage, delivery
service, freight or other transportation fees and expenses, (c) all
other disbursements and out-of-pocket expenses, (d) amounts paid in
settlement, to the extent not prohibited by Delaware Law, and (e)
reasonable compensation for time spent by Indemnitee for which he
is otherwise not compensated by the Company or any third party,
actually and reasonably incurred in connection with or arising out
of a Proceeding, including a Proceeding by Indemnitee to establish
or enforce a right to indemnification under this Agreement,
applicable law or otherwise.

1.5 "Independent Counsel" shall mean a law firm
or a member of a law firm that neither is presently nor in the past
five years has been retained to represent:

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<PAGE> 3
(a) the Company, an affiliate of the Company or Indemnitee in any
matter material to either party or (b) any other party to the
Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of
professional conduct then prevailing would have a conflict of
interest in representing either the Company or Indemnitee in an
action to determine Indemnitee's right to indemnification under
this Agreement.

1.6 "Liabilities" shall mean liabilities of any
type whatsoever, including, but not limited to, judgments or fines,
ERISA or other excise taxes and penalties, and amounts paid in
settlement (including all interest, assessments or other charges
paid or payable in connection with any of the foregoing) actually
and reasonably incurred by Indemnitee in connection with a
Proceeding.

1.7 "Delaware Law" means the Delaware General
Corporation Law, as amended and in effect from time to time or any
successor or other statutes of Delaware having similar import and
effect.

1.8 "Proceeding" shall mean any pending,
threatened or completed action, hearing, suit or any other
proceeding, whether civil, criminal, arbitrative, administrative,
investigative or any alternative dispute resolution mechanism,
including without limitation any such Proceeding brought by or in
the right of the Company.

2. Employment Rights and Duties. Subject to any other
obligations imposed on either of the parties by contract or by law, and with the
understanding that this Agreement is not intended to confer employment rights on
either party which they did not possess on the date of its execution, Indemnitee
agrees to serve as a director or officer so long as he is duly appointed or
elected and qualified in accordance with the applicable provisions of the
Certificate of Incorporation (the "Certificate") and Bylaws (the "Bylaws") of
the Company or any subsidiary of the Company and until such time as he resigns
or fails to stand for election or until his employment terminates. Indemnitee
may from time to time also perform other services at the request, or for the
convenience of, or otherwise benefiting the Company. Indemnitee may at any time
and for any reason resign or be removed from such position (subject to any other
contractual obligation or other obligation imposed by operation of law), in
which event the Company shall have no obligation under this Agreement to
continue Indemnitee in any such position.

2.1 Directors' and Officers' Insurance.

(a) The Company hereby covenants and agrees
that, so long as Indemnitee shall continue to serve as a
director or officer of the Company and thereafter so
long as Indemnitee shall be subject to any possible
Proceeding, the Company, subject to Section 2.1(c),
shall maintain directors' and officers' insurance in
full force and effect.

(b) In all policies of directors' and
officers' insurance,

-3-
<PAGE> 4

Indemnitee shall be named as an insured in such a manner
as to provide Indemnitee the same rights and benefits,
subject to the same limitations, as are accorded to the
Company's directors or officers most favorably insured
by such policy.

(c) The Company shall have no obligation to
maintain directors' and officers' insurance if the
Company determines in good faith that such insurance is
not reasonably available, the premium costs for such
insurance are disproportionate to the amount of coverage
provided, or the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient
benefit.

3. Indemnification. The Company shall indemnify Indemnitee
to the fullest extent authorized or permitted by Delaware Law in effect on the
date hereof, and as Delaware Law may from time to time be amended (but, in the
case of any such amendment, only to the extent such amendment permits the
Company to provide broader indemnification rights than Delaware Law permitted
the Company to provide before such amendment). Without in any way diminishing
the scope of the indemnification provided by this Section 3, the Company shall
indemnify Indemnitee if and whenever he is or was a witness, party or is
threatened to be made a witness or a party to any Proceeding, by reason of the
fact that he is or was an Agent or by reason of anything done or not done, or
alleged to have been done or not done, by him in such capacity, against all
Expenses and Liabilities actually and reasonably incurred by Indemnitee or on
his behalf in connection with the investigation, defense, settlement or appeal
of such Proceeding. In addition to, and not as a limitation of, the foregoing,
the rights of indemnification of Indemnitee provided under this Agreement shall
include those rights set forth in Sections 4, 5 and 6 below.

4. Payment of Expenses.

4.1 All Expenses incurred by or on behalf of
Indemnitee shall be advanced by the Company to Indemnitee within 20
days after the receipt by the Company of a written request for such
advance which may be made from time to time, whether prior to or
after final disposition of a Proceeding (unless there has been a
final determination by a court of competent jurisdiction that
Indemnitee is not entitled to be indemnified for such Expenses).
Indemnitee's entitlement to advancement of Expenses shall include
those incurred in connection with any Proceeding by Indemnitee
seeking a determination, an adjudication or an award in arbitration
pursuant to this Agreement. The requests shall reasonably evidence
the Expenses incurred by Indemnitee in connection therewith.
Indemnitee hereby undertakes to repay the amounts advanced if it
shall ultimately be determined that Indemnitee is not entitled to
be indemnified pursuant to the terms of this Agreement.

4.2 Notwithstanding any other provision in this
Agreement, to the extent that Indemnitee has been successful on the
merits or otherwise in defense of any Proceeding, Indemnitee shall
be indemnified against all Expenses actually and reasonably incurred
by Indemnitee in connection therewith.

-4-
<PAGE> 5
5. Procedure for Determination of Entitlement to
Indemnification.

5.1 Whenever Indemnitee believes that he is
entitled to indemnification pursuant to this Agreement, Indemnitee
shall submit a written request for indemnification (the
"Indemnification Request") to the Company to the attention of the
Chief Executive Officer with a copy to the Corporate Secretary.
This request shall include documentation or information which is
necessary for the determination of entitlement to indemnification
and which is reasonably available to Indemnitee. Determination of
Indemnitee's entitlement to indemnification shall be made no later
than 60 days after receipt of the Indemnification Request. The
President or the Secretary shall, promptly upon receipt of
Indemnitee's request for indemnification, advise the Board in
writing that Indemnitee has made such request for indemnification.

5.2 The Indemnification Request shall set forth
Indemnitee's selection of which of the following forums shall
determine whether Indemnitee is entitled to indemnification:

(1) A majority vote of Directors who are not
parties to the action with respect to which
indemnification is sought, even though less than a
quorum.

(2) A written opinion of an Independent
Counsel (provided there are no such Directors as set
forth in (1) above or if such Directors as set forth in
(1) above so direct).

(3) A majority vote of the stockholders at a
meeting at which a quorum is present, with the shares
owned by the person to be indemnified not being entitled
to vote thereon.

(4) The court in which the Proceeding is or
was pending upon application by Indemnitee.

The Company agrees to bear any and all costs and expenses incurred
by Indemnitee or the Company in connection with the determination of
Indemnitee's entitlement to indemnification by any of the above forums.

6. Presumptions and Effect of Certain Proceedings. No
initial finding by the Board, its counsel, Independent Counsel, arbitrators or
the stockholders shall be effective to deprive Indemnitee of the protection of
this indemnity, nor shall a court or other forum to which Indemnitee may apply
for enforcement of this indemnity give any weight to any such adverse finding in
deciding any issue before it. Upon making a request for indemnification,
Indemnitee shall be presumed to be entitled to indemnification under this

-5-
<PAGE> 6
Agreement and the Company shall have the burden of proof to overcome that
presumption in reaching any contrary determination. The termination of any
Proceeding by judgment, order, settlement, arbitration award or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, (a)
adversely affect the rights of Indemnitee to indemnification except as
indemnification may be expressly prohibited under this Agreement, (b) create a
presumption that Indemnitee did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Company
or (c) with respect to any criminal action or proceeding, create a presumption
that Indemnitee had reasonable cause to believe that his conduct was unlawful.

7. Remedies of Indemnitee in Cases of Determination not to
Indemnify or to Advance Expenses.

7.1 In the event that (a) an initial
determination is made that Indemnitee is not entitled to
indemnification, (b) advances for Expenses are not made when and as
required by this Agreement, (c) payment has not been timely made
following a determination of entitlement to indemnification
pursuant to this Agreement or (d) Indemnitee otherwise seeks
enforcement of this Agreement, Indemnitee shall be entitled to a
final adjudication in an appropriate court of the State of Delaware
of his entitlement to such indemnification or advance.
Alternatively, Indemnitee at his option may seek an award in
arbitration. If the parties are unable to agree on an arbitrator,
the parties shall provide JAMS Endispute ("JAMS") with a statement
of the nature of the dispute and the desired qualifications of the
arbitrator. JAMS will then provide a list of three available
arbitrators. Each party may strike one of the names on the list,
and the remaining person will serve as the arbitrator. If both
parties strike the same person, JAMS will select the arbitrator
from the other two names. The arbitration award shall be made
within 90 days following the demand for arbitration. Except as set
forth herein, the provisions of Delaware law shall apply to any
such arbitration. The Company shall not oppose Indemnitee's right
to seek any such adjudication or arbitration award. In any such
proceeding or arbitration Indemnitee shall be presumed to be
entitled to indemnification under this Agreement and the Company
shall have the burden of proof to overcome that presumption.

7.2 An initial determination, in whole or in
part, that Indemnitee is not entitled to indemnification shall
create no presumption in any judicial proceeding or arbitration that
Indemnitee has not met the applicable standard of conduct for, or is
otherwise not entitled to, indemnification.

7.3 If an initial determination is made or
deemed to have been made pursuant to the terms of this Agreement
that Indemnitee is entitled to indemnification, the Company shall be
bound by such determination in the absence of (a) a
misrepresentation of a material fact by Indemnitee in the request
for indemnification or (b) a specific finding (which has become
final) by a court of competent jurisdiction that all or any part of
such indemnification is expressly prohibited by law.

7.4 The Company and Indemnitee agree herein that
a monetary remedy for breach of this Agreement, at some later date,
will be inadequate, impracticable and difficult of proof, and
further agree that such breach would cause Indemnitee irreparable
harm. Accordingly, the Company and Indemnitee agree that Indemnitee
shall be entitled to temporary and permanent injunctive relief to
enforce this

-6-
<PAGE> 7
Agreement without the necessity of proving actual damages or
irreparable harm. The Company and Indemnitee further agree that
Indemnitee shall be entitled to such injunctive relief, including
temporary restraining orders, preliminary injunctions and permanent
injunctions, without the necessity of posting bond or other
undertaking in connection therewith. Any such requirement of bond
or undertaking is hereby waived by the Company, and the Company
acknowledges that in the absence of such a waiver, a bond or
undertaking may be required by the court.

7.5 The Company shall be precluded from
asserting that the procedures and presumptions of this Agreement
are not valid, binding and enforceable. The Company shall stipulate
in any such court or before any such arbitrator that the Company is
bound by all the provisions of this Agreement and is precluded from
making any assertion to the contrary.

7.6 Expenses incurred by Indemnitee in
connection with his request for indemnification under, seeking
enforcement of or to recover damages for breach of this Agreement
shall be borne and advanced by the Company.

8. Other Rights to Indemnification. Indemnitee's rights of
indemnification and advancement of expenses provided by this Agreement shall not
be deemed exclusive of any other rights to which Indemnitee may now or in the
future be entitled under applicable law, the Certificate, the Bylaws, an
employment agreement, a vote of stockholders or Disinterested Directors,
insurance or other financial arrangements or otherwise.

9. Limitations on Indemnification. No indemnification
pursuant to Section 3 shall be paid by the Company nor shall Expenses be
advanced pursuant to Section 3:

9.1 Insurance. To the extent that Indemnitee is
reimbursed pursuant to such insurance as may exist for Indemnitee's
benefit. Notwithstanding the availability of such insurance,
Indemnitee also may claim indemnification from the Company pursuant
to this Agreement by assigning to the Company any claims under such
insurance to the extent Indemnitee is paid by the Company.
Indemnitee shall reimburse the Company for any sums he receives as
indemnification from other sources to the extent of any amount paid
to him for that purpose by the Company;

9.2 Section 16(b). On account and to the extent
of any wholly or partially successful claim against Indemnitee for
an accounting of profits made from the purchase or sale by
Indemnitee of securities of the Company pursuant to the provisions
of Section 16(b) or the Securities Exchange Act of 1934, as amended,
and amendments thereto or similar provisions of any federal, state
or local statutory law; or

9.3 Indemnitee's Proceedings. Except as
otherwise provided in this Agreement, in connection with all or any
part of a Proceeding which is initiated or maintained by or on
behalf of Indemnitee, or any Proceeding by Indemnitee against the
Company or its directors, officers, employees or other agents,
unless (a) such

-7-
<PAGE> 8
indemnification is expressly required to be made by Delaware Law,
(b) the Proceeding was authorized by a majority of the
Disinterested Directors (c) there has been a Change of Control or
(d) such indemnification is provided by the Company, in its sole
discretion, pursuant to the powers vested in the Company under
Delaware Law.

10. Duration and Scope of Agreement; Binding Effect. This
Agreement shall continue so long as Indemnitee shall be subject to any possible
Proceeding subject to indemnification by reason of the fact that he is or was an
Agent and shall be applicable to Proceedings commenced or continued after
execution of this Agreement, whether arising from acts or omissions occurring
before or after such execution. This Agreement shall be binding upon the Company
and its successors and assigns (including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business or assets of the Company) and shall inure to the benefit of Indemnitee
and his spouse, assigns, heirs, devisees, executors, administrators and other
legal representatives.

11. Notice by Indemnitee and Defense of Claims. Indemnitee
agrees promptly to notify the Company in writing upon being served with any
summons, citation, subpoena, complaint, indictment, information or other
document relating to any matter which may be subject to indemnification
hereunder, whether civil, criminal, arbitrative, administrative or
investigative; but the omission so to notify the Company will not relieve it
from any liability which it may have to Indemnitee if such omission does not
actually prejudice the Company's rights and, if such omission does prejudice the
Company's rights, it will relieve the Company from liability only to the extent
of such prejudice; nor will such omission relieve the Company from any liability
which it may have to Indemnitee otherwise than under this Agreement. With
respect to any Proceeding:

(a) The Company will be entitled to
participate therein at its own expense;

(b) Except as otherwise provided below, to
the extent that it may wish, the Company jointly with
any other indemnifying party similarly notified will be
entitled to assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee. After notice from
the Company to Indemnitee of its election so to assume
the defense thereof and the assumption of such defense,
the Company will not be liable to Indemnitee under this
Agreement for any attorney fees or costs subsequently
incurred by Indemnitee in connection with Indemnitee's
defense except as otherwise provided below. Indemnitee
shall have the right to employ his counsel in such
Proceeding but the fees and expenses of such counsel
incurred after notice from the Company of its assumption
of the defense thereof and the assumption of such
defense shall be at the expense of Indemnitee unless (i)
the employment of counsel by Indemnitee has been
authorized by the Company, (ii) Indemnitee shall have
reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the
conduct of the defense of such action or that the
Company's counsel may not be adequately

-8-
<PAGE> 9

representing Indemnitee or (iii) the Company shall not
in fact have employed counsel to assume the defense of
such action, in each of which cases the fees and
expenses of counsel shall be at the expense of the
Company; and

(c) The Company shall not be liable to
indemnify Indemnitee under this Agreement for any
amounts paid in settlement of any action or claim
effected without its written consent. The Company shall
not settle any action or claim which would impose any
limitation or penalty on Indemnitee without Indemnitee's
written consent. Neither the Company nor Indemnitee will
unreasonably withhold its or his consent to any proposed
settlement.

11.1 Contribution. In order to provide for just
and equitable contribution in circumstances in which the
indemnification provided for in this Agreement is held by a court
of competent jurisdiction to be unavailable to Indemnitee in whole
or part, the Company shall, in such an event, after taking into
account, among other things, contributions by other directors and
officers of the Company pursuant to indemnification agreements or
otherwise, and, in the absence of personal enrichment, acts of
intentional fraud or dishonesty or criminal conduct on the part of
Indemnitee, contribute to the payment of Indemnitee's losses to the
extent that, after other contributions are taken into account, such
losses exceed: (i) in the case of a director of the Company or any
of its subsidiaries who is not an officer of the Company or any of
such subsidiaries, the amount of fees paid to the director for
serving as a director during the 12 months preceding the
commencement of the Proceeding; or (ii) in the case of a director
of the Company or any of its subsidiaries who is also an officer of
the Company or any of such subsidiaries, the amount set forth in
clause (i) plus 5% of the aggregate cash compensation paid to said
director for service in such office(s) during the 12 months
preceding the commencement of the Proceeding; or (iii) in the case
of an officer of the Corporation or any of its subsidiaries, 5% of
the aggregate cash compensation paid to such officer for service in
such office(s) during the 12 months preceding the commencement of
such Proceeding.

12. Establishment of Trust. In order to secure the
obligations of the Company to indemnify and to advance Expenses to Indemnitee
pursuant to this Agreement, upon a Change of Control of the Company, the Company
or its successor or assign shall establish a Trust (the "Trust") for the benefit
of the Indemnitee, the trustee (the "Trustee") of which shall be chosen by the
Company and which is reasonably acceptable to the Indemnitee. Thereafter, from
time to time, upon receipt of a written request from Indemnitee, the Company
shall fund the Trust in amounts sufficient to satisfy any and all Liabilities
and Expenses reasonably anticipated at the time of such request for which the
Company may indemnify Indemnitee hereunder. The amount or amounts to be
deposited in the Trust pursuant to the foregoing funding obligation shall be
determined by mutual agreement of the Indemnitee and the Company or, if the
Company and the Indemnitee are unable to reach such an agreement, by Independent
Counsel selected jointly by the Company and the Indemnitee. The terms of the
Trust shall provide that except upon the consent of the Indemnitee and the
Company, (i) the Trust shall not be revoked or the principal thereof invaded,
without the

-9-
<PAGE> 10
written consent of the Indemnitee, (ii) the Trustee shall advance to the
Indemnitee, within 20 days of a request by the Indemnitee, any and all Expenses,
the Indemnitee hereby agreeing to reimburse the Trustee of the Trust for all
Expenses so advanced if a final determination is made by a court in a final
adjudication from which there is no further right of appeal that the Indemnitee
is not entitled to be indemnified under this Agreement, (iii) the Trust shall
continue to be funded by the Company in accordance with the funding obligations
set forth in this Section, (iv) the Trustee shall promptly pay to the Indemnitee
any amounts to which the Indemnitee shall be entitled pursuant to this
Agreement, and (v) all unexpended funds in the Trust shall revert to the Company
upon a final determination by Independent Counsel selected by Indemnitee or a
court of competent jurisdiction that Indemnitee has been fully indemnified with
respect to the Proceeding giving rise to the funding of the Trust under the
terms of this Agreement. The establishment of the Trust shall not, in any way,
diminish the Company's obligation to indemnify Indemnitee against Expenses and
Liabilities to the full extent required by this Agreement.

13. Miscellaneous Provisions.

13.1 Severability; Partial Indemnity. If any
provision or provisions of this Agreement (or any portion thereof)
shall be held by a court of competent jurisdiction to be invalid,
illegal or unenforceable for any reason whatever: (a) such
provision shall be limited or modified in its application to the
minimum extent necessary to avoid the invalidity, illegality or
unenforceability of such provision; (b) the validity, legality and
enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby; and (c) to the
fullest extent possible, the provisions of this Agreement shall be
construed so as to give effect to the intent manifested by the
provision (or portion thereof) held invalid, illegal or
unenforceable. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a
portion of any Expenses or Liabilities of any type whatsoever
incurred by him in the investigation, defense, settlement or appeal
of a Proceeding but not entitled to all of the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for
such total amount except as to the portion thereof for which it has
been determined pursuant to Section 5 hereof that Indemnitee is not
entitled.

13.2 Identical Counterparts. This Agreement may
be executed in one or more counterparts, each of which shall for all
purposes be deemed to be an original but all of which together shall
constitute one and the same Agreement. Only one such counterpart
signed by the party against whom enforceability is sought needs to
be produced to evidence the existence of this Agreement.

13.3 Interpretation of Agreement. It is
understood that the parties hereto intend this Agreement to be
interpreted and enforced so as to provide indemnification to
Indemnitee to the fullest extent not now or hereafter prohibited by
law.

13.4 Headings. The headings of the Sections and
paragraphs of this Agreement are inserted for convenience only and
shall not be deemed to constitute part of this Agreement or to
affect the construction thereof.

-10-
<PAGE> 11

13.5 Pronouns. Use of the masculine pronoun
shall be deemed to include use of the feminine pronoun where
appropriate.

13.6 Modification and Waiver. No supplement,
modification or amendment of this Agreement shall be binding unless
executed in writing by both of the parties to this Agreement. No
waiver of any provision of this Agreement shall be deemed to
constitute a waiver of any of the provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver. No
waiver of any provision of this Agreement shall be effective unless
executed in writing.

13.7 Notices. All notices, requests, demands and
other communications hereunder shall be in writing and shall be
deemed to have been duly given if (i) delivered by hand and
receipted for by the party to whom said notice or other
communication shall have been directed or (ii) mailed by certified
or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:

(a) If to Indemnitee, to:

c/o Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, VA 20170
Telephone: (703) 742-0400
Telefax: (703) 742-0065

(b) If to the Company to:

Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, VA 20170
Telephone: (703) 742-0400
Telefax: (703) 742-3386
Attention: Chief Executive Officer

with a copy to:

Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, VA 20170
Telephone: (703) 742-0400
Telefax: (703) 742-3386
Attention: Corporate Secretary

or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.

-11-
<PAGE> 12

13.8 Governing Law. The parties agree that this
Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be
performed entirely within Delaware.

13.9 Consent to Jurisdiction. The Company and
Indemnitee each hereby irrevocably consent to the jurisdiction of
the courts of the State of Delaware for all purposes in connection
with any action or proceeding which arises out of or relates to this
agreement and agree that any action instituted under this agreement
shall be brought only in the state courts of the State of Delaware.

13.10 Entire Agreement. This Agreement represents
the entire agreement between the parties hereto, and there are no
other agreements, contracts or understanding between the parties
hereto with respect to the subject matter of this Agreement, except
as specifically referred to herein or as provided in Sections 8 and
2.1 hereof.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.

NETWORK SOLUTIONS, INC.

By:
--------------------------------------

Name:

Title:

INDEMNITEE

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

Name:

Title:

-12-

<PAGE> 1

DEED OF LEASE

BY AND BETWEEN

SUGARLAND BUSINESS PARK LIMITED PARTNERSHIP

("LANDLORD")

AND

NETWORK SOLUTIONS, INC.

("TENANT")
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
The Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III
Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV
Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V
Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI
Use Of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VII
Assignment And Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII
Maintenance And Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IX
Construction: Tenant Improvements and Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE X
Signs, Equipment And Furnishings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XI
Inspection By Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XII
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XIII
Tenant's Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XIV
Liability Of Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XV
Rules And Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XVI
Damage Or Destruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE XVII
Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XVIII
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
<PAGE> 3

<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XIX
Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XX
Subordination; Mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XXI
Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XXII
Covenants and Representations Of Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XXIII
Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE XXIV
Expansion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XXV
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE XXVI
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Rider No. 1 - Option to renew Lease

EXHIBIT A Site Plan
EXHIBIT A-1 Reserved Parking Spaces Plan
EXHIBIT B Standard Method of Measurement of Rentable Area
EXHIBIT C Declaration of Covenants
EXHIBIT D Signage Specifications
EXHIBIT E Form of Estoppel Certificate
EXHIBIT F Surrendered Premises
</TABLE>

- ii -
<PAGE> 4
DEED OF LEASE

THIS DEED OF LEASE (the "Lease") is made as of the 30th day of May, 1997,
by and between SUGARLAND BUSINESS PARK LIMITED PARTNERSHIP, a Delaware limited
partnership (hereinafter referred to as "Landlord"), and NETWORK SOLUTIONS,
INC., a Delaware corporation (hereinafter referred to as "Tenant"), a
wholly-owned subsidiary of Science Applications International Corporation, a
Delaware Corporation.

RECITALS:

A. Landlord is the owner of a one story office/flex building known as
Sugarland I, having a street address of 365 Herndon Parkway, Herndon, Virginia
22070, in the office/flex park complex known as Sugarland Business Park
(hereinafter sometimes referred to as the "Park"), situated on the east side of
Herndon Parkway in Herndon, Fairfax County, Virginia.

B. Tenant desires to lease space in the Building (as hereinafter
defined) and Landlord is willing to rent space in the Building to Tenant upon
the terms, conditions, covenants and agreements set forth herein.

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
covenant and agree as follows:

ARTICLE I
THE PREMISES

1.1 Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, for the term and upon the terms and conditions hereinafter set forth,
the following described premises (the "Premises"):

31,247 square feet of rentable area, as shown on the plan attached
as Exhibit A (hereinafter the "Premises") and which is a part of
the building which is built and situated on Parcel E-1, SUGARLAND
INDUSTRIAL PARK, Town of Herndon, Fairfax County, Virginia, as
the same is duly dedicated, platted and recorded in Deed Book 4080
at Page 182 and resubdivided in Deed Book 5738 at page 1736, among
the land records of Fairfax County, Virginia (the "Property").
The building, including the parking and other common areas more
particularly described on Exhibit A hereto, is hereinafter
referred to as the "Building."
<PAGE> 5
1.2 The Lease of the Premises includes the right to use the Building
and the adjacent parking areas which are generally described on the site plan
attached hereto as Exhibit A, but includes no other rights not specifically set
forth herein.

1.3 For the purposes hereof, it is agreed that the rentable area of
the Building (including the space used for the 900 KW generator and
uninterrupted power supply equipment) is 53,136 square feet. However, the
number of square feet in the Building and the Premises shall be subject to
adjustment on or about the Lease Commencement Date (hereinafter defined), if
requested by either Landlord or Tenant. If so requested, the rentable area of
the Building and/or the Premises shall be determined by Landlord's architect.
However, Tenant shall have the right, within the first fifteen (15) days after
the execution of this Lease by Tenant, to have the rentable area of the
Building and/or the Premises measured by its own architect in accordance with
the standard of measurement set forth in Exhibit B attached hereto. In the
event that the number of square feet of rentable area determined by Tenant's
architect in accordance with Exhibit B differs from the number of square feet
as set out in this Lease or the number of square feet of rentable area
determined by Landlord's architect in accordance with Exhibit B, then such
architects shall work together in good faith to resolve such discrepancy. In
the event such architects are unable to resolve such discrepancy, then they
shall together select a third architect, who shall be reasonably acceptable to
Landlord and Tenant, to resolve such discrepancy. Each party shall pay its own
architect and half of the cost of the third architect.

1.4 Landlord agrees that promptly after the date of this Lease,
Landlord shall submit a request to the building officials of the City of
Herndon, Virginia, for the waiver of the requirement that there be two (2)
remote and accessible means of egress from the common area of the Building. In
the event such request is granted, the number of square feet of rentable area
of the common area in the Building and the Premises shall be recalculated and
adjusted by Landlord's architect in accordance with the provisions of Exhibit B
attached hereto. In the event that the number of square feet of rentable area
in the Premises is recalculated as provided in the preceding sentence, Landlord
and Tenant shall execute an amendment to this Lease (a) reflecting such
adjustment in the square footage of the Premises, (b) providing that Tenant's
base rent shall be decreased in accordance with such reduction in square
footage effective on the date that Landlord substantially completes the
modification of the common area of the Building and (c) stating Tenant's
proportionate share of Expenses incurred by Landlord in the operation of the
Building for the purposes set forth in Section 4.3 below, effective on the date
that Landlord substantially completes the modification of the common area of
the Building.

ARTICLE II
TERM

2.1 The term of this Lease (hereinafter referred to as the "Lease
Term") shall commence on May 30, 1997 (the "Lease Commencement Date" and shall
continue for a period of approximately five (5) years and two (2) months
thereafter, through July 31, 2002, unless such Lease Term shall be renewed or
terminated earlier in accordance with the provisions hereof. (Provided,

- 2 -
<PAGE> 6
however, that if the Lease Commencement Date shall occur on a day other than
the first day of a month, the Lease Term shall commence on such date and
continue for the balance of such month and for a period of approximately five
(5) years and two (2) months thereafter, through July 31, 2002.) The term
"Lease Term" shall include any and all renewals and extensions of the term of
the Lease.

2.2 (a) It is understood and agreed that Tenant shall construct
or cause to be constructed the Tenant Improvements to the Premises described in
Section 9.1 below. Tenant shall be responsible for the design and construction
of the interior Tenant Improvements to the Premises and Tenant shall obtain all
necessary permits to construct such Tenant Improvements and legally occupy the
Premises. The timing of Tenant's completion of such work and the receipt or
issuance of any required building, special exception, occupancy or other
permits or approvals shall have no bearing on the Lease Commencement Date, the
Rent Commencement Date, as defined in Section 3.1 below or Tenant's obligation
to pay base rent and additional rent as provided in Article III and Article IV
below; provided, however, that if Final Completion, as defined herein, of
Landlord's Work is delayed beyond June 6, 1997, then the Rent Commencement Date
of July 15, 1997 shall be extended by two (2) days for each day that the
Landlord's Work is not Finally Completed by June 6, 1997. For the purposes of
this Section 2.2(a), Landlord's Work shall be deemed to be "Finally Complete"
when (i) the work described in Section 9.4 below shall have been completed, as
determined by Landlord's contractor in its professional judgement in accordance
with the provisions of Section 9.4 below, including the separation of
electrical wiring and systems serving the Premises from the remainder of the
Building electrical systems (the "Long Lead Item"), which can be completed by
Landlord without substantial interference with Tenant's completion of the
Tenant Improvements, and (ii) final inspections (except for the inspection
related to the Long Lead Item) pursuant to the applicable building permits have
been obtained. Any and all construction, installation and other related
activity by Tenant or its contractors prior to the Rent Commencement Date shall
be coordinated with Landlord in accordance with the terms of Section 9.1
hereof. All terms and conditions of this Lease, including, without limitation,
the insurance, release and waiver of liability provisions of Article XII and
XIV hereof, shall apply to and be effective during such period of occupancy by
Tenant, except for Tenant's obligation to pay any base rent or additional rent
attributable to Expenses.

(b) Landlord and Tenant shall cooperate with each other and
shall work together in good faith to effect the timely completion of the Tenant
Improvements and Landlord's Work. Where required all approval, consents or
disapprovals or denials of consent shall be delivered promptly after a request
therefor. All disapprovals or denials of consent shall include a statement of
the reason for such disapproval or denial of consent. Landlord and Tenant
shall each use its commercially reasonable efforts to comply with all
construction schedules created in connection with the performance of the work
described in this Lease.

2.3 (a) Landlord presently anticipates that the Landlord's Work
shall be Finally Complete on or about June 6, 1997. In the event that
completion of Landlord's Work or the delivery of possession of the Premises to
Tenant is delayed, regardless of the reasons or causes of such delay, this
Lease shall not be rendered void or voidable as a result of such delay, and the
term of this Lease shall commence on the Lease Commencement Date as determined
pursuant to Section 2.2(a) hereof and Tenant's obligation to pay base rent
shall commence on the Rent Commencement

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<PAGE> 7
Date provided in Section 3.1 below, as such date may be extended pursuant to
Section 2.2(a) above. Furthermore, except as provided in Section 2.2(a) above
and Section 2.3(b) below, Landlord shall not have any liability whatsoever to
Tenant on account of any such delay.

(b) Notwithstanding anything to the contrary set forth in
Section 2.3(a) above, in the event that Landlord's Work is not Finally Complete
on or before August 1, 1997 then, except as otherwise provided below, Tenant,
at its sole option, shall have the right to terminate this Lease by delivering
written notice of the exercise of such right of termination to Landlord.
Tenant's right to terminate this Lease in accordance with the provisions of
this Section 2.3(b) may be exercised by Tenant only during the ten (10) day
period commencing on August 2, 1997 and terminating at 5:00 p.m. on August 11,
1997 and if such right is not exercised by 5:00 p.m. on August 11, 1997, such
right of termination shall lapse and expire and be of no further force and
effect. In the event this Lease is terminated pursuant to this Section 2.3(b),
this Lease shall be null and void and the parties shall be released and
discharged from further liabilities, obligations or responsibilities hereunder
and Landlord will return to Tenant all sums paid to Landlord in accordance with
Section 3.1 below. Notwithstanding the foregoing, Tenant shall not have the
right to terminate this Lease pursuant to this Section 2.3(b) if any of the
following provisions are applicable:

(i) if the delay in completion is a result
of any of the reasons described in Section 9.4
below or Section 26.18 below or any other cause
within Tenant's reasonable control; or

(ii) if the Landlord certifies in writing and
in good faith to Tenant, on or before August 1,
1997 that Landlord's Work will be Finally
Completed not later than August 15, 1997, except
for punch list items, the completion of which will
not substantially interfere with the normal
conduct of Tenant's business, and long-lead time
items.

(c) Notwithstanding anything to the contrary set forth in
Section 2.3(a) and 2.3(b) above, in the event that Landlord's Work is not
substantially complete on or before August 15, 1997, except as otherwise
provided in this Section 2.3(c), Tenant, at its sole option, shall have the
right to terminate this Lease by delivering written notice of the exercise of
such right of termination to Landlord. Tenant's right to terminate this Lease
in accordance with the provisions of this Section 2.3(c) may be exercised by
Tenant only during the ten (10) day period commencing on August 16, 1997 and
terminating at 5:00 p.m. on August 25, 1997 and if such right is not exercised
by Tenant by 5:00 p.m. on the August 25, 1997, such right of termination shall
lapse and expire and be of no further force and effect. In the event this
Lease is terminated pursuant to this Section 2.3(c), this Lease shall be null
and void and the parties shall be released and discharged from further
liabilities, obligations or responsibilities hereunder and Landlord will return
to Tenant all sums paid to Landlord concurrently with the signing of this Lease
pursuant to Section 3.1(a) hereof. Notwithstanding the foregoing, Tenant shall
not have the right to terminate this Lease pursuant to

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<PAGE> 8
this Section 2.3(c) if the delay in completion is a result of any of the
reasons described in Section 2.3(b)(i) above.

2.4 Promptly after the Lease Commencement Date is ascertained,
Landlord and Tenant shall execute a written declaration setting for the Lease
Commencement Date, the date upon which the Lease Term will expire, and the
exact number of square feet of rentable area in the Building and the Premises.
The form of such declaration is attached hereto as Exhibit E and made a part
hereof.

2.5 For purposes of this Lease, the term "Lease Year" shall mean each
period of twelve (12) consecutive calendar months commencing on the first day
of August and ending on July 31 of each calendar year during the Lease Term,
except that the first Lease Year shall also include the period from the Lease
Commencement Date to July 31, 1997.

ARTICLE III
BASE RENT

3.1 Commencing on July 15, 1997 (the "Rent Commencement Date") and
continuing throughout the remainder of the Lease Term, Tenant shall pay to
Landlord as annual base rent for the Premises, without set off, deduction or
demand, an amount equal to the product of Seventeen Dollars and Fifty-Five
Cents ($17.55) multiplied by the total number of square feet of rentable area
in the Premises, which amount shall be subject to annual adjustment as provided
in Section 3.2 hereof. The annual base rent payable hereunder during each
Lease Year shall be divided into equal monthly installments and such monthly
installments shall be due and payable in advance on the first day of each month
during such Lease Year. Concurrently with Tenant's execution and delivery of
this Lease to Landlord, Tenant shall pay to Landlord Forty-Five Thousand Six
Hundred Ninety-Eight Dollars and Seventy-Four Cents ($45,698.74), which sum
shall be credited by Landlord toward the monthly installment of base rent due
for the first full calendar month falling within the Lease Term after the Rent
Commencement Date. If the Lease Term begins on a date other than on the first
day of a month, rent from such date until the first day of the following month
shall be prorated on a per diem basis at the base rate payable during the first
Lease Year, and such prorated rent shall be payable in advance on the Lease
Commencement Date.

3.2 (a) Commencing on the first (1st) day of the second (2nd)
Lease Year and on the first day of each and every Lease Year thereafter during
the Lease Term, the annual base rent set forth in Section 3.1 hereof shall be
adjusted (the "CPI Adjustment") to reflect increases in the cost of living in
the following manner:

(1) The Revised Consumer Price Index for Urban Wage
Earners and Clerical Workers, 1982-84 Base Year, All
Items, Washington, DC-MD-VA Metropolitan Area (CPI-W), as
published by the Bureau of Labor Statistics of the United
States Department of Labor (herein referred to as the
"Index"), which is published for the period that includes
the month immediately preceding the first day of the
Lease Year for which such CPI Adjustment is being made
(herein referred to as the

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<PAGE> 9
"Adjustment Index"), shall be compared with the Index
published for the period that includes the month
immediately preceding the month in which the Lease
Commencement Date occurs (herein referred to as the
"Beginning Index"). If the Adjustment Index has
increased over the Beginning Index, the percentage
increase between the Beginning Index and the Adjustment
Index shall be determined.

(2) The percentage increase determined in Step (1) above
shall be multiplied by one hundred percent (100%). The
resulting percentage shall then be multiplied by the
annual base rent for the first Lease Year set forth in
Section 3.1 hereof to arrive at the amount of the
increase in annual base rent for the Lease Year for which
such adjustment is being determined.

(3) The CPI Adjustment determined in Step (2) above
shall be added to the annual base rent for the first
Lease Year set forth in Section 3.1 to arrive at the
adjusted annual base rent payable for the Lease Year for
which the adjustment is being made, which rent shall be
payable in equal monthly installments in advance on the
first day of each month of such Lease Year.

(4) Notwithstanding anything above to the contrary, in
the event that the determination made in accordance with
Steps (1)-(3) above results in a CPI adjustment for the
second Lease Year or any subsequent Lease Year which is
greater than three and one-half percent (3.5%) of the
annual base rent payable for the immediately preceding
Lease Year, then the CPI adjustment for the Lease Year
for which such adjustment is being made shall be deemed
to be an amount equal to three and one-half percent
(3.5%) of the annual base rent payable for the
immediately preceding Lease Year.

(b) In no event shall the annual base rent payable during any
Lease Year be less than the annual base rent payable hereunder during the
immediately preceding Lease Year.

(c) If the Index is changed so that a base year other than
1982-84 is used, the Index used herein shall be converted in accordance with
the conversion factor published by the Bureau of Labor Statistics of the United
States Department of Labor. If the Index is discontinued or otherwise revised
during the Lease Term, such other government index or computation with which it
is replaced shall be used in order to obtain substantially the same result as
would be obtained if the Index had not been discontinued or revised.

(d) Promptly after the adjustment in the annual base rent is
determined for each Lease Year, Landlord shall submit to Tenant a statement
setting forth the amount of such adjustment and the computations by which it
was determined. Since the actual increase in the annual base rent may not be
determined until after the start of a new Lease Year, until the actual increase
in the annual base rent is determined, Tenant shall make monthly payments of
base rent during such Lease Year in an amount equal to the monthly installments
of base rent that were payable during the preceding

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<PAGE> 10
Lease Year. Promptly after receipt of a statement from Landlord setting forth
the actual increase in the monthly installments of base rent for such Lease
Year, the difference between the actual monthly payments paid by Tenant and the
actual amount of base rent determined to be owing for such months shall be
determined. If the actual amount determined to be owing is greater than
Tenant's actual payments, the deficiency shall be paid by Tenant together with
the next monthly installment of base rent due hereunder.

3.3 All rent shall be paid to Landlord in legal tender of the United
States at the address to which notices to Landlord are to be given or to such
other address as Landlord may designate from time to time by written notice to
Tenant. If Landlord shall at any time accept rent after it shall come due and
payable, such acceptance shall not excuse a delay upon subsequent occasions, or
constitute or be construed as a waiver of any of Landlord's rights hereunder.

ARTICLE IV
ADDITIONAL RENT

4.1 An integral part of Landlord's leasing program for the Building
involves the requirement that Tenant shall pay to Landlord the Tenant's
proportionate share of the costs and expenses incurred each year in the
operation of the Building as hereinafter set forth. For the purposes of this
Article IV, Tenant's proportionate share shall mean a fraction, in which the
numerator is the rentable area of the Premises and the denominator is the
rentable area of the Building.

4.2 The costs and expenses (the "Expenses") for which Tenant shall be
responsible to pay its proportionate share are defined as follows:

(a) "Operating Expenses" shall mean and include those direct
expenses necessary to operate and maintain the Building in a manner deemed
reasonable and appropriate by Landlord and for the best interests of Tenant,
including the following:

(i) all costs and expenses directly related to the
Building for the removal of snow, ice, and debris, unless
Tenant contracts directly for such services and pays the
provider of such services directly therefor;

(ii) all costs and expenses, other than those of a
capital nature (as defined by the Internal Revenue Service),
incurred by Landlord to operate, repair, maintain and
replace (v) the common area of the Building comprising
approximately 1,700 square feet of rentable area, which
amount is subject to adjustment pursuant to the provisions
of Section 1.4 above, (w) the foundation, roof and exterior
walls of the Building, (x) the utility service lines and
other mechanical and electrical elements of the Building
located in the

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<PAGE> 11
common area thereof, (y) the driveways and parking areas
adjacent to the Building, including the curbs, walkways and
landscaping thereof, and (z) electricity for lighting the
parking lot and other common areas of the Building;

(iii) reasonable management expenses arising out of the
operation, use, or maintenance of the Building, including
personnel costs of Landlord and the management fee; and

(iv) insurance against fire and other casualty, and
liability insurance relating to the Building.

Notwithstanding the foregoing, Operating Expenses shall not include:

(i) expenses for any capital repairs, replacements, or
improvements, as defined by the Internal Revenue Service;

(ii) expenses for electricity or other utilities consumed by
Tenant and paid for directly by Tenant to the appropriate utility provider(s);

(iii) expenses for which the Landlord is otherwise
reimbursed or indemnified (either by an insurer, condemnor, or otherwise);

(iv) expenses incurred in leasing or procuring tenants
(including, without limitation, lease commissions, advertising expenses, and
expenses of renovating space for tenants);

(v) legal expenses arising out of the construction of the
Building or the enforcement of any agreements affecting the Building;

(vi) interest or amortization payments on any mortgage or
mortgages;

(vii) wages, salaries, or other compensation paid to any
executive employee of Landlord;

(viii) repairs or replacements made to correct any defect in
the design, materials or workmanship of the Building or to comply with any
requirements of any governmental authority;

(ix) the costs of damage and repairs to the extent
actually recovered under any warranty or insurance policy carried by Landlord
in connection with the Building;

(x) damage and repairs necessitated by the negligence
or wilful misconduct of Landlord or Landlord's employees, contractors or
agents;

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<PAGE> 12
(xi) Landlord's general overhead expenses not related
to the Building;

(xii) legal fees, accountant's fees and other expenses
incurred in connection with disputes with tenants or other occupants of the
Building or associated with the enforcement of any leases or defense of
Landlord's title to or interest in the Building;

(xiii) costs incurred due to violation by Landlord or any
other tenant of the Building of the terms and conditions of any lease;

(xiv) the costs of any service provided to other tenants of
the Building to the extent Landlord is entitled to be reimbursed directly;

(xv) costs associated with revenue-generating public parking
areas of the Building where fees are charged for the use of parking areas by
the public and not by tenants of the Building;

(xvi) all costs associated with Americans With Disabilities
Act compliance in all public areas and common areas of the Building and the
Property; and

(xvii) building management fees in excess of fifty cents
(.50) per rentable square foot of floor area in the Building.

(b) "Real Estate Taxes" shall mean and include (i) all real
property taxes, including general and special assessments, if any, which are
imposed upon Landlord or assessed against the Building; (ii) any other present
or future taxes or governmental charges which are imposed upon Landlord, or
assessed against the Building and/or the land upon which it is situated,
including, but not limited to, any tax levied on or measured by the rents
payable by tenants in the Building which are in the nature of, or in
substitution for, real property taxes; and (iii) all taxes which are imposed
upon Landlord, and which are assessed against the value of any improvements to
the Premises made by Tenant or any machinery, equipment, fixtures or other
personal property of Tenant used therein. In no event shall "Real Estate
Taxes" include income or gross receipts taxes imposed upon Landlord, except to
the extent such taxes fall within clause (ii) of the above definition of Real
Estate Taxes. Any taxes and assessments which are payable in installments
without interest and penalty shall be deemed to be payable over the maximum
period of installments permitted by the applicable taxing authority.

(c) "Utilities" shall mean and include any gas,
electricity, water and sewer services provided to the Building during the term
of this Lease and paid for by Landlord, but shall not include any utility
services paid for directly by Tenant, or consumed and paid for directly by
other tenants of the Building or the Park.

(d) Notwithstanding anything to the contrary in this
Article IV, Tenant shall not be obligated to pay to Landlord increases of
additional rent attributable to Controllable Expenses (as defined in the next
sentence) which exceed six percent (6%), in the aggregate, of the amount of

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<PAGE> 13
additional rent attributable to Controllable Expenses for the immediately
preceding calendar year. For the purposes of this Section 4.2(d), Controllable
Expenses are all Expenses other than Expenses incurred by Landlord which are
attributable to (i) Real Estate Taxes, (ii) Utilities, (iii) snow removal, (iv)
insurance and (v) major repairs to the Building and/or the adjacent parking
areas serving the Building, which otherwise fall within the definition of
Operating Expenses.

4.3 Tenant shall pay to Landlord, as additional rent for the Premises,
the Tenant's proportionate share of the Expenses incurred by Landlord in the
operation of the Building during any calendar year falling entirely or partly
within the Lease Term. Subject to the provisions of Section 1.4 above, for the
purposes hereof, Tenant's proportionate share of such Expenses shall be
fifty-eight and eighty-one-hundredths percent (58.81%), which is the proportion
that the number of square feet of rentable area in the Premises (31,247) bears
to the total number of square feet of rentable area in the Building (53,136);
provided, however, that Tenant's proportionate share shall be adjusted, if
necessary, at the time the number of square feet of rentable area in the
Building and in the Premises are determined by Landlord's architect in
accordance with the provision of Section 1.3 hereof.

4.4 Tenant shall pay to Landlord, as additional rent for the Premises,
Tenant's proportionate share of the Expenses incurred by Landlord in the
operation of the Building during any calendar year falling entirely or partly
within the Lease Term.

4.5 Commencing on the Rent Commencement Date and on the first day of
each month thereafter, Tenant shall make estimated monthly payments to Landlord
on account of Tenant's proportionate share of the Expenses that are expected to
be incurred during each calendar year falling entirely or partly within the
Lease Term. The amount of such monthly payments shall be determined as
follows: Commencing with the Rent Commencement Date and at the beginning of
each calendar year thereafter, Landlord shall submit to Tenant a statement
setting forth Landlord's reasonable estimate of the Expenses that are expected
to be incurred during such calendar year and the computation of Tenant's
proportionate share thereof. Provided that Tenant receives such statement at
least thirty (30) days in advance, Tenant shall pay to Landlord on the first
day of each month following receipt of such statement during such calendar year
an amount equal to Tenant's proportionate share of the anticipated Expenses
multiplied by a fraction, the numerator of which is 1, and the denominator of
which is the number of months during such calendar year which fall within the
Lease Term and follow the date of the foregoing statement. Within ninety (90)
days after the expiration of each calendar year, Landlord shall submit to
Tenant a statement, showing (i) Tenant's proportionate share of the Expenses
actually incurred during the preceding calendar year, and (ii) the aggregate
amount of the estimated payments made by Tenant on account thereof. If the
aggregate amount of such estimated payments exceeds Tenant's actual liability
for its proportionate share of such Expenses, then Landlord, in Landlord's sole
discretion, either (a) shall credit the net overpayment against the next
monthly installment of additional rent coming due under this lease or (b) shall
pay to Tenant the net overpayment within thirty (30) days after it submits such
certified statement to Tenant. If Tenant's actual liability for such Expenses
exceeds the estimated payments made by Tenant on account thereof, then Tenant
shall pay to Landlord the total amount of such deficiency within thirty (30)
days after its receipt of the certified statement from Landlord.

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<PAGE> 14
The provisions of this paragraph shall survive the expiration or earlier
termination of the Lease for a period of one year thereafter.

4.6 Tenant's proportionate share of Expenses for any calendar year
during the Lease Term shall be apportioned so that Tenant shall pay only that
portion thereof for such year as fall within the Lease Term. This provision
shall survive the expiration or earlier termination of the Lease for a period
of one (1) year thereafter.

4.7 Landlord agrees to retain the books and records substantiating the
Expenses incurred in each calendar year for a period of at least one (1) year
from the date Landlord submits a statement to Tenant. Tenant or its designee
shall have the right, during business hours and upon reasonable prior notice,
from time to time to inspect Landlord's books and records relating to Expenses,
and/or to have such books and records audited at Tenant's expense by a
certified public accountant designated by Tenant and approved by Landlord,
which approval shall not be unreasonably withheld, conditioned or delayed,
except that any audit that discloses a discrepancy of more than five percent
(5%) in the annual Expenses shall be at Landlord's expense. Any discrepancy
shall be promptly corrected by a payment of any shortfall to Landlord by Tenant
within thirty (30) days after the applicable audit, or by a credit against the
next payment(s) of rent hereunder or (at Tenant's election) a refund of the
overpaid amount within thirty (30) days, as may be applicable. In the event
Tenant does not contest a statement of Expenses within six (6) months after it
is rendered, such statement shall become binding and conclusive.

ARTICLE V
SECURITY DEPOSIT

[INTENTIONALLY OMITTED]

ARTICLE VI
USE OF PREMISES

6.1 Tenant shall use and occupy the Premises solely for general office
purposes and for use as a telephone call center and for no other use or
purpose without the prior written consent of Landlord, which consent shall not
be unreasonably withheld, conditioned or delayed provided that such other use
or purpose is otherwise in compliance with the provisions of this Section 6.1
and would not, in Landlord's sole but reasonable discretion, impair the
reputation of the Building and/or the Park as a high quality office/flex
building and park. Tenant shall not use or occupy the Premises for any
unlawful purpose or in any manner that will constitute waste, nuisance or
unreasonable annoyance to Landlord or other occupants of the Park. Tenant
shall comply with the provisions of the Declaration of Covenants attached
hereto as Exhibit C. Tenant shall also comply with all present and future
laws, ordinances (including zoning ordinances and the land use requirements),
regulations, and orders of the County of Fairfax, Commonwealth of Virginia, and
any other public or quasi-public authority having jurisdiction over the
Premises, concerning the use, occupancy and

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<PAGE> 15
condition of the Premises and all machinery, equipment and furnishings therein,
except to the extent that such compliance is expressly stated to be Landlord's
obligation under this Lease.

6.2 Tenant shall obtain, at its own expense, the certificate of
occupancy or other governmental approvals which may be required for its
occupancy of the Premises. It is expressly understood that if any present or
future law, ordinance, regulation or order (collectively, "Legal Requirements")
requires any other permit(s) for the Premises due to Tenant's particular use
thereof, or Tenant's improvements or future alterations thereto, that Tenant
will also obtain such permit(s) at Tenant's own expense. Further, Tenant will
comply with all legal requirements which impose on Landlord or Tenant a duty
relating to or arising as a result of the use, occupancy, or configuration of
the Premises. Tenant shall promptly pay all fines, penalties and damages that
may arise out of or be imposed on Landlord or Tenant because of Tenant's
failure to comply with the provisions of this Section.

6.3 Tenant shall pay any business, rent or other taxes that are now or
hereafter levied upon Tenant's use or occupancy of the Premises, the conduct of
Tenant's business at the Premises, or Tenant's equipment, fixtures or personal
property. In the event that any such taxes are enacted, changed, or altered so
that any of such taxes are levied against Landlord or the mode of collection of
such taxes is changed so that Landlord is responsible for collection or payment
of such taxes, Tenant shall pay any and all such taxes to Landlord upon written
demand from Landlord.

6.4 Tenant shall not generate, dispose of or maintain any toxic or
hazardous substances in the Premises other than cleaning agents and other
substances normally and customarily used by office tenants and which are not
prohibited by applicable law and which Tenant shall store and shall use in
accordance with applicable law.

ARTICLE VII
ASSIGNMENT AND SUBLETTING

7.1 (a) Tenant shall not have the right to assign, transfer mortgage
or otherwise encumber this Lease or its interest herein without first obtaining
the prior written consent of Landlord, which consent shall not be unreasonably
withheld, conditioned or delayed by Landlord; provided, however, that Landlord
may withhold its consent to any proposed assignment, transfer, mortgage or
other encumbrance of this Lease, among other reasons, if (i) Tenant is in
default under any provisions of this Lease, or (ii) Landlord determines, in its
reasonable discretion, that the character of the proposed assignee or the
nature of the activities to be conducted by such proposed assignee would
adversely affect the other tenants of the Building, if any, or that the
financial history or credit rating of the proposed assignee is unacceptable to
Landlord. If Tenant is a partnership, a withdrawal or change whether
voluntary, involuntary or by operation of law, of partners owning, individually
or collectively, a controlling interest in Tenant shall be deemed a voluntary
assignment of this Lease and shall be subject to the foregoing provisions. If
Tenant is a corporation, any dissolution, merger, consolidation or other
reorganization of Tenant, or the sale or transfer of a controlling interest of
the capital stock of Tenant, shall be deemed a voluntary assignment of this

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<PAGE> 16
Lease and subject to the foregoing provisions. However, the preceding sentence
shall not apply to corporations the stock of which is traded through a national
or regional stock exchange, or through a private internal stock exchange in
connection with a scheme of employee-ownership, for example, such as that of
Tenant's current parent company, Science Applications International
Corporation, under which shares are widely-held and traded by employees of
Tenant. Landlord agrees not to unreasonably withhold its consent to a public
offering of the stock of Tenant. Any attempted assignment or transfer by
Tenant of this Lease or its interest herein without Landlord's consent shall,
at the option of Landlord, terminate this Lease; however, in the event of such
termination, Tenant shall remain liable for all rent and other sums due under
this Lease and all damages suffered by Landlord on account of such breach by
Tenant.

(b) In the event of any such assignment pursuant to this Section 7.1,
Tenant shall remain fully liable as a primary obligor and principal for
Tenant's obligations and responsibilities under this Lease, including without
limitation, the payment of all rent and other charges required hereunder and
the performance of all conditions and obligations to be performed under this
Lease.

7.2 Tenant shall not have the right to sublease (which term, as used
herein, shall include any type of subrental arrangement and any type of license
to occupy) all or any part of the Premises without first complying with the
provisions of subsections (a) and (b) below:

(a) Tenant shall have the right to sublease any portion or
portions of the Premises, provided that Tenant obtains the prior written
consent of Landlord to such proposed sublease, which consent shall not be
unreasonably withheld, conditioned or delayed by Landlord; provided, however,
that Landlord may withhold its consent to any proposed sublease, among other
reasons, if (i) Tenant is in default under any provisions of this Lease, or
(ii) Landlord determines, in its sole but reasonable discretion, that the
character of the proposed subtenant or the nature of the activities to be
conducted by such proposed subtenant would adversely affect the other tenants
of the Building, if any, or that the financial history or credit rating of the
proposed subtenant is reasonably unacceptable to Landlord. Notwithstanding the
foregoing, Tenant shall in no event have the right to sublease the Premises, or
any portion thereof, to more than three (3) subtenants at any one time,
without Landlord's consent, not to be unreasonably withheld, conditioned or
delayed.

(b) In any case where Landlord's consent to assign or to sublease
is required by this Lease, Tenant agrees to give Landlord at least fourteen
(14) days advance written notice of Tenant's intention to sublease a portion of
the Premises, along with sufficient information about the proposed subtenant to
enable Landlord to make the determination called for by subsection (b) above.

7.3 The consent by Landlord to any assignment or subletting shall not
be construed as a waiver or release of Tenant from any and all liability for
the performance of all covenants and obligations to be performed by Tenant
under this Lease, nor shall the collection or acceptance of rent from any
assignee, transferee or subtenant constitute a waiver or release of Tenant from
any of its liabilities or obligations under this Lease. Landlord's consent to
any assignment or subletting shall not be construed as relieving Tenant from
the obligation of complying with the provisions of

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<PAGE> 17
Sections 7.1 or 7.2 hereof, as applicable, with respect to any subsequent
assignment or subletting. For any period during which Tenant is in default
hereunder, Tenant hereby assigns to Landlord the rent due from any subtenant of
Tenant and hereby authorizes each subtenant to pay said rent directly to
Landlord. Tenant further agrees to submit any and all instruments of
assignment and sublease to Landlord for Landlord's prior written approval as to
form and substance, which approval shall not be unreasonably withheld or
delayed, but which instruments, as an express condition precedent to Landlord's
prior approval, shall provide that (i) such sublease or assignment is subject
and subordinate to this Lease in all respects, and to any amendments,
modifications, renewals, extensions or expansions hereof, (ii) Tenant shall
remain primarily liable as Tenant hereunder, (iii) such assignee or sublessee
shall conduct a business in the Premises which is a permitted use pursuant to
Article VI of this Lease, (iv) in the case of an assignment, such assignee is
bound by the terms and conditions of this Lease and assumes all of the
obligations and liabilities of Tenant hereunder, (v) in the case of a sublease,
(x) Landlord is not, and will not become, a party to such sublease, (y)
Landlord's consent to such sublease does not create a contractual relationship
between Landlord and such sublessee, nor does it create any liability of
Landlord to such sublessee, and (z) Landlord's consent to such assignment or
sublease does not affect the obligations of Landlord or Tenant under this
Lease, and (vi) Landlord's consent to such assignment or sublease shall not be
construed to mean that Landlord has approved any plans or specifications for
renovations to the Premises intended by such assignee or sublessee and that any
such work to the Premises must be conducted in accordance with the terms of
this Lease.

7.4 If this Lease is or shall be assigned by Landlord to the holder of
a mortgage against the Building as additional security for such mortgage loan,
the consent of such holder (if required by the terms of the applicable loan
documents) shall be required in addition to any consents by Landlord under the
terms of this Article VII.

7.5 (a) Notwithstanding the above restrictions on subletting and
assignments and provided Tenant is not then in default under this Lease, Tenant
shall have the right, without Landlord's prior written consent, to assign this
Lease or to sublet all or any part of the Premises to (I) an "Affiliate of
Tenant" (as hereinafter described) or (II) a "Parent of Tenant" (as hereinafter
defined), provided (i) that such assignee or sublessee has a creditworthiness
(e.g. assets and capitalization) and net worth (which shall be determined on a
pro forma basis using generally accepted accounting principals consistently
applied and using the most recent financial statements) reasonably acceptable
to Landlord, (ii) that the conditions set forth in Section 7.3(i) - (vi) are
fully satisfied, as determined by Landlord in its reasonable judgment, (iii)
that the character of such person or entity and the nature of its activities on
the Premises and in the Building will not adversely affect the Building as a
first-class office/warehouse building, (iv) that the sublease with such person
or entity is not a so-called "sham" transaction intended by Tenant to
circumvent the provisions of this Article VII and (v) that Tenant provides
Landlord with written notice of such assignment or sublease not less than ten
(10) days after the effective date of such assignment or sublease.

(b) For purposes of this Section 7.5, an "Affiliate of Tenant"
shall mean any corporation, association, trust or partnership (i) which
Controls (as herein defined) Tenant or (ii)

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which is under the Control of Tenant through stock ownership or otherwise or
(iii) which is under common Control with Tenant. For the purposes hereof, a
"Parent of Tenant" shall mean any corporation, association, trust or
partnership (X) which Controls Tenant or (Y) which owns more than fifty percent
(50%) of the issued and outstanding voting securities of Tenant. The terms
"Control" or "Controls" as used in this Section 7.5 shall mean the power to
directly or indirectly influence the direction, management or policies of
Tenant or such other entity.

ARTICLE VIII
MAINTENANCE AND REPAIRS

8.1 Landlord shall keep and maintain the foundation, roof and exterior
walls of the Building (specifically excluding the interior walls, doors,
partitions, locks, door jambs, windows and glass in the Premises as well as all
mechanical, plumbing, heating, air conditioning, sprinkler and electrical
systems and utility service lines exclusively servicing the Premises and
located therein), the plumbing and electrical systems to and from the Building
and the driveways and parking areas adjacent to, and all common areas of, the
Building in good condition and repair.

8.2 (a) Tenant will keep and maintain the Premises and all fixtures
and equipment located therein (specifically including the interior walls,
doors, partitions, locks, door jambs, windows and glass in the Premises, as
well as all mechanical, plumbing, heating, air conditioning, sprinkler,
electrical systems, and utility service lines exclusively servicing the
Premises and located therein) in clean, safe and sanitary condition, will take
good care thereof and make all required repairs thereto, and will suffer no
waste or injury thereto. At the expiration or other termination of the Lease
Term, Tenant shall surrender the Premises, broom clean, in the same order and
condition which they are in on the Lease Commencement Date, ordinary wear and
tear and unavoidable damage by the elements or casualty excepted. Tenant
shall, at its own expense, replace any broken or damaged glass windows, doors,
locks, jambs and partition walls, and such replacement items shall be of the
same quality and design as those initially installed by Landlord in the
Premises.

(b) Tenant shall maintain the heating, ventilating and air
conditioning equipment (the "HVAC system") serving the Premises in good
condition and repair, reasonable wear and tear and damage or destruction by
fire or other casualty which Tenant is not obligated to repair excepted.
Except as provided in subsections (c) and (d) below, Tenant shall repair or
replace any damage or injury to the HVAC system serving the Premises. All
maintenance and repairs made by Tenant shall be performed only by licensed
contractors first approved by Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed. Tenant shall require its
contractors to comply with Landlord's regulations regarding all work to be
performed.

(c) With specific reference to the HVAC system, Tenant is
responsible to carry, with a reputable service company, a full service
maintenance and repair contract on all component parts except the refrigeration
compressors. This contract shall include, without limitation, substantially
the following provisions:

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<PAGE> 19
(i) Contractor will provide regularly (as required by
industry custom) scheduled inspections for each
component of the HVAC system, checking the operating
efficiency of each, oiling and adjusting where
necessary.

(ii) Contractor will provide and install air filters as
necessary in the Contractor's reasonable judgment.

(iii) Contractor will provide complete inspection of all
automatic temperature controls and their electronic
components.

(iv) Contractor will automatically correct all problems which
could cause breakdowns in extreme weather.

(v) Contractor will provide a full written report on the
system's condition after each inspection; provided,
however, the Contractor shall not be required to provide
more than two reports in any twelve-month period.

(vi) Copies of all reports will be provided to Landlord.

8.3 Except loss or damage recovered by Landlord under Landlord's
insurance, and as otherwise provided in Article XVI hereof, and notwithstanding
the provisions of Section 8.1 hereof, all injury, breakage and damage to the
Premises or to any other part of the Building caused by any negligent act or
omission or willful misconduct of Tenant, or of any agent, employee, subtenant
or contractor of Tenant, shall be repaired by and at the sole expense of
Tenant, except that Landlord shall have the right, at its option, to make such
repairs and to charge Tenant for all reasonable costs and expenses incurred in
connection therewith as additional rent hereunder. The liability of Tenant for
such costs and expenses shall be reduced by the amount of any insurance
proceeds which are received by Landlord on account of such injury, breakage or
damage, or which would be received by Landlord had Landlord maintained the
insurance coverages required to be maintained by Landlord under this Lease,
whether or not Landlord has maintained such insurance coverages.

ARTICLE IX
CONSTRUCTION; TENANT IMPROVEMENTS AND ALTERATIONS

9.1 (a) Except as expressly provided elsewhere in this Lease, the
Premises shall be delivered to and accepted by Tenant in their present "as-is"
condition. It is understood and agreed that Landlord will not make, and is
under no obligation to make, any structural or other alterations, decorations,
additions or improvements in or to the Premises, except as otherwise provided
in Section 9.4 hereof.

(b) All alterations, renovations, modifications and improvements
which are made to the Premises pursuant to this Section 9.1: (i) shall be done
in accordance with the space plan and construction drawings approved by
Landlord, (ii) shall be subject to the provisions of Article IX and

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Article XIII hereof and (iii) shall be made at Tenant's sole cost; provided,
however, that Landlord agrees to provide Tenant with an improvement allowance
(the "Tenant Improvement Allowance") in an amount equal to the product of
Fifteen Dollars ($15.00) multiplied by the number of square feet of rentable
area in the Premises. The Tenant Improvement Allowance shall be applied, as
hereinafter set forth, to all "hard" and "soft" costs incurred in connection
with the design, modification, alteration, renovation, construction and
installation of the Tenant Improvements, as hereinafter defined, in the
Premises, including, without limitation, any and all architectural, engineering
and consulting fees and cabling and wiring fees in connection therewith. In
the event the entire Tenant Improvement Allowance is not utilized by Tenant in
connection with designing, renovating, altering and upgrading the tenant
improvements in the Premises, such unused portion of the Tenant Improvement
Allowance shall be applied against the initial installment(s) of annual base
rent due with respect to the Premises pursuant to Article III hereof.

(d) (i) Tenant shall make or cause to be made the alterations
and improvements to the Premises and shall have its own space planner and
architect prepare the plans, working drawings and specifications for such work.
Tenant's space planner and architect shall prepare the plans, working drawings
and specifications for such work. Tenant shall cause, or shall be responsible
for, the preparation of such preliminary and final space plans for the Premises
and all architectural, structural, electrical, plumbing and mechanical working
drawings and other working drawings necessary for the construction and
installation of the Tenant Improvements and alterations in and to the Premises
("Tenant's Plans"), at Tenant's sole cost and expense, subject to the Tenant
Improvement Allowance. Landlord hereby acknowledges that Tenant has delivered
the Tenant's Plans to Landlord. Tenant's Plans must conform to all Insurance
Requirements, as defined in Section 9.2 below, in effect at the time this Lease
is executed and with all applicable laws, statutes, rules, regulations and
requirements of the Federal, Fairfax County and the Commonwealth of Virginia
governments, including, without limitation, the ADA and with all Insurance
Requirements, as defined in Section 9.2. The work shown on Tenant's Plans is
referred to throughout this Article IX as the "Tenant Improvements." Tenant, if
required to do so by Landlord, shall consult with Landlord's engineers and
consultants, without charge therefor, in connection with the preparation of all
architectural, structural, mechanical, plumbing and electrical working drawings
for the Tenant Improvements.

(ii) Tenant's Plans shall be subject to Landlord's written
approval prior to commencement of construction of the Tenant Improvements in
the Premises. Any material changes or modifications that Tenant desires to
make to such plans or working drawings shall also be subject to Landlord's
prior written approval. Landlord agrees that it will not unreasonably
withhold, delay or condition its approval of the Tenant's Plans for the
construction of any Tenant Improvements or of any changes or modifications
thereof; provided, however, that Landlord shall have sole and absolute
discretion to approve or disapprove any improvements (i) that will be visible
to the exterior of the Premises, (ii) which affect the structural integrity of
the Building or of the mechanical, HVAC,

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sprinkler, life safety and other operating systems therein, or (iii) which
would cause the overloading of the Building's electrical system or would
require any material modifications thereto.

(iii) Landlord shall have no liability or responsibility for
the work schedule for such Tenant Improvements to be constructed in the
Premises.

(iv) In connection with the intended alterations and
improvements to the Premises, Landlord agrees to pay Tenant's contractor,
promptly upon Landlord's receipt of (I) invoices for work performed and
materials supplied and (II) lien releases for the amount of the applicable
invoice, up to the amount of the Tenant Improvement Allowance. Upon completion
of the installation of the Tenant Improvements in the Premises, Tenant shall
deliver to Landlord (A) a verification of the costs of the installation of the
Tenant Improvements in the Premises from Tenant's contractor in the form of an
AIA form of requisition or other form reasonably approved by Landlord, (B)
final lien waivers furnished by Tenant's general contractor and its major
subcontractors (that is, subcontractors furnishing labor or materials in excess
of $10,000) with respect to the Tenant Improvements and (C) the certification
by Landlord's architect or other representative designated by Landlord that the
Tenant Improvements have been performed or supplied, which certifications (and
any inspections required therefor) shall be made promptly by Landlord's
architect or other representative.

(v) Tenant shall employ its own general contractor to
construct and install the Tenant Improvements in the Premises, such general
contractor to be subject to Landlord's prior written approval, which approval
shall not be unreasonably withheld, conditioned or delayed.

(vi) Prior to the commencement of the construction and
installation of any Tenant Improvements in the Premises, Tenant shall provide
Landlord with a certificate issued by Tenant's liability and property damage
insurance carrier or carriers which shall certify that Tenant's insurance will
be available to cover any loss, damage or injury to persons or property caused
or occasioned by Tenant's contractor or the work to be done by Tenant's
contractor in the Premises in an amount reasonably acceptable to Landlord up to
Five Million Dollars ($5,000,000.00) and subject to any insurance coverage
provided by Tenant's contractor.

(vii) Tenant shall be responsible for obtaining all
governmental permits, licenses or approvals necessary to construct and install
the Tenant Improvements in the Premises. Tenant agrees to comply with all
terms and conditions of all such governmental permits, licenses and approvals.
Copies of all permits and final inspection certificates shall be provided to
Landlord as Tenant receives them from the issuing governmental authority.

(viii) All work done and materials furnished in connection
with the construction and installation of the Tenant Improvements in the
Premises shall be of good quality, shall be performed in a good and workmanlike
manner, free from faults and defects and in accordance with Tenant's Plans as
approved by Landlord, and shall be in compliance with all applicable laws and
regulations. Tenant agrees to proceed, and to cause its architect and its

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contractor to proceed, diligently to complete the Tenant Improvements in the
Premises as soon as practicable.

(ix) Landlord's architect or other representative designated
by Landlord shall have the right to inspect Tenant's work in the Premises prior
to any disbursement of the Tenant Improvement Allowance or at any other time
reasonably requested by Landlord.

(x) Tenant shall be solely responsible to correct and repair
any work or materials installed in the Premises by Tenant or Tenant's
contractor that prove defective as a result of faulty workmanship or materials.
Further, Tenant agrees that Landlord shall have no liability to Tenant
whatsoever on account of any work performed or materials provided by Tenant or
Tenant's contractor. Tenant agrees to indemnify and hold Landlord harmless from
and against any and all costs, expenses, liens, claims, liabilities or damages
based on or arising, directly or indirectly, by reason of any work performed or
materials provided by Tenant or Tenant's contractor.

(xi) Tenant, and Tenant's contractor, shall conduct their
work pursuant to this Lease in a manner which shall minimize disruption and
inconvenience to other tenants in the Building and the Park. Public areas shall
be kept reasonably clean at all times; debris shall be removed at the end of
each work day; reasonable steps shall be taken to minimize dust and noise; and
work shall be conducted only during normal working hours unless Landlord
otherwise agrees in advance. Tenant shall promptly repair, at its sole
expense, any damage done to the Building or the Property, to other premises in
the Building, to any electrical, mechanical, HVAC, sprinkler, life safety and
other operating systems within the Building or to the surface parking areas or
other common areas appurtenant to the Building which are caused by or arise out
of the work to be performed by Tenant under this Section 9.2(d).

(xii) Tenant shall provide Landlord, or cause its architect
to provide Landlord, with a copy, on CADD computer discs, of the as-built
drawings for the Tenant Improvements and with one (1) set of as-built
construction drawings on mylar sepias, upon completion of the Tenant
Improvements in the Premises.

(xiii) Tenant, and Tenant's contractor, shall observe all
reasonable rules and regulations of Landlord relating to the construction of
Tenant Improvements in the Premises, including, without limitation, (1) that
the requirements of Industrial Risk Insurers, Herndon, Virginia, concerning
fire protection be met and (2) other reasonable requirements of Landlord or its
insurance carrier or consultant be satisfied. Such rules and regulations shall
be communicated to Tenant in writing prior to commencement of Tenant's work in
the Premises.

(e) Intentionally Omitted.

(f) Tenant agrees to repair and correct any work or materials
installed by Tenant or its contractor in the Premises pursuant to this Section
9.1, that prove to be defective as a result of faulty materials, equipment or
workmanship and that appear within one (1) year of the date of

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substantial completion of the Tenant Improvements, provided, however that
Tenant shall cause latent defects in work or materials installed by Tenant or
its contractor in the Premises to be repaired and/or corrected, promptly after
it receives notice of such latent defect from Landlord. Landlord shall not be
responsible to repair or correct any defective work or material installed by
Tenant or by any contractor other than Landlord's contractor or any work or
materials that prove defective as a result of any act or omission of Tenant or
any of its employees, guests, invitees, licensees, subtenants, customers,
clients or other occupants of the Premises.

(g) Intentionally Omitted.

(h) Intentionally Omitted.

(i) It is understood and agreed that Landlord will not make, and
is under no obligation to make, any structural or other alterations,
decorations, additions or improvements in or to the Premises, except as
provided in Section 9.4 hereof.

9.2 Tenant will not make or permit anyone to make any alterations,
decorations, additions or improvements (hereinafter referred to collectively as
"improvements"), structural or otherwise, in or to the Premises, including the
initial improvements to be performed by Tenant prior to Tenant's taking
occupancy of the Premises, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld, conditioned or delayed. When
granting its consent, Landlord may impose any conditions it deems reasonably
appropriate, including, without limitation, the approval by Landlord of plans
and specifications, the approval by Landlord of the contractor or other persons
who will perform the work, Tenant's obtaining all necessary permits and
approvals for such work, and Tenant's obtaining, and providing Landlord with
certificates of insurance evidencing, specified insurance. All improvements
permitted by Landlord must conform to all rules and regulations established
from time to time by the Underwriters' Association of the Commonwealth of
Virginia and to all laws, regulations and requirements of the Federal, State,
Fairfax County and Town of Herndon governments. Landlord's review and approval
of any such plans and specifications and consent to the performance of work
described therein shall not be deemed an agreement by Landlord that such plans,
specifications and work conform with all applicable Legal Requirements and
requirements of the insurers of the Building ("Insurance Requirements") nor
deemed a waiver of Tenant's obligations under this Lease with respect to Legal
Requirements and Insurance Requirements nor impose any liability or obligation
upon Landlord with respect to the completeness, design sufficiency or
compliance with Legal Requirements or Insurance Requirements of such plans,
specifications and work. As a condition precedent to such written consent of
Landlord, Tenant agrees to obtain and deliver to Landlord written,
unconditional waivers of mechanic's and materialmen's liens against the
Building and the land upon which it is situated from all proposed contractors,
subcontractors, laborers and material suppliers for all work, labor and
services to be performed and materials to be furnished in connection with
improvements to the Premises. Upon completion of the work, Tenant shall
provide Landlord with final release of lien forms from all major contractors,
subcontractors, laborers and materials suppliers. If, notwithstanding the
foregoing, any mechanic's or materialmen's lien is filed against the Premises,
the Building and/or

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<PAGE> 24
the land upon which it is situated, for work claimed to have been done for, or
materials claimed to have been furnished to, the Premises, such lien shall be
discharged by Tenant within ten (10) days thereafter, at Tenant's sole cost and
expense, by the payment thereof or by the filing of a surety bond in form and
substance acceptable to Landlord. If Tenant shall fail to discharge any such
mechanic's or materialmen's lien, Landlord may, at its option, discharge such
lien and treat the cost thereof (including reasonable attorneys' fees incurred
in connection therewith) as additional rent payable with the next monthly
installment of base rent falling due; it being expressly agreed that such
discharge by Landlord shall not be deemed to waive or release the default of
Tenant in not discharging such lien. It is understood and agreed that any
improvements to the Premises shall be conducted on behalf of Tenant, and that
Tenant shall be fully responsible therefor. It is further understood and
agreed that in the event Landlord shall give its written consent to the making
of any improvements to the Premises, such written consent shall not be deemed
to be an agreement or consent by Landlord to subject its interest in the
Premises, the Building or the land upon which it is situated to any mechanic's
or materialmen's liens which may be filed in connection therewith. Upon
completion of any improvements by Tenant, Tenant shall provide Landlord with
accurate "as-built" plans showing the new work.

9.3 Tenant shall indemnify and hold Landlord harmless from and against
any and all expenses, liens, claims, liabilities and damages based on or
arising, directly or indirectly, by reason of the making of any improvements to
the Premises by Tenant or its employees, agents or contractors. If any
improvements requiring Landlord's consent hereunder are made without the prior
written consent of Landlord, Landlord, acting reasonably, shall have the right
to remove and correct such improvements and restore the Premises to their
condition immediately prior thereto, and Tenant shall be liable for all
reasonable expenses incurred by Landlord in connection therewith. All
improvements affixed to the Premises or the Building made by either party shall
remain upon and be surrendered with the Premises as a part thereof at the end
of the Lease Term, except that if Tenant is not in default under this Lease,
Tenant shall have the right to remove, prior to the expiration of the Lease
Term, all movable furniture, furnishings, trade fixtures and equipment
installed in the Premises solely at the expense of Tenant. All damage and
injury to the Premises or the Building caused by such removal shall be repaired
by Tenant, at Tenant's sole expense. If such property of Tenant is not removed
by Tenant prior to the expiration or termination of this Lease, the same shall
become the property of Landlord and shall be surrendered with the Premises as a
part thereof.

9.4 Notwithstanding anything to the contrary in Section 9.1 above, on
or before the Lease Commencement Date, Landlord, at its sole cost and expense,
shall Substantially Complete the following work: (i) installation of a new roof
on the Building, (ii) replacement of the heating, ventilation and air
conditioning system serving the Building and (iii) installation of a two
thousand (2,000) gallon fuel tank (the "Fuel Tank") in a location to be
determined by Landlord, in its sole discretion, on the surface of the parking
lot adjacent to the Building (collectively "Landlord's Work"). Landlord and
Tenant agree to cooperate with each other in the scheduling of Landlord's Work
so as not to delay the Substantial Completion of Landlord's Work and the Tenant
Improvements in the Premises. Landlord's Work shall be performed in accordance
with all applicable

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building and fire codes, regulations and ordinances. For the purposes of this
Section 9.4, Landlord's Work shall be deemed to be "Substantially Completed" on
the date determined by Landlord's contractor in its professional judgement,
except for the separation of electrical wiring and systems serving the Premises
from the remainder of the Building electrical systems. Notwithstanding the
foregoing, if Landlord is delayed in Substantial Completion or Final
Completion, as applicable, of Landlord's Work due to delays caused by the
actions or inactions of Tenant, its employees, agents, consultants, contractors
or subcontractors, then, for the purposes of determining the Rent Commencement
Date the Landlord's Work shall be deemed to have been Substantially Completed
or Finally Completed, as applicable, on the date that the Premises would have
been Substantially Completed or Finally Completed if such delay or delays had
not occurred. In the event Tenant disputes the determination by Landlord's
contractor that the Landlord's Work has been Substantially Completed or Finally
Completed on the date which Landlord's contractor determines that the
Landlord's Work was Substantially Completed or Finally Completed or would have
been Substantially Completed or Finally Completed but for delays caused by
Tenant, its employees, agents, consultants, contractors, or subcontractors,
then Landlord and Tenant shall together promptly appoint an independent
contractor to promptly determine such matter. In the event Landlord and Tenant
are unable to agree on such independent contractor, then the parties shall
request that the president of the American Arbitration Association appoint an
independent contractor to determine such matter. The determination of the
independent contractor shall be binding upon Landlord and Tenant.

ARTICLE X
SIGNS, EQUIPMENT AND FURNISHINGS

10.1 No sign, advertisement or notice referring to Tenant shall be
inscribed, painted, affixed or otherwise displayed on any part of the exterior
or the interior of the Building, except such areas as are designated by
Landlord, and then only in such place, number, size, color and style as are
approved by Landlord, in its reasonable judgment and in accordance with the
applicable regulations of the County of Fairfax, Virginia. Landlord's signage
specifications are attached hereto as Exhibit D. All of Tenant's signs that
are approved by Landlord shall be installed and removed at the expiration or
earlier termination of the Lease Term at Tenant's cost and expense. If any
sign, advertisement or notice that has not been approved by Landlord, where
such approval is required by this Lease, is exhibited or installed by Tenant,
Landlord shall have the right to remove the same at Tenant's expense. Landlord
shall have the right to prohibit any advertisement of or by Tenant which in its
reasonable opinion tends to impair the reputation of the Building and, upon
written notice from Landlord, Tenant shall immediately refrain from and
discontinue any such advertisement. Landlord reserves the right to affix,
install and display such signs, advertisements and notices on any part of the
exterior or interior of the Building, (i) as may be required by applicable law
and (ii) during the last six (6) months of the Lease Term, as Landlord may
desire to advertise the Building for rent.

10.2 Tenant shall not place or install in the Premises any safes,
fixtures or other equipment which will exceed a load factor of two-hundred
pounds (200 lbs.) per square foot on the first floor of the Premises. Any and
all damage or injury to the Premises or the Building caused by moving the
property of Tenant into or out of the Premises, or due to the same being in or
upon the Premises, shall be repaired at the sole cost of Tenant. Tenant agrees
to remove promptly from the parking

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<PAGE> 26
areas or sidewalks adjacent to the Building any of Tenant's furniture,
equipment or other material there delivered or deposited.

10.3 Subject to the provisions of this Section 10.3, Landlord shall
provide Tenant access to and the ability to use the 900KW "back-up" generator
(the "Generator") for the Building. Tenant shall not be permitted to use or
attach any system to the Generator unless (a) such system and the use and
method of "hooking" such system up to the Generator conforms to plans,
specifications and requirements for such system and method of attachment
approved by Landlord in its reasonable judgment and (b) Tenant obtains and
provides copies to Landlord of all necessary governmental permits and approvals
for such system and its method of attachment to the Generator. Landlord shall
have no liability or responsibility to Tenant whatsoever for any damage, loss,
injury, compensation, claim or the like arising out of, resulting from or in
anyway attributable to, directly or indirectly, any failure of the Generator or
any system which Tenant elects to attach to the Generator. Landlord agrees
that it shall give Tenant reasonable advance notice (at least 48 hours except
no advance notice is required in an emergency), which notice may be verbal, of
any anticipated shut down of the Generator for service, repairs or other
reasons.

ARTICLE XI
INSPECTION BY LANDLORD

11.1 Tenant will permit Landlord, or its agents or representatives, to
enter the Premises, without charge therefor to Landlord and without diminution
of the rent payable by Tenant, (i) to examine, inspect and protect the Premises
and the Building, (ii) to make such alterations and/or repairs as in Landlord's
reasonable judgment may be required by law or be necessary to maintain the
Building in good condition and repair, (iii) to comply with and carry out
Landlord's obligations under this Lease, and (iv) to exhibit the same to
prospective tenants during the last one hundred eighty (180) days of the Lease
Term. In connection with any such entry, Landlord shall reasonably endeavor to
minimize the disruption to Tenant's use of the Premises, shall give Tenant at
least twenty-four (24) hours advance notice of such entry (except in the event
of an emergency) and shall conduct such entry only during normal working hours
(except in the event of an emergency).

ARTICLE XII
INSURANCE

12.1 Tenant shall not conduct or permit to be conducted any activity,
or place any equipment, inventory or other materials, in or about the Premises
or the Building that will in any way increase the rate of fire insurance or
other insurance on the Building. If any increase in the rate of fire insurance
or other insurance is stated by any insurance company or by the applicable
Insurance Rating Bureau to be due to any activity of Tenant or the placing of
any equipment, inventory or other materials by or about the Premises or the
Building, such statement shall be conclusive evidence that the increase in such
rate is due to such activity or equipment and, as a result thereof, Tenant
shall be liable for the amount of such increase. Tenant shall reimburse
Landlord for such amount upon written demand from Landlord and such sum shall
be considered additional rent payable hereunder.

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12.2 Throughout the Lease Term, Landlord shall insure the Building and
the initial Tenant Improvements in the Premises against loss due to fire and
other casualties included in standard extended coverage insurance policies, in
an amount equal to at least ninety percent (90%) of the replacement cost
thereof, exclusive of architectural and engineering fees, excavation, footings
and foundations.

12.3 Through the Lease Term, Tenant shall bear the risk of loss of the
furnishings, trade fixtures, equipment and contents of the Premises due to fire
and other casualties included in standard extended coverage insurance policies
and shall have the right to insure against such loss. Landlord shall have no
responsibility to insure against such loss.

12.4 Throughout the Lease Term, Tenant shall insure the contents of the
Premises, including all furnishings, trade fixtures, and equipment used or
installed in the Premises by Tenant, and any other personal property of Tenant
therein, against loss due to fire and other casualties included in standard
extended coverage insurance policies in minimum amounts not less than the full
replacement cost of Tenant's furnishings, trade fixtures, equipment and other
personal property. Throughout the Lease Term, Tenant shall obtain and maintain
comprehensive public liability insurance in a company or companies licensed to
do business in the Commonwealth of Virginia and approved by Landlord. Such
insurance shall be in minimum amounts of One Million Dollars ($1,000,000.00)
per occurrence plus a general aggregate of Two Million Dollars ($2,000,000.00)
for injury to persons and damage to property and shall be for a minimum term of
one (1) year. In addition, each of said policies of insurance shall name
Landlord and Boston Properties as managing agent of the office park, as
additional insureds. If requested by the holder of any mortgage or deed of
trust against the Building and communicated to Tenant in writing, the public
liability policy referred to above shall also name such holder as an additional
insured thereunder. Receipts or certificates evidencing payment of the
premiums for such insurance shall be delivered by Tenant at least annually.
Each such policy shall contain an endorsement prohibiting cancellation or
reduction of coverage without first giving Landlord and the holder of any
mortgage or deed of trust on the Building named as additional insured as
aforesaid at least thirty (30) days' prior written notice of such proposed
action.

12.5 (a) Tenant hereby waives its right of recovery against Landlord
and releases Landlord from any claim for property loss or damage arising out of
losses, claims, casualties or other damages for which Landlord may otherwise be
liable to the extent Tenant is either required to maintain insurance pursuant
to this Article XII or receives insurance proceeds on account thereof. Each
policy obtained by Tenant pursuant to the provisions of this Article XII shall
include a waiver of the insurer's right of subrogation against Landlord, and
shall contain an endorsement to the effect that any loss payable under such
policy shall be payable notwithstanding any act or negligence of Landlord, or
any agent, contractor or employee of Landlord, which might, absent such
agreement, result in the forfeiture of payment for such loss.

(b) Landlord hereby waives its right of recovery against Tenant
and releases Tenant from any claim for property loss or damage for which Tenant
may otherwise be liable arising

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out of losses, claims, casualties or other damages to the extent Landlord
either receives insurance proceeds on account thereof or is required by this
Lease to maintain such insurance. Each policy of insurance obtained by
Landlord with respect to the Building shall include a waiver of the insurer's
right of subrogation against Tenant and shall contain an endorsement to the
effect that any loss payable under such policies shall be payable
notwithstanding any act or negligence of Tenant, its agents, contractors or
employees which might, absent such agreement, result in the forfeiture of
payment for such loss.

ARTICLE XIII
TENANT'S RESPONSIBILITIES

13.1 Tenant shall be responsible for the payment for all utilities
furnished to the Premises including, without limitation, gas, electric, water,
sewer and telephone services. Landlord, at its expense, shall cause the
Premises to be separately metered for the purpose of measuring electrical power
furnished exclusively to the Premises. To the extent that the consumption of
gas, water and sewer services are measured by a single meter or meters for such
services for multiple tenants, Tenant shall pay only its proportionate share of
the bill or bills for such services. For the purposes hereof, "Tenant's
proportionate share" of the bill for any single metered utilities shall be the
percentage determined in accordance with Section 4.3 hereof. Tenant shall have
no responsibility for any excessive use of utilities by other tenants in the
Building but shall be responsible for its own excessive use of such utilities.
Tenant agrees to pay all applicable utility bills when due, or upon
presentation thereof by Landlord and, further, agrees to indemnify and hold
Landlord harmless from and against any claims made by any utility companies
which arise from Tenant's use of such utilities or from Tenant's failure to
pay any bill rendered for utilities furnished to the Premises.

13.2 It is understood and agreed that Landlord shall not have any
liability to Tenant whatsoever as a result of Landlord's failure or inability
to furnish any of the utilities or services required to be furnished by
Landlord under the terms of this Lease, whether resulting from breakdown,
removal from service for maintenance or repairs, strikes, scarcity of labor or
materials, acts of God, governmental requirements or from any other cause
whatsoever. It is further agreed that any such failure or inability to furnish
the utilities or services required hereunder shall not be considered an
eviction, actual or constructive, of Tenant from the Premises, and shall not
entitle Tenant to terminate this Lease or to an abatement of any rent payable
hereunder.

13.3 (a) Notwithstanding provisions of Section 13.2 to the contrary,
if (i) Landlord fails or is unable to furnish the utilities or services which
Landlord is required to provide or furnish pursuant to Section 13.1 hereof for
a period of more than seven (7) consecutive business days, (ii) Landlord has
not commenced or its not diligently pursuing curing such interruption or
inability to furnish such utilities or services, (iii) such interruption is not
the result or strikes, unavailability of parts or other materials, or any other
cause beyond Landlord's reasonable control and (iv) such interruption
materially impairs the use of the Premises by Tenant and provided that Tenant
does not use the Premises for any purpose during the period any such
interruption exists, then, Tenant shall

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be entitled to a pro rata abatement of rent beginning on the eighth (8th)
business day that the Premises are unusable and continuing until the use of the
Premises is restored to Tenant.

(b) Landlord will use its commercially reasonable efforts
(including, in Landlord's sole discretion, reasonable expenditures of money) to
cause the prompt restoration of any interrupted utility services; further,
should any equipment or machinery in the Building for which Landlord has
responsibility pursuant to Article VIII hereof break down so as to render the
Premises unusable by Tenant, Landlord shall promptly repair or replace it
(subject to delays which result from strikes, unavailability of parts or other
materials or other matters beyond Landlord's control).

13.4 Tenant shall not perform any acts, carry on any activities or
store any materials on the Premises which may damage the Premises, the
Building, or the land upon which the Building is situated, or be a menace or
nuisance to the other tenants in the Building, if any. Tenant shall not store
or place any materials, crates, boxes, equipment, abandoned trailers or
automobiles in or on the parking areas, access roads or landscaped area
adjacent to the Building. Tenant shall keep the Premises clean at all times
and shall store all trash, rubbish and debris within the Premises, or outside
the Premises, in trash containers approved by Landlord.

13.5 Tenant shall be responsible for its own trash removal and char and
janitorial services.

13.6 If Tenant, by its own act or neglect, or as a result of the act or
neglect of any of its employees or agents, shall damage any portion of the
Park, the Premises, the Building, or the land upon which it is situated, or
shall fail to remove any trash or hazardous or noxious waste which requires
special handling, Tenant shall reimburse Landlord for any additional costs to
Landlord occasioned thereby excepting losses or damages for which Landlord is
or is required to be insured under this Lease.

ARTICLE XIV
LIABILITY OF LANDLORD

14.1 Except as otherwise provided in Article XIII or Article XVI hereof,
Landlord shall not be liable to Tenant, its employees, agents, business
invitees, licensees, customers, clients, family members or guests for any
damage, injury, loss, compensation or claim, including, but not limited to,
claims for the interruption of or loss to Tenant's business, based on, arising
out of or resulting from any cause whatsoever, including but not limited to the
following: (i) repairs to any portion of the Premises or the Building; (ii)
interruption in the use of the Premises; (iii) any accident or damage resulting
from the use or operation (by Landlord, Tenant or any other person or persons)
of elevators (if any), or of the heating, cooling, electrical or plumbing
equipment or apparatus; (iv) the termination of this Lease by reason of the
destruction of the Premises or the Building; (v) any fire, robbery, theft,
mysterious disappearance and/or any other casualty; (vi) the actions of other
tenants in the Building, if any, or of any other person or persons; and (vii)
any leakage in any part or portion of the Premises or the Building, or from
water, rain or snow that may leak into, or flow from, any part of the Premises
or the Building, or from drains, pipes or plumbing fixtures in the Building;

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provided, however, that Landlord shall not be released from liability pursuant
to this Section 14.1 for personal injuries caused solely and directly by
Landlord's or its agents' or employees' gross negligence or willful misconduct.
Any goods, property or personal effects stored or placed by the Tenant or its
employees in or about the Premises or Building shall be at the sole risk of
Tenant, and Landlord shall not in any manner be held responsible therefor. In
no event shall Landlord have any liability to Tenant for any claims based on
the interruption of or loss to Tenant's business or for any consequential
damages or incidental losses whatsoever.

14.2 Tenant hereby agrees to indemnify and hold Landlord harmless from
and against all costs, damages, claims, liabilities and expenses (including
reasonable attorneys' fees and costs of litigation) suffered by or claimed by
any third party against Landlord, directly or indirectly, based on, arising out
of or resulting from (i) Tenant's use and occupancy of the Premises or the
business conducted by Tenant therein, (ii) any accident, injury or damage
whatsoever caused to any person, or to the property of any person, occurring on
or about the Premises during the Lease Term, (iii) any act or omission to act
by Tenant or its employees, contractors, agents, licensees, or invitees, or
(iv) any breach or default by Tenant in the performance or observance of its
covenants or obligations under this Lease; provided that Tenant's obligations
to indemnify and hold harmless Landlord pursuant to this Section 14.2 shall not
include any costs, damages, claims, liabilities, or expenses suffered by or
claimed against Landlord solely and directly based on, arising out of or
resulting from any negligence or willful misconduct of Landlord or its agents
or employees. In no event shall Tenant have any liability to Landlord for
rental losses, beyond the amount of any commercially reasonable deductible, for
which Landlord has obtained insurance or for any consequential damages or
incidental losses whatsoever.

14.3 Landlord hereby agrees to indemnify and hold Tenant harmless from
and against all governmental or quasi-governmental fines and penalties,
including without limitation clean-up costs, assessed against Tenant as a
result of there being discovered to be present in, on, or under the Building
and/or any other portion of the Park any toxic or hazardous wastes, substances
or related materials (collectively, "Hazardous Materials"); provided that
Landlord's obligation to indemnify and hold harmless Tenant pursuant to this
Section shall not include any costs, damages, claims, liabilities, or expenses
assessed against, suffered by or claimed against Tenant based on, arising out
of or resulting from any act or omission of Tenant or its agents, employees,
business invitees, licensees, customers, clients, family members, guests,
subtenants or assignees. As used herein, Hazardous Materials shall include,
but not be limited to, substances defined as "hazardous substances" or "toxic
substances" in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., Hazardous
Materials Transportation Act, 49 U.S.C. Section 1802, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., and those substances
similarly defined in the local and state laws of the Commonwealth of Virginia
and the regulations adopted and publications promulgated pursuant to said laws.

14.4 In the event that at any time Landlord shall sell or transfer the
Building, provided the purchaser or transferee assumes the obligations of
Landlord hereunder, the Landlord named herein shall not be liable to Tenant for
any obligations or liabilities based on or arising out of events or

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<PAGE> 31
conditions occurring on or after the date of such sale or transfer.
Furthermore, Tenant agrees to attorn to any such purchaser or transferee upon
all the terms and conditions of this Lease.

14.5 In the event that at any time during the Lease Term Tenant shall
have a claim against Landlord, Tenant shall not have the right to deduct the
amount allegedly owed to Tenant from any rent or other sums payable to Landlord
hereunder, it being understood that Tenant's sole remedy for recovering upon
such claim shall be to institute an independent action against Landlord, as
provided in Section 18.8 hereof.

14.6 Tenant agrees that in the event Tenant is awarded a money judgment
against Landlord, Tenant's sole recourse for satisfaction of such judgment
shall be limited to execution against Landlord's equity interest in the
Building at the time of such execution. In no event shall Landlord or any
partner of Landlord or any other person be held to have any personal liability
for satisfaction of any claims or judgments that Tenant may have against
Landlord.

14.7 (a) Landlord hereby agrees to indemnify and hold Tenant harmless
from and against all costs, damages, claims, liabilities and expenses
(including reasonable attorney's fees and costs of litigation) suffered by or
claimed against Tenant, directly or indirectly, based on, arising out of or
resulting from (i) any accident, injury or damage whatsoever caused to any
person, or the property of any person, on or about the common or public areas
of the Building within Landlord's exclusive control during the Lease Term, (ii)
Landlord's negligence or intentional, wrongful acts or failure to comply with
applicable Legal Requirements or (iii) any breach or default by Landlord in the
performance or observance of its covenants or obligations under this Lease;
except, to the extent such accident, injury, damage, failure, breach or default
is a result of Tenant's or any of its agents, contractors or employees'
negligence, misconduct or wrongful act or omission to act and except, further,
that Landlord's obligation to indemnify Tenant pursuant to clauses (i), (ii)
and (iii) of this Section 14.7(a), shall be applicable and shall be enforceable
only to the extent that Tenant has suffered an actual and demonstrable loss
directly caused by the breach or default by Landlord in the performance or
observance of its covenants or obligations under this Lease or the negligence
of Landlord or its employees; and provided, however, that in no event shall
Landlord have any liability to Tenant for claims based on the interruption of
or loss to Tenant's business or for any indirect losses or consequential
damages whatsoever. Notwithstanding anything to the contrary in this Section
14.7(a) or elsewhere in this Lease, this Section 14.7(a) shall not apply to the
holder of any mortgage or deed of trust secured by the Building if such holder
acts as landlord under this Lease or otherwise owns or holds title to the
Building by foreclosure or deed-in-lieu of foreclosure.

(b) Throughout the Lease Term, Landlord shall obtain and maintain
comprehensive public liability insurance in a company or companies licensed to
do business in the Commonwealth of Virginia and reasonably approved by Tenant.
Such insurance shall include contractual liability and shall be in minimum
amounts of One Million Dollars ($1,000,000) per occurrence plus a general
aggregate of Two Million Dollars ($2,000,000) for injury to persons and damage
to property.

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<PAGE> 32
ARTICLE XV
RULES AND REGULATIONS

15.1 This Lease is made subject to the provisions of the Declaration of
Covenants recorded in Deed Book 4108 at page 474, among the land records of
Fairfax County, Virginia, as amended in Deed Book 4164 at page 291, Deed Book
5454 at page 810, Deed Book 5541 at page 702 and assigned in Deed Book 5455 at
page 20. A copy of the Declaration of Covenants and said First Amendment are
attached hereto as Exhibit C. Tenant agrees to observe and comply with all
provisions of said Declaration of Covenants, as amended, which may be
applicable to it.

15.2 Tenant agrees to comply with and observe such reasonable rules and
regulations pertaining to the use and occupancy of the Premises or the Building
as may be promulgated hereinafter by Landlord (the "Rules and Regulations").
Tenant's failure to keep and observe said Rules and Regulations shall
constitute a material breach of the terms of this Lease. Landlord reserves the
right from time to time to amend or supplement said Rules and Regulations and
to adopt and promulgate additional reasonable Rules and Regulations applicable
to the Premises and the Building, and upon receipt thereof, Tenant agrees
thereupon to comply with and observe any such additional, amended or
supplemental Regulations; provided that such Rules and Regulations shall be
applied and enforced by Landlord in a reasonable and non-discriminatory manner
against all tenants of the Building.

ARTICLE XVI
DAMAGE OR DESTRUCTION

16.1 If, during the Lease Term, the Premises or the Building are totally
or partially damaged or destroyed from any cause, thereby rendering the
Premises totally or partially inaccessible or unusable, Landlord shall
diligently (taking into account the time necessary to effectuate a satisfactory
settlement with any insurance company involved) restore and repair the Premises
and the Building to substantially the same condition they were in prior to such
damage; provided, however, if in the reasonable judgment of Landlord (i) the
repairs and restoration cannot be completed within ninety (90) days after the
occurrence of such damage, including the time needed for removal of debris,
preparation of plans and issuance of all required governmental permits, or (ii)
if more than fifty percent (50%) of the Building is rendered inaccessible or
unusable as a result of such damage, or (iii) the estimated cost of such
restoration, as prepared by Landlord's architect, exceeds the amount of
insurance proceeds available to Landlord for such restoration by more than ten
percent (10%) of such amount, then Landlord shall have the right, at its sole
option, to terminate this Lease by giving written notice of termination to
Tenant within thirty (30) days after the occurrence of such damage.
Notwithstanding the foregoing, Landlord shall not be entitled to terminate the
Lease pursuant to this Section 16.1 if the damage or destruction was caused
solely and directly by the act or omission of Landlord or its agents or
employees. If this Lease is terminated as aforesaid, all rent payable
hereunder shall be apportioned and paid to the effective date of the occurrence
of such damage or destruction, and Tenant shall have no further rights or
remedies as against Landlord pursuant to this Lease, or otherwise.

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<PAGE> 33
16.2 If, within thirty (30) days after the occurrence of the damage or
destruction described in Section 16.1, Landlord determines in its reasonable
discretion that the repairs and restoration cannot be completed within one
hundred twenty (120) days after the date of such damage or destruction but that
Landlord does not elect to terminate this Lease pursuant to Section 16.1, then
Landlord shall promptly notify Tenant of such determination. For a period
continuing through the fifteenth (15th) day after receipt of such notice,
Tenant shall have the right to terminate this Lease by providing written notice
thereof to Landlord, and the Lease Term shall end on the date of the giving of
such notice as if such date were the date originally provided herein as the end
of the Lease Term. If Tenant does not elect to terminate this Lease within
such period, and provided Landlord does not elect to terminate this Lease, then
Landlord shall proceed to repair and restore the Premises and the Building.
Notwithstanding any of the foregoing to the contrary, Tenant shall not have the
right to terminate this Lease if the act or omission of Tenant or any of its
employees, agents, licensees or subtenants shall have caused the damage or
destruction.

16.3 If this Lease is not terminated in accordance with the provisions of
Sections 16.1 or 16.2, and provided that such damage was not caused by the act
or omission to act of Tenant, or any of its employees, agents, licensees,
subtenants, invitees, customers, clients, family members or guests, until the
repair and restoration of the Premises is completed Tenant shall be required to
pay base rent and additional rent only for that part of the Premises that
Landlord and Tenant mutually agree, in their reasonable judgment, that Tenant
is able to use (as such use is contemplated by this Lease) while repairs are
being made, based on the ratio that the amount of usable rentable area bears to
the total rentable area in the Premises. Landlord shall bear the costs and
expenses of repairing and restoring the Premises, except that if such damage or
destruction was caused by the negligent act or omission to act or willful
misconduct of Tenant, or any of its employees, agents, licensees, subtenants or
invited guests, upon written demand from Landlord, Tenant shall pay to Landlord
the amount by which such costs and expenses exceed the insurance proceeds, if
any, received by Landlord on account of such damage or destruction or which
Landlord would have received had Landlord maintained the insurance required by
this Lease, where Landlord has failed to maintain such insurance.

16.4 If Landlord repairs and restores the Premises as provided in this
Article XVI, Landlord shall not be required to repair or restore any
decorations, alterations or improvements to the Premises previously made by or
at the expense of Tenant or any trade fixtures, furnishings, equipment or
personal property belonging to Tenant except the initial Tenant Improvements
contemplated herein and any other improvements to the Premises which are
required hereunder to be insured by Landlord. It shall be Tenant's sole
responsibility to repair and restore all such items which are not the
Landlord's responsibility hereunder.

ARTICLE XVII
CONDEMNATION

17.1 If the whole or any part of the Premises, or the use or occupancy of
the Premises, shall be taken or condemned by any governmental or
quasi-governmental authority for any public or

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<PAGE> 34
quasi-public use or purpose including a sale thereof under threat of such a
taking), then this Lease shall terminate on the date title thereto vests in
such governmental or quasi-governmental authority, and all base rent and
additional rent payable hereunder shall be apportioned as of such date. If such
condemnation or taking shall not be of any portion of the Premises but shall
result in a taking of twenty-five percent (25%) or more of the parking areas
adjacent to the Building, then either Landlord or Tenant shall have the option,
upon written notice to the other given within thirty (30) days after it
receives notice of the condemnation or taking, to terminate this Lease.

17.2 All awards, damages and other compensation paid by the condemning
authority on account of such taking or condemnation (or sale under threat of
such a taking) shall belong to Landlord, and Tenant hereby assigns to Landlord
all rights to such awards, damages and compensation. Tenant agrees not to make
any claim against the Landlord or the condemning authority for any portion of
such award or compensation attributable to damages to the Premises, the value
of the unexpired term of this Lease, the loss of profits or goodwill, leasehold
improvements or severance damages. Nothing contained herein, however, shall
prevent Tenant from pursuing a separate claim against the condemning authority
for the value of furnishings, equipment and trade fixtures installed in the
Premises at Tenant's expense and for relocation expenses, provided that such
claim does not in any way diminish the award or compensation payable to or
recoverable by Landlord in connection with such taking or condemnation.

ARTICLE XVIII
DEFAULT

18.1 The occurrence of any of the following shall constitute a default
by Tenant under this Lease:

(a) If Tenant shall fail to pay any installment of base rent or
additional rent when due and such failure shall continue uncured for a period
of ten (10) days after Landlord notifies Tenant in writing of such failure;
provided, however, that after Landlord has given Tenant two (2) such written
notices in any twelve (12)-month period, Tenant shall be in default if any
payment of base rent or additional rent during such twelve (12)-month period is
not made within ten (10) days after such payment is due (without the necessity
of any notice being sent by Landlord).

(b) If Tenant shall fail to pay when due any other payment
required by this Lease (other than base rent or additional rent), and such
failure shall continue for a period of twenty (20) days after Landlord notifies
Tenant, in writing, of such failure.

(c) If Tenant shall violate or fail to perform any other term,
condition, covenant or agreement to be performed or observed by Tenant under
this Lease and such violation or failure shall continue uncured for a period of
thirty (30) days after Landlord notifies Tenant in writing of such failure. If
such violation or failure is not capable of being cured within such thirty
(30)-day period, Tenant shall not be deemed to be in default hereunder if
Tenant commences curative action within

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<PAGE> 35
such thirty (30)-day period and proceeds diligently and in good faith
thereafter to cure such violation or failure until completion.

(d) If Tenant shall vacate or abandon the Premises for ten (10)
consecutive days and rent shall concurrently be in arrears.

(e) An Event of Bankruptcy as defined in Article XIX hereof.

18.2 If Tenant shall be in default under this Lease, including without
limitation a default prior to the Lease Commencement Date, Landlord shall have
the right, at its sole option, to terminate this Lease. In addition, with or
without terminating this Lease, Landlord may re-enter, terminate Tenant's right
of possession, and take possession of the Premises. The provisions of this
Article XVIII shall operate as a notice to quit, and Tenant waives any other
notice to quit or notice of Landlord's intention to re-enter the Premises or
terminate this Lease. If necessary, Landlord may proceed to recover possession
of the Premises under and by virtue of the laws of the Commonwealth of
Virginia, or by such other proceedings, including re-entry and possession, as
may be applicable. If Landlord elects to terminate this Lease and/or elects to
terminate Tenant's right of possession, then everything contained in this Lease
on the part of Landlord to be done and performed shall cease without prejudice,
however, to the right of Landlord to recover from Tenant all rent and other
sums due under this Lease. Whether or not this Lease and/or Tenant's right of
possession is terminated by reason of Tenant's default, Landlord shall have the
right to grant or withhold any consent or approval pursuant to this Lease in
its sole and absolute discretion. Landlord agrees to use reasonable efforts to
relet the Premises for such rent and upon such terms as are not unreasonable
under the circumstances, and if the full rental provided herein plus the costs,
expenses and damages hereafter described shall not be realized by Landlord,
Tenant shall be liable for all damages sustained by Landlord, including,
without limitation, deficiency in base rent and additional rent, reasonable
attorneys' fees, brokerage fees, and the commercially reasonable expenses of
placing the Premises in rentable condition consistent with the condition of the
Premises on the Rent Commencement Date. Tenant expressly acknowledges that
Landlord's agreement to use reasonable efforts to relet the Premises shall in
no event limit, restrict or prejudice in any way Landlord's and Landlord's
affiliates' and agents' rights to lease other space in the Park prior to
reletting the Premises. In addition, Landlord shall in no way be responsible
or liable for any failure to relet the Premises or any part thereof, or any
failure to collect any rent due or accrued upon such reletting, to the end and
intent that Tenant may be liable for the base rent, additional rent, and any
and all other items of cost and expense which Tenant shall have been obligated
to pay throughout the remainder of the Lease Term. Any damages or loss of rent
sustained by Landlord may be recovered by Landlord, at Landlord's option, at
the time of the reletting, or in separate actions, from time to time, as said
damage shall have been made more easily ascertainable by successive relettings,
or, at Landlord's option, may be deferred until the expiration of the Lease
Term, in which event Tenant hereby agrees that the cause of action shall not be
deemed to have accrued until the date of expiration of the Lease Term. The
provisions contained in this Section 18.2 shall be in addition to and shall not
prevent the enforcement of any claim Landlord may have against Tenant for
anticipatory breach of this Lease.

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<PAGE> 36
18.3 All rights and remedies of Landlord set forth herein are in addition
to all other rights and remedies available to Landlord at law or in equity.
All rights and remedies available to Landlord hereunder or at law or in equity
are expressly declared to be cumulative. The exercise by Landlord of any such
right or remedy shall not prevent the concurrent or subsequent exercise of any
other right or remedy. No delay in the enforcement or exercise of any such
right or remedy shall constitute a waiver of any default by Tenant hereunder or
of any of Landlord's rights or remedies in connection therewith. Landlord
shall not be deemed to have waived any default by Tenant hereunder unless such
waiver is set forth in a written instrument signed by Landlord. If Landlord
waives in writing any default by Tenant, such waiver shall not be construed as
a waiver of any covenant, condition or agreement set forth in this Lease except
as to specific circumstances described in such written waiver.

18.4 If Landlord shall institute proceedings against Tenant and a
compromise or settlement thereof shall be made, the same shall not constitute a
waiver of default or of any other covenant, condition or agreement set forth
herein, nor of any of Landlord's rights hereunder. Neither the payment by
Tenant of a lesser amount than the installments of base rent, additional rent
or of any sums due hereunder nor any endorsement or statement on any check or
letter accompanying a check for payment of rent or other sums payable hereunder
shall be deemed an accord and satisfaction, and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance of
such rent or other sums or to pursue any other remedy available to Landlord.
Notwithstanding any request or designation by Tenant, Landlord may apply any
payment received from Tenant to any payment then due. No re-entry by Landlord,
and no acceptance by Landlord of keys from Tenant, shall of itself be
considered an acceptance of a surrender of this Lease.

18.5 If Tenant defaults in the making of any payment or in the doing of
any act herein required to be made or done by Tenant, then Landlord may, but
shall not be required to, make such payment or do such act. If Landlord elects
to make such payment or do such act, all costs and expenses incurred by
Landlord, plus interest thereon at the rate per annum which is two percent (2%)
higher than the publicly announced "prime rate" then being charged by The Riggs
National Bank of Washington, D.C., from the date paid by Landlord to the date
of payment thereof by Tenant, shall constitute additional rent hereunder and
shall be immediately paid by Tenant to Landlord; provided, however, that
nothing contained herein shall be construed as permitting Landlord to charge or
receive interest in excess of the maximum rate then allowed by law. The taking
of such action by Landlord shall not be considered as a cure of such default by
Tenant or prevent Landlord from pursuing any remedy it is otherwise entitled to
in connection with such default.

18.6 If Tenant fails to make any payment of base rent or of additional
rent on or before the date such payment is due and payable, and shall fail to
make such payment within three (3) days of the date on which Landlord notifies
Tenant in writing, which written notice shall be required only in the case of
the first such late payment in any twelve (12) month period, Tenant shall pay
to Landlord a late charge of five percent (5%) of the amount of such payment.
In addition, such payment shall bear interest at the rate per annum which is
two percent (2%) higher than the publicly announced "prime rate" then being
charged by The Riggs National Bank of Washington, D.C., from

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<PAGE> 37
the date such payment became due to the date of payment thereof by Tenant;
provided, however, that nothing contained herein shall be construed as
permitting Landlord to charge or receive interest in excess of the maximum rate
then allowed by law. Such late charge and interest shall constitute additional
rent due and payable hereunder with the next installment of base rent due
hereunder.

18.7 Landlord shall be in default under this Lease if it fails to
perform any of its obligations hereunder and such failure continues for twenty
(20) days after Landlord has received written notice from Tenant specifying
such failure; provided, however, that if the failure is not susceptible to cure
within said twenty (20) day cure period, the period for such cure shall extend
for the period necessary to permit Landlord to cure the failure exercising
reasonable diligence. If the failure is not cured within such twenty (20) day
period to cure, as it may be extended, Tenant, subject to the provisions of
Section 20.3 hereof, may take such actions as are reasonably necessary to cure
the failure and Landlord shall promptly reimburse Tenant for the actual and
reasonable cost of curing such failure, together with any reasonable costs and
attorneys' fees, if any, actually incurred by Tenant in the exercise of its
rights hereunder.

ARTICLE XIX
BANKRUPTCY

19.1 The following shall be an Event of Bankruptcy under this Lease:

(a) Tenant's becoming insolvent, as that term is defined in Title
11 of the United States Code (the "Bankruptcy Code"), or under the insolvency
laws of any State, District, Commonwealth or territory of the United States
(the "Insolvency Laws");

(b) The appointment of a receiver of custodian for any or all of
Tenant's property or assets, or the institution of a foreclosure action upon
any of Tenant's real or personal property;

(d) The filing of an involuntary petition against Tenant as the
subject debtor under the Bankruptcy Code or Insolvency Laws, which either (i)
is not discussed within thirty (30) days of filing or (ii) results in the
issuance of an order or relief against the debtor; or

(e) Tenant's making or consenting to an assignment for the
benefit of creditors or a common law composition of creditors.

19.2 (a) Upon occurrence of an Event of Bankruptcy, Landlord shall have
all rights and remedies available to Landlord pursuant to Article XVIII,
provided that while a case in which Tenant is the subject debtor under the
Bankruptcy Code is pending and only for so long as Tenant or its Trustee in
Bankruptcy (hereinafter referred to as "Trustee") is in compliance with the
provisions of

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Section 19.2(b), (c) and (d) below, Landlord shall not exercise its rights and
remedies pursuant to Article XVIII.

(b) In the event Tenant becomes the subject debtor in a case
pending under the Bankruptcy Code, Landlord's right to terminate this Lease
pursuant to Section 19.2(a) shall be subject to the rights of Trustee to assume
or assign this Lease. Trustee shall not have the right to assume or assign
this Lease unless Trustee promptly (i) cures all defaults under this Lease,
(ii) compensates Landlord for monetary damages incurred as a result of such
defaults, and (iii) provides adequate assurance of future performance on the
part of Tenant as debtor in possession or on the part of the assignee tenant.

(c) Landlord and Tenant hereby agree in advance that adequate
assurance of future performance, as used in Section 19.2(b) above, shall mean
that all of the following minimum criteria must be met: (i) Tenant's gross
receipts in the ordinary course of business during the thirty (30) day period
immediately preceding the initiation of the case under the Bankruptcy Code must
be at least two (2) times greater than the next monthly installment of annual
base rent and additional rent due under this Lease; (ii) both the monthly
average and median of Tenant's gross receipts in the ordinary course of
business during the six month period immediately preceding the initiation of
the case under the Bankruptcy Code must be at least two (2) times greater than
the next monthly installment of annual base rent and additional rent due under
this Lease; (iii) Tenant must pay its estimated pro rata share of the cost of
all services provided by Landlord (whether or not previously included as a part
of the annual base rent) in advance of the performance or provision of such
services; (iv) Trustee must agree that Tenant's business shall be conducted in
a first-class manner and that no liquidating sales, auctions or other
non-first-class business operations shall be conducted on the Premises; (v)
Trustee must agree that the use of the Premises as stated in this Lease will
remain unchanged and that no prohibited use shall be permitted; (vi) Trustee
must agree that the assumption or assignment of this Lease will not violate or
affect the rights of other tenants in the Office Complex; (vii) Trustee must
pay to Landlord at the time the next monthly installment of annual base rent is
due under this Lease, in addition to such installment of annual base rent and
additional rent due under this Lease for the next six (6) months under this
Lease, said amount to be held by Landlord in escrow until either Trustee or
Tenant defaults in its payment of rent or other obligations under this Lease
(whereupon Landlord shall have the right to draw on such escrowed funds) or
until the expiration of this Lease (whereupon the funds shall be returned to
Trustee or Tenant); and (viii) Tenant or Trustee must agree to pay to Landlord
at any time Landlord is authorized to and does draw on the escrow amount to the
original level required by Section 19.2(c)(iii).

(d) In the event Tenant is unable to (i) cure its defaults, (ii)
reimburse Landlord for its monetary damages, (iii) pay the rent due under this
Lease and all other payments required of Tenant under this Lease on time (or
within five (5) days of the due date), or (iv) meet the criteria and
obligations imposed by Section 19.2(c) above, Tenant agrees in advance that it
has not met its burden to provide adequate assurance of future performance and
this Lease may be terminated by Landlord in accordance with Section 19.2(a)
above.

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ARTICLE XX
SUBORDINATION; MORTGAGES

20.1 This Lease is subject and subordinate to the lien of any and all
mortgages (which term "mortgages" shall include both construction and permanent
financing and shall include deeds of trust and similar security instruments)
which may now or hereafter encumber the Building, and to all and any renewals,
extensions, modifications, recastings or refinancings thereof. This Lease
shall also be subject and subordinate to (a) any new first mortgage that
hereafter may encumber the Building and (b) any second or junior mortgages that
hereafter may encumber the Building, provided that the holder of the first
mortgage consents to the subordination. At any time after the execution of
this Lease, the holder of any mortgage to which this Lease is subordinate shall
have the right to declare this Lease to be superior to the lien of such
mortgage, and Tenant agrees to execute all documents required by such holder in
confirmation thereof.

20.2 In confirmation of the foregoing subordination, Tenant shall, at
Landlord's request, promptly execute and deliver any requisite or appropriate
certificate or other document. Tenant agrees that neither the institution of
any suit, action or other proceeding by the holder of any mortgage on the
Building to realize upon such mortgage holder's interest in the Building, nor
any sale of the Building pursuant to the provisions of the Deed of Trust in
favor of such mortgage holder, shall by operation of law or otherwise, result
in the cancellation or termination of this Lease or of the obligations of
Tenant hereunder and that Tenant shall attorn to the purchaser at such
foreclosure sale, if requested to do so by such purchaser, and shall recognize
such purchaser as the landlord under this Lease. Tenant further agrees that
for the purposes of this Section 20.2, the term "purchaser" or "purchaser at a
foreclosure sale" shall mean, without limitation, a purchaser at a foreclosure
sale affecting the Building or the holder of any mortgage on the Building.
Tenant agrees that upon such attornment, such purchaser shall not (a) be bound
by any rent credits or payments of annual base rent or additional rent for more
than one (1) month in advance, except payments of annual base rent made
pursuant to the requirements of Section 3.1(a) hereof, (b) be bound by any
amendment of this Lease made without the consent of any lender providing
permanent financing for the Building if required by the terms of such Lender's
loan documents, (c) be liable for damages for any act or omission of any prior
landlord; or (d) be subject to any offsets or defenses which Tenant might have
against any prior landlord; provided, however, that after succeeding to
Landlord's interest under this Lease, such purchaser shall perform in
accordance with the terms of this Lease all obligations of Landlord arising
after the date such purchaser acquires title to the Building. Upon request by
such purchaser, Tenant shall execute and deliver an instrument or instruments
confirming its attornment.

20.3 (a) After receiving notice from any person, firm or other entity
that it holds a mortgage, deed of trust or a ground lease on the Building, or
the land on which the Building is situated, no notice from Tenant to Landlord
alleging any default by Landlord shall be effective unless and until a copy of
the same is given to such holder, Trustee, or ground lessor; provided, however,
that Tenant shall have been furnished with the name and address of such holder,
Trustee

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or ground lessor. The curing of any of Landlord's defaults by such holder,
Trustee or ground lessor shall be treated as performance by Landlord.

(b) In addition to the time afforded the Landlord for the curing
of any default, any such holder, Trustee, or ground lessor shall have an
additional thirty (30) days after the expiration of the period allowed to the
Landlord for the cure of any such default within which to commence a cure.

(c) In the event that any lender providing construction or
permanent financing or any refinancing for the Building requires, as a
condition of such financing, that modifications to this Lease be obtained, and
provided that such modifications (i) are reasonably acceptable to Tenant, (ii)
do not adversely affect in a material manner Tenant's use of the Premises as
herein permitted, and (iii) do not increase the rent and other sums to be paid
by Tenant hereunder, Landlord may submit to Tenant a written amendment to this
Lease incorporating such required changes, and Tenant hereby covenants and
agrees to respond to Landlord's request within ten (10) days of Tenant's
receipt thereof.

(d) Landlord shall use its reasonable efforts to obtain from any
future ground lessor or future holder of any mortgage or deed of trust on the
Building a non-disturbance agreement on such lessor's or holder's standard form
in favor of Tenant to the end and intent that as long as Tenant pays all rent
when due and punctually observes all other covenants and obligations on its
part to be observed under the Lease, the terms and conditions of this Lease
shall continue in full force and effect and Tenant's possession, use and
occupancy of the Premises shall not be disturbed during the term of this Lease
by the holder of such mortgage or deed of trust or by any purchaser upon
foreclosure of such mortgage or deed of trust. Landlord represents to Tenant
that as of the date of this Lease neither the Building nor the land upon which
it is situated is encumbered by a mortgage or deed of trust. Landlord shall
notify Tenant of the name and address of any future holder of a mortgage or
deed of trust secured by the Building, promptly after such mortgage or deed of
trust is recorded among the land records of Fairfax County, Virginia.

20.4 Notwithstanding any other provision of this Lease, in particular
this Article XX, this Lease shall not be subordinate to, and Tenant shall not
subordinate its interest in this Lease nor be required to execute further
instruments of subordination in favor of, the interest of any holder(s) of any
lien, mortgage, deed of trust or other encumbrance which may in the future,
after the execution of this Lease, affect the Building or the Property, unless
the holder of such lien, mortgage, deed of trust or other encumbrance (the
"Mortgagee") shall execute and deliver to Tenant a non-disturbance agreement in
such Mortgagee's usual, but reasonable, form, providing that so long as Tenant
is not in default under the terms and provisions of this Lease, Tenant's
interest in the Lease and possession of the Premises shall not be disturbed by
any foreclosure sale or other action by the Mortgagee or its successors in
title or interest, as mortgagee-in-possession or otherwise.

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ARTICLE XXI
HOLDING OVER

21.1 In the event that Tenant shall not immediately surrender the
Premises on the date of the expiration of the Lease Term, Tenant shall become a
tenant by the month at one hundred twenty-five percent (125%) of the base rent
and all additional rent in effect during the last month of the Lease Term.
Said monthly tenancy shall commence on the first day following the expiration
of the Lease Term. As a monthly tenant, Tenant shall be subject to all the
terms, conditions, covenants and agreements of this Lease. Tenant shall give
to Landlord at least thirty (30) days' written notice of any intention to
vacate the Premises, and Tenant shall be entitled to thirty (30) days' written
notice to quit the Premises, unless Tenant is in default hereunder, in which
event Tenant shall not be entitled to any notice to quit, the usual thirty (30)
days' notice to quit being hereby expressly waived. Notwithstanding the
foregoing provisions of this Section 20.1, in the event that Tenant shall hold
over after the expiration of the Lease Term, and if Landlord shall desire to
regain possession of the Premises promptly at the expiration of the Lease Term,
then at any time prior to Landlord's acceptance of rent from Tenant as a
monthly tenant hereunder, Landlord, at its option, may forthwith re-enter and
take possession of the Premises without process, or by any legal process in
force in the Commonwealth of Virginia.

ARTICLE XXII
COVENANTS AND REPRESENTATIONS OF LANDLORD

22.1 Landlord covenants that it is the fee owner of the Building and the
land on which it is situated and, except for mortgages now or hereafter placed
against the said land or Building by Landlord in accordance with the provisions
of Article XIX hereof, the said land and Building are free and clear of all
leases, tenancies, mortgages, liens or encumbrances except as set forth in this
Lease. Landlord covenants that it has the right to make this Lease for the
term aforesaid, and that if Tenant shall pay all rent when due and punctually
perform all the covenants, terms, conditions and agreements of this Lease to be
performed by Tenant, Tenant shall, during the term hereby created, freely,
peaceably and quietly occupy and enjoy the full possession of the Premises
without molestation or hindrance by any person whatever claiming an interest in
the Premises prior or superior to Tenant's, subject to the provisions of
Section 20.2 hereof. Tenant acknowledges and agrees that its leasehold estate
in and to the Premises vests on the date this Lease is executed,
notwithstanding that the Lease Term will not commence until a future date.

22.2 Landlord hereby reserves to itself and its successors and assigns
the following rights (all of which are hereby consented to by Tenant): (i) if
required by applicable law in Landlord's reasonable judgment, to change the
street address and/or the arrangement and/or location of entrances,
passageways, doors, doorways, corridors, elevators, stairs, toilets, or other
public parts of the Building; and (ii) to erect, use and maintain pipes and
conduits in and through the Premises. Landlord may exercise any or all of the
foregoing rights without being deemed to be guilty of an eviction, actual or
constructive, or a disturbance or interruption of the business of Tenant or of
Tenant's use or occupancy of the Premises.

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22.3 To the best of Landlord's actual knowledge as of the date of this
Lease, no independent or professional investigation or additional inquiry
having been performed or relied on by Landlord, (i) no Hazardous Materials, as
hereinafter defined, are located on or about the Property nor has Landlord,
during its period of ownership of the Property, used the Property for the
storage, manufacture or disposal of Hazardous Materials and (ii) during the
period of Landlord's ownership of the Property, the Property has never been
listed by the Commonwealth of Virginia or by any agency of the Federal
government, as containing any oil, hazardous waste, hazardous material,
chemical waste, or other toxic substance. For the purposes of this Agreement,
"Hazardous Materials" shall mean "hazardous substance," "hazardous waste" and
"hazardous material" as defined in the Comprehensive Environmental Response
Compensation and Liability Act of 1984, 42 U.S.C. Section 9601 et. seq., as
amended, the Resource Conservation and Recovery Act of 1976, amended and the
Hazardous and Solid Waste Amendment of 1984, as amended, the regulations
adopted pursuant thereto and any other federal, state and local law, statute or
ordinance or any court or administrative decree or any private agreement with
any governmental authority pertaining to hazardous or toxic materials,
substances, pollutants, contaminants or waste.

22.4 Landlord represents that on the Lease Commencement Date, to the
best of its actual knowledge, the common and public areas of the Building
within Landlord's exclusive control shall comply with and not be in violation
of any municipal, county, state, federal and other applicable government
authorities, including, without limitation, the Americans with Disabilities Act
of 1990. Landlord shall be responsible for the continuous compliance of the
common areas of the Building with the mandatory requirements of such laws
throughout the Lease Term.

ARTICLE XXIII
PARKING

23.1 (a) During the Lease Term, Landlord shall provide, at no charge
to Tenant, unassigned parking spaces in the parking lot immediately adjacent to
the Building for use by Tenant, its guests, invitees and employees in an amount
equal to four (4) spaces for every one thousand (1,000) square feet of rentable
area in the Premises. Tenant accepts said parking area in its "as is" condition
as of the date hereof.

(b) Included among the parking spaces described in subsection (a)
above, Landlord will provide Tenant with reserved parking spaces for the
parking of eight (8) standard sized passenger automobiles in the parking lot.
Such parking spaces will be located at the places shown on Exhibit A-1 attached
hereto and made a part hereof. The location of such reserved parking spaces is
subject to change by Landlord; provided, however, that the relocation of such
reserved parking spaces shall be subject to Tenant's prior approval, which
approval shall not be unreasonably withhold, conditioned or delayed. Landlord
shall have the duty and obligation to enforce the reserved parking provided to
Tenant in this Section 24.1(b) but Landlord shall not be liable to Tenant for
any unauthorized vehicles which are parking in such reserved spaces.

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(c) Except as provided in Section 24.1(b) above, it is understood
and agreed that no specific parking spaces will be allocated for use by Tenant.
Each user of the parking lot will have the right to park in any available
parking space in accordance with regulations of uniform applicability
promulgated by Landlord.

23.2 It is understood and agreed that the Landlord does not assume any
responsibility for, and shall not be held liable for, any damage or loss to any
automobiles parked in the parking area or to any personal property located
therein, or for any injury sustained by any person in or about the parking
area.

ARTICLE XXIV
EXPANSION

24.1 Landlord agrees that Tenant shall have the right, at any time and
from time to time during the Lease Term, to lease additional space in the
Building which is contiguous to the Premises (the "Additional Space") as it
becomes available following the vacation of such leased space by the then
current tenant of such space, subject to the following terms and conditions:

(a) Landlord shall notify Tenant of the availability of the
Additional Space.

(b) The annual base rent and additional rent with respect to the
Additional Space shall be the same amount per square foot and shall be adjusted
at the same time and in the same manner as the adjusted annual base rent and
additional rent then in effect with respect to the original Premises.

(c) For a period of ten (10) days after receipt of any such
notice from Landlord, Tenant shall have the right to lease the Additional Space
from Landlord upon the terms and conditions set forth in this Lease (but
without any obligation on the part of Landlord to construct, alter, renovate,
repaint, recarpet or provide any construction allowance for tenant improvements
in the Premises) commencing on the date the Additional Space becomes available
as set forth in the notice from Landlord. In the event Tenant agrees to lease
the Additional Space within such ten (10) day period, Landlord and Tenant shall
promptly execute an amendment to the Lease indicating the location and
configuration of the Additional Space. The number of square feet of rentable
area of the Premises shall be measured and calculated by Landlord's architect
in accordance with the provisions of Exhibit E attached hereto and shall be set
forth in the amendment to the Lease.

(d) In no event shall Tenant have the right to lease less than
all of the Additional Space available.

(e) Tenant shall accept the Additional Space in "as is" condition
and Landlord shall have no obligation to provide Tenant with an improvement
allowance with respect to the Additional Space. All work performed in the
Additional Space shall be performed in accordance with the terms and provisions
of this Lease.

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(f) Tenant shall be obligated to pay additional rent with respect
to the Additional Space in accordance with the provisions of Article IV of this
Lease.

(g) In the event Tenant does not agree to lease the Additional
Space within the ten (10) day period provided in Section 24.1(c) above or if
Tenant fails to timely notify Landlord of its election to lease the Additional
Space, Landlord shall have the right to lease such space to any other person or
entity upon any terms and conditions which Landlord desires, in its discretion.

(h) The term of the lease for such Additional Space shall be for
a period of not less than one (1) year and, if there is more than one (1) year
remaining in the Lease Term, shall be coincident with the remaining Lease Term
(subject to Tenant's right to renew such term) under the Lease.

24.2 If Tenant is in default under the Lease beyond any applicable
notice and cure period, on the date Landlord's notice is given to Tenant by
Landlord or at any time thereafter but prior to the commencement of the term
for such Additional Space and if such default is not cured within the
applicable notice and cure period, if any, provided in this Lease, then, at
Landlord's option, Tenant's right to lease the Additional Space shall lapse and
be of no further force or effect.

24.3 Tenant's right under this Article XXIV are subject to (a)
Landlord's obligation to extend or renew the lease of the then current tenant
of such space beyond the expiration date of such tenant's lease upon any terms
and conditions to which Landlord and such tenant may agree pursuant to the
terms of such tenant's lease with Landlord and (b) to any expansion rights of
any other tenant occupying space in the Building with respect to such tenant's
right to lease the Additional Space.

24.4 Network Solutions, Inc. shall not be entitled to exercise its
rights under this Article XXIV to lease any Additional Space if at the time
Tenant would otherwise be entitled to exercise its rights, Network Solutions,
Inc. (together with any of its subcontractors working in the Premises) is
occupying less than fifty percent (50%) of the Premises.

ARTICLE XXV
TERMINATION

25.1 Subject to the provisions of this Article XXV, Tenant shall have
the one-time right, exercisable at its option, to terminate this Lease with
respect to all or a portion of the Premises effective at the expiration of the
fourth (4th) Lease Year. Tenant shall have no right to terminate this Lease if
Tenant shall be in default of its obligations under this Lease, beyond any
applicable notice and cure period, on the effective date of termination.

25.2 Tenant may exercise its right of cancellation under this Article
XXV by (a) giving Landlord no less than six (6) months prior written notice of
the date on which this Lease shall be so terminated (the "Termination Notice"),
(b) specifying in the Termination Notice which portion of the Premises which it
intends to surrender to Landlord in accordance with Exhibit F attached hereto

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and made a part hereof (the "Surrendered Premises") and (c) paying to Landlord,
not more than thirty (30) days after the date on which it delivers its
Termination Notice to Landlord, a termination payment (the "Termination
Payment") in a sum equal to the aggregate of: (i) Four Dollars and Seventy-One
Cents ($4.71) multiplied by the number of square feet in the Surrendered
Premises (which amount has been calculated based on the unamortized portion of
the Tenant Improvement Allowance and brokerage commissions as if such costs are
amortized over a five (5) year period with interest at the rate of ten percent
(10%) per annum) plus (ii) two (2) monthly installments of base rent then being
paid by Tenant with respect to the Surrendered Premises on the date the
Termination Notice is delivered to Landlord. In addition to the Termination
Payment, Tenant shall pay to Landlord, promptly after the full amount of such
costs are determined and Landlord submits to Tenant an invoice therefor, all
costs of separating the Surrendered Premises from the remaining Premises,
including, but not limited to, any and all architect's fees and other costs of
constructing demising walls and making other alterations and improvements to
the Surrendered Premises or the remaining Premises as may be necessary as a
result of such separation of the Surrendered Premises from the remaining
Premises, in order to comply with all applicable building codes, zoning laws
and other legal requirements (collectively, "Legal Requirements") or in order
to render the Surrendered Premises readily marketable to other tenants, as
reasonably determined by Landlord. The costs of separating the Surrendered
Premises shall not include any tenant allowances or tenant build-out costs for
improvements not directly related to the separation of the Surrendered Premises
from the remaining Premises; provided, however, in the event Tenant elects to
surrender Surrendered Premises A as shown on Exhibit F the costs of separating
the Surrendered Premises shall include the costs of designing and installing a
bathroom facility which satisfies all applicable Legal Requirements in
Surrendered Premises A.

25.3 Tenant's rights under this Section 25.3 are expressly subject to
Landlord's ability, in good faith, to separate the Surrendered Premises from
the remaining Premises on or before the effective date of the partial
termination in compliance with all applicable Legal Requirements. In addition,
Landlord shall have the right to redefine the portion of the Premises which
will comprise the Surrendered Premises if Landlord reasonably determines that
such redefinition is necessary to facilitate compliance with Legal Requirements
or the marketing of such space. Landlord agrees to consult with Tenant
concerning any such redefinition of the Surrendered Premises, Landlord hereby
reserving unto itself, however, final decision making authority over such
matter in accordance with the preceding sentence. If the Surrendered Premises
cannot be separated from the remaining Premises in compliance with all
applicable Legal Requirements, then, provided Landlord has redefined the
Surrendered Premises in accordance with the terms hereof, tenant's sole
recourse shall be to withdraw the Termination Notice with respect to the
Surrendered Premises, whereupon such notice shall become null and void and of
no force or effect.

25.4 If the Termination Notice is not given timely or if the
Termination Payment is not made timely to Landlord, Tenant's right of
cancellation shall be of no force or effect and this Lease shall continue
through the full Lease Term. If the Termination Notice is given timely and the
Termination Payment is made timely, this Lease with respect to the Surrendered
Premises shall terminate on the effective date set forth in the Termination
Notice.

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25.5 Notwithstanding anything to the contrary in this Article XXV,
Tenant shall remain liable for any payments which may become due under the
Lease which relate to costs or expenses incurred by Landlord prior to the
effective date of termination of this Lease.

ARTICLE XXVI
GENERAL PROVISIONS

26.1 Tenant acknowledges that neither Landlord nor any broker, agent or
employee of Landlord has made any representations or promises with respect to
the Premises or the Building except as herein expressly set forth, and no
rights, privileges, easements or licenses are being acquired by Tenant except
as herein expressly set forth.

26.2 Nothing contained in this Lease shall be construed as creating a
partnership or joint venture of or between Landlord and Tenant, or to create
any other relationship between the parties hereto other than that of landlord
and tenant.

26.3 Landlord and Tenant recognize Barnes, Morris, Pardoe & Foster and CB
Commercial Real Estate Group, Inc. as the brokers procuring this Lease and
Landlord shall pay said brokers a commission pursuant to a separate agreement
between said brokers and Landlord. Landlord and Tenant each represents and
warrants to the other that, except as provided in the preceding sentence,
neither of them has employed or dealt with any broker, agent or finder in
carrying on the negotiations relating to this Lease. Each party shall
indemnify and hold the other harmless from and against any claim or claims for
brokerage or other commissions asserted by any broker, agent or finder engaged
by the indemnifying party or with whom the indemnifying party has dealt in
connection with this Lease, other than the brokers named in the first sentence
of this Section 26.3.

26.4 Tenant agrees, at any time and from time to time, upon not less than
five (5) days' prior written notice by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing substantially in the form of
Exhibit E attached hereto (i) certifying that this Lease is unmodified and in
full force and effect (or if there have been any modifications, that the Lease
is in full force and effect as modified and stating the modifications); (ii)
stating the dates to which the rent and any other charges hereunder have been
paid by Tenant; (iii) stating whether or not, to the best knowledge of Tenant,
Landlord is in default in the performance of any covenant, agreement or
condition contained in this Lease, and if so, specifying the nature of such
default; (iv) stating the address to which notices to Tenant are to be sent;
and (v) stating such other information as Landlord or any mortgagee or
prospective mortgagee of the Building may reasonably request. Any such
statement delivered by Tenant may be relied upon by any owner of the Building
or the land upon which it is situated, any prospective purchaser of the
Building or such land, any mortgagee or prospective mortgagee of the Building
or such land or of Landlord's interest therein, or any prospective assignee of
any such mortgagee.

26.5 Landlord and Tenant each hereby waive trial by jury in any action,
proceeding or counterclaim brought by either of them against the other in
connection with any matter arising out

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of or in any way connected with this Lease, the relationship of landlord and
tenant hereunder, Tenant's use or occupancy of the Premises, and/or any claim
of injury or damage.

26.6 All notices or other communications required hereunder shall be in
writing and shall be deemed duly given if delivered by a nationally recognized
overnight courier (with receipt therefor), or if sent by certified or
registered mail, return receipt requested, postage prepaid, to the following
addresses: (i) if to Landlord at Boston Properties, 500 E Street, S.W.,
Washington, D.C. 20024, with a "courtesy" copy to Boston Properties, 8
Arlington Street, Boston, Massachusetts 02116; (ii) if to Tenant, to 10260
Campus Point Court, San Diego, CA 92121, Attention: Corporate Leasing, with a
"courtesy" copy to Tenant at the Premises (provided, however, that any failure
to provided such courtesy copy shall not in any way invalidate or otherwise
impair the delivery of such notice to Tenant), except that prior to the Lease
Commencement Date, courtesy copies of notices to Tenant shall be sent to such
address as Tenant shall designate and inform Landlord. The parties shall
exercise reasonable efforts to give the "courtesy" copies of notices provided
for herein; however, failure to give such courtesy copies of notices shall not
under any circumstances affect the effectiveness of any notice given pursuant
to the provisions of this Lease. Either party may change its address for the
giving of notices by notice given in accordance with this Section.

26.7 If any provision of this Lease or the application thereof to any
person or circumstances shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each provision of this Lease shall be valid
and enforced to the fullest extent permitted by law.

26.8 Feminine or neuter pronouns shall be substituted for those of the
masculine form, and the plural shall be substituted for the singular number, in
any place or places herein in which the context may require such substitution.

26.9 The provisions of this Lease shall be binding upon, and shall inure
to the benefit of, the parties hereto and each of their respective
representatives, successors and assigns, subject to the provisions hereof
restricting assignment or subletting by Tenant.

26.10 This Lease contains and embodies the entire agreement of the
parties hereto and supersedes all prior agreements, negotiations and
discussions between the parties hereto. Any representation, inducement or
agreement that is not contained in this Lease shall not be of any force or
effect. This Lease may not be modified or changed in whole or in part in any
manner other than by an instrument in writing duly signed by both parties
hereto.

26.11 This Lease shall be governed by and construed in accordance with
the laws of the Commonwealth of Virginia.

26.12 Article and section headings are used herein for the convenience of
reference and shall not be considered when construing or interpreting this
Lease.

- 44 -
<PAGE> 48
26.13 The submission of an unsigned copy of this document to Tenant for
Tenant's consideration does not constitute an offer to lease the Premises or an
option to or for the Premises. This document shall become effective and
binding only upon the execution and delivery of this Lease by both Landlord and
Tenant.

26.14 Time is of the essence of each provision of this Lease.

26.15 This Lease shall not be recorded, except that upon the request of
either party, the parties agree to execute, in recordable form, a short-form
memorandum of this Lease, provided that such memorandum shall not contain any
of the specific rental terms set forth herein. Such memorandum may be recorded
in the land records of Fairfax County in the Commonwealth of Virginia and the
party desiring such recordation shall pay all recordation costs.

26.16 Except as otherwise provided in Section 4.4 and Section 5.1 of this
Lease any additional rent owed by Tenant to Landlord, and any cost, expense,
damage or liability shall be paid by Tenant to Landlord no later than the later
of (i) twenty (20) days after the date Landlord notifies Tenant of the amount
of such additional rent or such cost, expense, damage or liability, or (ii) the
day the next monthly installment of base rent is due. If any payment hereunder
is due after the end of the Lease Term, such additional rent or such cost,
expense, damage or liability shall be paid by Tenant to Landlord not later than
twenty (20) days after Landlord notifies Tenant of the amount of such
additional rent or such cost, expense, damage or liability.

26.17 All of Landlord's and Tenant's duties and obligations hereunder,
including but not limited to duties and obligations to pay or to refund
overpayments of base rent, additional rent and the costs, expenses, damages and
liabilities, shall survive the termination of this Lease.

26.18 In the event either party is in any way delayed, interrupted or
prevented from performing any non-monetary obligations under this Lease, and
such delay, interruption or prevention is due to fire, act of God, governmental
act, action or inaction (including, without limitation, government delays in
issuing any required building, construction, occupancy or other certificate,
permit or approval or performing any other inspection or review in connection
therewith) strike, labor dispute, inability to procure materials, or any other
cause beyond such party's reasonable control (whether similar or dissimilar),
then such party shall be excused from performing the affected obligations for
the period of such delay, interruption or prevention.

26.19 Each party hereby represents and warrants to the other that all
necessary corporate action has been taken to enter into this Lease and that the
person signing this Lease on its behalf has been duly authorized to do so.

26.20 Any amounts required to be paid by Tenant under this Lease
(including, but not limited to, the payments to be made pursuant to Sections
4.2, 4.3, 4.4, 13.1, 19.5 and 19.6) shall be considered additional rent. All
payments of additional rent shall be paid to Landlord without

- 45 -
<PAGE> 49
diminution, set-off or deduction in the same manner as annual base rent
pursuant to Article III hereof or as may otherwise be provided in this Lease.

26.21 Landlord and Tenant each hereby covenant and agree that each and
every provision of this Lease has been jointly and mutually authorized by both
Landlord and Tenant; and, in the event of any dispute arising out of any
provision of this Lease, Landlord and Tenant do hereby waive any claim of
authorship against the other party.

26.22 This Lease includes and incorporates Rider No. 1 (Option to renew
Lease) and Exhibits A, A-1, B, C, D, E and F attached hereto.

[signatures follow on the next page]

- 46 -
<PAGE> 50
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under
seal on or as of the day and year first above written.

LANDLORD:

SUGARLAND BUSINESS PARK LIMITED
PARTNERSHIP, a Delaware limited partnership

By: Sugarland, Inc., its general partner

WITNESS:

/s/ KATHRYN R. STEVENSON By: /s/ EDWARD H. LINDE
- ------------------------ ------------------------------
Edward H. Linde, President
[SEAL]

TENANT:

NETWORK SOLUTIONS, INC., a Delaware corporation

[KM] By: /s/ ROBERT J. KORZENIEWSKI
-------------------------------------------
Name: Robert J. Korzeniewski
--------------------------------------
Title: Chief Financial Officer
---------------------------------

ATTEST:

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

[CORPORATE SEAL]

- 47 -
<PAGE> 51
RIDER NO. 1

THIS RIDER NO. 1 is attached to and made a part of that certain Lease
Agreement dated ______________, 1997 (the "Lease"), by and between SUGARLAND
BUSINESS PARK LIMITED PARTNERSHIP ("Landlord") and NETWORK SOLUTIONS, INC.
("Tenant"). The terms used in this Rider which are defined in the Lease have
the same meanings as provided in the Lease.

WITNESSETH, that for and in consideration of Tenant's entering into the
Lease Agreement described above, and other good and valuable consideration, and
intending to be legally bound hereby, Landlord hereby grants to Tenant the
conditional right to renew the initial term of the Lease upon the following
terms and conditions:

(1) Provided Tenant has not terminated or elected to terminate the Lease
in accordance with the provisions of Section 2.1(b) thereof, Landlord hereby
grants to Tenant the conditional right, exercisable at Tenant's option, to
renew the term of the Lease for two (2) additional successive terms of three
(3) years each. If exercised and if the conditions applicable thereto have
been satisfied, the first such renewal term (the "First Renewal Term") shall
commence immediately following the end of the initial term provided in Section
2.1 of the Lease and the second such renewal term (the "Second Renewal Term")
shall commence immediately following the end of the First Renewal Term. The
rights of renewal herein granted to the Tenant shall be subject to, and shall
be exercised in accordance with, the following terms and conditions:

(a) Tenant shall exercise its right of renewal with respect to each
renewal term by giving Landlord written notice of the exercise thereof (the
"renewal option notice") not less than six (6) months and not more than nine
(9) months prior to the expiration of the preceding term of the Lease. In the
event that a renewal option notice is not given in a timely manner, Tenant's
right of renewal with respect to such renewal term and any subsequent renewal
term shall lapse and be of no further force or effect. If Tenant is in default
under the Lease on the date any renewal option notice is given or at any time
thereafter on or before the commencement date of such renewal term, then, at
Landlord's option, the right of renewal as to such renewal term, and any
subsequent renewal term, shall lapse and be of no further force or effect.

(b) Promptly following Landlord's timely receipt of the renewal option
notice for each renewal term, Landlord and Tenant shall commence negotiations
concerning the amount of annual base rent which shall be payable during such
renewal term, it being intended that such annual base rent shall be equal to
the greater of (i) ninety-five percent (95%) of the then prevailing fair market
rent for the Premises during each of the First Renewal Term and the Second
Renewal Term and (ii) one hundred three percent (103%) of the annual base rent
payable with respect to the Premises during the immediately preceding Lease
Year. The parties shall have thirty (30) days after Landlord's receipt of each
renewal option notice in which to agree in the base rent which shall be payable
during the year of the renewal term for which such renewal option notice was
given. The parties shall be obligated to conduct such negotiations in good
faith. Among the factors to be considered by the parties during such
negotiations shall be (i) the general office/flex building rental market in
Herndon, VA, (ii) rental rates then being realized by other building owners for
office/flex buildings of comparable size, location and quality to the Building
in Herndon, VA, and (iii) the
<PAGE> 52
rental rates then being quoted by Landlord to prospective tenants for
comparable space in "as is" condition in the Building. In no event, however,
shall the base rent payable during any year of any renewal term be less than
the base rent in effect under the Lease during the Lease Year immediately
preceding the commencement of such renewal term. If the parties agree on the
base rent payable during the year of a renewal term, they shall promptly
execute an amendment to the Lease stating the rent so agreed upon. If during
such thirty (30) day period the parties are unable to agree on the base rent
payable during such renewal term, the Tenant's option(s) to renew the term of
the Lease shall cease and expire and be of no further force or effect.

(c) During each renewal term, all the terms, conditions, covenants and
agreements set forth in the Lease shall continue to apply and be binding upon
Landlord and Tenant, except that (i) the base rent payable during each year of
each renewal term shall be the amount set forth in Paragraph 1(b) above and
(ii) in no event shall Tenant have the right to renew the term of the Lease, or
any renewal term thereof, beyond the expiration of the Second Renewal Term.

(2) In the event that Tenant's right of renewal with respect to the First
Renewal Term shall lapse for any reason, Tenant's right of Renewal with respect
to the Second Renewal Term shall similarly lapse and be of no further force or
effect.

(3) Tenant's rights of renewals provided under this Rider No. 1 are
personal to and may be exercised only by Network Solutions, Inc. and shall not
be exercisable by any assignee or subtenant of Network Solutions, Inc.

(4) Tenant shall not be entitled to exercise its rights under this
Rider No. 1 to renew the term of the Lease if at the time Tenant would
otherwise be entitled to exercise its rights, Tenant is occupying less than
fifty percent (50%) of the Premises.

Initials of:

E
---------------
Landlord

KM
---------------
Tenant

- 2 -
<PAGE> 53
EXHIBIT A

[GRAPHIC]

Initials of:

Landlord E
---------
Tenant KM
---------

<TABLE>
<S> <C> <C>
- -------------------
THE TOWER GROUP SUGARLAND BUSINESS PARK Boston Properties
- ------------------- 365 HERNDON PARKWAY 500 E Street, S.W.
A R C H I T E C T S HERNDON, VIRGINIA Washington, D.C.
</TABLE>

<PAGE> 54
EXHIBIT A-1

[GRAPHIC]

Landlord E
--------
Tenant KM
--------

<PAGE> 55
EXHIBIT B

The Tenant Rentable Area has been calculated based upon the GWCAR, (Greater
Washington Commercial Association of Realtors, formerly WDCAR) Standard Method
of Measurement dated June 13, 1995. The Rentable Area for a Tenant space in a
one-story building with no common core areas is calculated by measuring from
the finished surface of the dominant permanent perimeter wall surface
(including the inside face of glass at windows) to the center of any demising
partitions of adjoining areas.

The Rentable Area of a Tenant space in a Multi-Tenant building is a function of
the relationship between the Tenant Usable Area and the Building Common Area.
The Building Common Areas are spaces such as Common Corridors, Common
Toiletrooms and Common Service Rooms that are shared by more than one tenant.

The Usable Area for a Tenant space in a one-story building with common core
areas is calculated by deducting the Building Common Area from the Gross
Interior Area of the Building (as defined above).

The Rentable Area is calculated by dividing the Building Common Area by each of
the individual Tenant Usable Areas to identify the pro-rata share of the
Building Common Area. The Usable Area of each Tenant Area is then multiplied
by the pro-rata share fraction plus One (1) to identify the Tenant Rentable
Area.

Initials of:

Landlord E
---------
Tenant KM
-----------
<PAGE> 56
EXHIBIT E

FORM OF ESTOPPEL CERTIFICATE

This Exhibit E is attached to and made a part of that certain Lease
Agreement dated as of __________, 1997 (the "Lease"), between SUGARLAND
BUSINESS PARK LIMITED PARTNERSHIP ("Landlord") and NETWORK SOLUTIONS, INC.
("Tenant"). The terms used in this Exhibit that are defined in the Lease shall
have the same meaning as provided in the Lease. The Estoppel Certificate to be
executed by Landlord and Tenant pursuant to Section 2.1(c) of the Lease shall
provide as follows:

"This Estoppel Certificate made as of the ____ day of ________________,
1997, is being provided pursuant to the terms and provisions of that certain
Lease Agreement dated as of ____________, 1997 (the "Lease"), between SUGARLAND
BUSINESS PARK LIMITED PARTNERSHIP ("Landlord") and NETWORK SOLUTIONS, INC.
("Tenant"). The parties to the Lease desire to confirm that the following
terms which are defined in the Lease shall have the meanings set forth below
for all purposes in the Lease:

1. The Lease Commencement Date is ________________.

2. The initial term of the Lease shall expire on July 31, 2002.

3. The number of square feet of rentable area in the Building is
________________ and the number of square feet of rentable area in
the Premises is _______________ .

4. The annual base rent with respect to the Premises for the first
Lease Year is an amount equal to the product of
____________________________ Dollars ($___________) multiplied by
the total number of square feet of rentable area in the Premises.

5. As of the date hereof the Lease has not been modified and is in
full force and effect and there are no defaults thereunder.

Initials of:

- --------------------
Landlord

- --------------------
Tenant

<PAGE> 1
EXHIBIT 10.21

AMENDMENT NO. 1
TO
LEASE AGREEMENT

THIS AMENDMENT NO. 1 TO LEASE AGREEMENT (the "Amendment") is made as
of the 31st day of January, 1998 by and between BOSTON PROPERTIES LIMITED
PARTNERSHIP (successor-in-interest to "Landlord") and NETWORK SOLUTIONS, INC.
("Tenant").

WITNESSETH

WHEREAS, by Lease Agreement dated as of May 30, 1997 (the "Lease"),
Landlord leased to Tenant for an initial term of five (5) years and two (2)
months 31,247 square feet of rentable area located in the office/flex building
(the "Building") known as Sugarland I and located at 365 Herndon Parkway,
Herndon, Virginia, as such space is more particularly described in the Lease;
and

WHEREAS, Tenant desires to lease additional space in the Building
contiguous to the Premises on the terms and conditions set forth herein; and

WHEREAS, Landlord and Tenant wish to amend the Lease (i) to include in
the description of the premises covered thereby an additional 9,509 square feet
of rentable area in the Building (the "Additional Space"), as depicted on
Exhibit 1 attached hereto and made a part hereof and (ii) to modify the terms
and provisions of the Lease as hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and other good and valuable consideration the receipt and
sufficiency of which hereby is acknowledged, Landlord and Tenant hereby agree
to amend the Lease as follows:

1. Defined Terms. Except as otherwise provided herein, all of the
capitalized terms used herein shall have the same meanings as provided in the
Lease.

2. The Premises. Commencing on the Lease Commencement Date-II, as
defined in Paragraph 3(a) below, the definition of the "Premises" in the Lease
hereby is amended to include therein the Additional Space. In addition,
commencing on the Lease Commencement Date-II, Exhibit 1 attached hereto
depicting the floor plan for the Additional Space, hereby is added to Exhibit A
to the Lease. As a result, commencing on the Lease Commencement Date-II, the
aggregate number of square feet of rentable area comprising the Premises hereby
is increased to a total of 40,756 square feet. Commencing on the Lease
Commencement Date-II, the Additional Space shall be subject to all of the terms
and conditions of the Lease, except as otherwise provided below.

(b) Landlord and Tenant hereby agree that (i) the rentable area of
the Building (including the space used for the 900 KW generator and
uninterrupted power supply equipment) is 53,136 square feet and (ii) the
rentable area of the entire Premises including the Additional Space is 40,756
square feet.
<PAGE> 2
(c) The provisions of Section 1.4 of the Lease shall not apply to
the Additional Space.

(d) In the event the Lease Commencement Date-II is delayed, then,
promptly after the Lease Commencement Date-II is ascertained, Landlord and
Tenant shall execute a written declaration in substantially the form attached
as Exhibit E to the Lease, setting forth the Lease Commencement Date-II and
such other information as is provided therein.

3. Term. (a) The term of the Lease with respect to the Additional
Space shall commence on February 1. 1998 (the "Lease Commencement Date-II") and
shall be coterminous with the Lease Term (i.e. through July 31, 2002);
provided, however, that in the event delivery of the Additional Space is
delayed beyond February 1, 1998, then the Lease Commencement Date-II shall be
the day after the day Landlord notifies Tenant that the Additional Space is
available for Tenant to commence the work described in Paragraph 6 below.

(b) In the event that the delivery of possession of the Additional
Space to Tenant is delayed beyond February 1, 1998, regardless of the reasons
or causes of such delay, the Lease with respect to the Additional Space shall
not be rendered void or voidable as a result of such delay and the term of the
Lease with respect to the Additional Space shall commence on the Lease
Commencement Date-II, as determined in accordance with Paragraph 3(a) above.
In no event shall Landlord have any liability whatsoever to Tenant on account
of any such delay.

4. Base Rent. (a) Commencing on February 1, 1998 (the ?Rent
Commencement Date-II), Tenant shall pay to Landlord as annual base rent for the
Additional Space an amount equal to the product of (i) the dollar amount per
square foot of annual base rent being paid by Tenant on the Rent Commencement
Date-II with respect to the original Premises multiplied by (ii) the number of
square feet of rentable area in the Additional Space. The annual base rent for
the Additional Space shall be payable as provided in Sections 3.1 and 3.3 of
the Lease and shall be adjusted each Lease Year at the same times and in the
same manner as provided in Section 3.2 of the Lease with respect to adjustments
in the annual base rent payable for the original Premises. If the Rent
Commencement Date-II falls on a date other than on the first day of a month,
rent from such date until the first day of the following month shall be
prorated on a per diem basis and such prorated rent shall be payable in advance
on the Rent Commencement Date-II.

5. Additional Rent. (a) Commencing on the Rent Commencement
Date-II, the provisions of Article IV of the Lease respecting the payment by
Tenant of its proportionate share of Expenses incurred by Landlord in the
operation of the Building, shall be applicable to this lease of the Additional
Space. Accordingly, commencing on the Rent Commencement Date-II, Tenant's
proportionate share of Expenses shall be determined with reference to the
entire Premises, including the Additional Space.

(b) Commencing on the Rent Commencement Date-II, the second (2nd)
sentence of Section 4.3 of the Lease hereby is deleted in its entirety and the
following substituted therefore:

<PAGE> 3
For the purposes hereof, Tenant's proportionate share of
Expenses shall be Seventy-Six and Seven tenths percent (76.7%), which
is the proportion that the number of square feet of rentable area in
the Premises (40,756) bears to the total number of square feet of
rentable area in the Building (53,136).

6. Condition of the Additional Space. (a) Except as expressly
provided otherwise in this Amendment, the Additional Space shall be delivered
to and accepted by Tenant in its present "as-is" condition. It is understood
and agreed that Landlord will not make, and is under no obligation to make, any
structural or other alterations, decorations, additions or improvements in or
to the Additional Space. Notwithstanding the foregoing, on the Lease
Commencement Date-II, Landlord shall deliver the Base Building and the
mechanical systems serving the Additional Space to Tenant in substantially the
same condition in which Landlord was required to deliver the Base Building and
the equivalent systems serving the Premises in accordance with the Lease, in
particular Section 9.8 thereof, except that (i) there shall be no ceiling
tiles in the Additional Space and Landlord shall not be obligated to replace or
install or pay for the replacement or installation of such ceiling tiles, (ii)
there shall be no fire alarm system serving the Additional Space and Landlord
shall not be required to purchase or to install a fire alarm system for the
Additional Space and (iii) there are no ducts or diffusers downstream of the
VAV boxes serving the Additional Space. In addition to the Additional Space
Improvement Allowance described in subparagraph (b) below, Landlord shall
provide to Tenant an allowance in an amount to be agreed upon by Landlord and
Tenant which shall be applied solely to the costs and expenses incurred by
Tenant in connection with the installation of the ducts and diffusers required
to serve the Additional Space.

(b) It is understood and agreed that Tenant intends to make
certain alterations, renovations and improvements to the Additional Space
(collectively, the "Additional Space Improvements"). The Additional Space
Improvements (i) shall be done in accordance with Tenant's plans therefor which
shall be subject to the prior written approval of Landlord, which shall not be
unreasonably withheld, conditioned or delayed provided such plans comply with
all applicable Legal Requirements, (ii) shall be subject to the provisions of
Article IX and Article XIII of the Lease and (iii) shall be made at Tenant's
sole cost and expense; provided, however, that Landlord agrees to provide
Tenant with an improvement allowance (the "Additional Space Improvement
Allowance") in an amount equal to the product of (x) Fifteen Dollars ($15.00)
multiplied by (y) the number of square feet of rentable area in the Additional
Space, multiplied by (z) a fraction the numerator of which is the number of
full calendar months in the period commencing on the Rent Commencement Date-II
and continuing through the expiration of the Lease Term, excluding any Renewal
Term, as defined in Rider No. 1 to the Lease and the denominator of which is
sixty (60) (the number of complete calendar months commencing on the Rent
Commencement Date and continuing through the expiration of the initial Lease
Term). The Additional Space Improvement Allowance shall be applied, as
hereinafter set forth, to all "hard" and "soft" costs incurred in connection
with the design, construction and installation of the Additional Space
Improvements, including, without limitation, any and all architectural,
engineering and consulting fees and telephone and data cabling costs. The
funding of the Additional Space Improvement Allowance is subject to the
fulfillment by Tenant of all covenants and conditions set forth in the Lease
and this Amendment. In the event the entire Additional Space Improvement
Allowance is not utilized for the Additional Space Improvements on or before
December 31, 1998, such unused portion of the Additional Space Improvement

<PAGE> 4
Allowance shall be applied against the installment(s) of base rent due
commencing January 1, 1999 with respect to the Additional Space pursuant to
Paragraph 3 hereof.

(c) Tenant shall be responsible for the design and construction of
the Additional Space Improvements and Tenant shall obtain all necessary permits
to construct such Additional Space Improvements and legally occupy the
Additional Space. The timing of Tenant's completion of the Additional Space
Improvements and the receipt or issuance of any required building, special
exception, occupancy or other permits or approvals shall have no bearing on the
Lease Commencement Date-II, the Rent Commencement Date-II or Tenant's
obligation to pay base rent and additional rent as provided in Paragraph 4 and
Paragraph 5 above. Any and all construction, installation and other related
activity by Tenant or its contractors in the Additional Space prior to the Rent
Commencement Date-II shall be coordinated with Landlord in accordance with the
terms of Section 9.1 of the Lease. All terms and conditions of the Lease,
including, without limitation, the insurance, release and waiver of liability
provisions of Article XII and XIV thereof, shall apply to and be effective
during such period of occupancy by Tenant, except for Tenant's obligation to
pay any base rent or additional rent attributable to Expenses.

(d) Landlord and Tenant shall cooperate with each other and shall
work together in good faith to effect the timely completion of the Additional
Space Improvements. Where required all approval, consents or disapprovals or
denials of consent shall be delivered promptly after a request therefor. All
disapprovals or denials of consent shall include a statement of the reason for
such disapproval or denial of consent. Landlord and Tenant shall each use its
commercially reasonable efforts to comply with all construction schedules
created in connection with the performance of the work described in this Lease.

(e) Landlord and Tenant agree that Landlord's Work as defined in
Section 9.4 of the Lease has been Substantially Completed, as defined in
Section 9.4 of the Lease.

7. Parking. Landlord shall not be obligated to provide Tenant
reserved parking spaces in connection with its lease of the Additional Space.
Effective on the Lease Commencement Date-II, Tenant's pro rata share of parking
spaces in the parking lot immediately adjacent to the Building shall increase
to account for the rentable area of the Additional Space.

8. Incorporation of Lease Terms. All of the terms, conditions,
covenants and agreements set forth in the Lease (a) are incorporated herein by
reference, (b) shall remain in full force and effect, (c) shall apply to this
Amendment and the lease of the Additional Space and (d) shall be applicable to
and binding upon the parties hereto at all times during the term of the Lease
as if set forth herein, except to the extent expressly modified herein.

9. Broker. Landlord and Tenant recognize Barnes, Morris, Pardoe
& Foster and CB Commercial Real Estate Group, Inc. as the brokers procuring
this Amendment and Landlord shall pay said brokers a commission pursuant to a
separate agreement between said brokers and Landlord. Landlord and Tenant each
represents and warrants to the other that, except as provided in the preceding
sentence, neither of them has employed or dealt with any broker, agent or
finder in carrying on the negotiations relating to this Amendment. Each party
shall indemnify and hold the

<PAGE> 5
other harmless from and against any claim or claims for brokerage or other
commissions asserted by any broker, agent or finder engaged by the indemnifying
party or with whom the indemnifying party has dealt in connection with this
Amendment, other than the brokers named in the first sentence of this Paragraph
9.

IN WITNESS WHEREOF, Landlord and Tenant have executed this
Amendment No. 1 to Lease Agreement as of the date and year first above written.

<TABLE>
<S> <C>
BOSTON PROPERTIES LIMITED PARTNERSHIP,
a Delaware limited partnership
WITNESS:
By: Boston Properties, Inc., its general partner

/s/ LORI E. SUTHERLAND /s/ RAYMOND A. RITCHEY
- -------------------------------------- -------------------------------------------------
[SEAL] Raymond A. Ritchey, Senior Vice President

TENANT:

NETWORK SOLUTIONS, INC., a Delaware corporation

By: /s/ ROBERT J. KORZENIEWSKI
--------------------------------------------
Name: Robert J. Korzeniewski
------------------------------------------
Title: Chief Financial Officer
-----------------------------------------

ATTEST:

/s/ MARK MANDOLIA
- -------------------------------------
[CORPORATE SEAL]
</TABLE>

<PAGE> 6
[MAP]

<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-43821 and No. 333-45873) of Network Solutions,
Inc. of our reports dated February 6, 1998 appearing on pages F-2 and F-3 of
this Form 10-K.

/s/ PRICE WATERHOUSE LLP

PRICE WATERHOUSE LLP

Falls Church, VA
March 27, 1998

<ARTICLE> 5
<LEGEND>
Financial Data Schedule Exhibit EPS 27.1
</LEGEND>
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 41,146
<SECURITIES> 40,200
<RECEIVABLES> 23,648
<ALLOWANCES> (17,856)
<INVENTORY> 0
<CURRENT-ASSETS> 134,169
<PP&E> 9,383
<DEPRECIATION> (3,237)
<TOTAL-ASSETS> 149,620
<CURRENT-LIABILITIES> 83,222
<BONDS> 0
0
0
<COMMON> 16
<OTHER-SE> 47,639
<TOTAL-LIABILITY-AND-EQUITY> 149,620
<SALES> 0
<TOTAL-REVENUES> 45,326
<CGS> 0
<TOTAL-COSTS> 25,798
<OTHER-EXPENSES> 11,826
<LOSS-PROVISION> 8,082
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,702
<INCOME-TAX> 3,471
<INCOME-CONTINUING> 4,231
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,231
<EPS-PRIMARY> 0.32<F1>
<EPS-DILUTED> 0.31

<FN>
<F1>EPS-Primary is EPS-Basic.
</FN>

</TABLE>

<ARTICLE> 5
<LEGEND>
Restated Prior Period Financial Data Schedule for FAS 128 EPS Exhibit 27.2
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 19,062
<SECURITIES> 28,321
<RECEIVABLES> 24,097
<ALLOWANCES> (14,758)
<INVENTORY> 0
<CURRENT-ASSETS> 113,362
<PP&E> 8,784
<DEPRECIATION> (3,972)
<TOTAL-ASSETS> 127,268
<CURRENT-LIABILITIES> 116,014
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> (6,087)
<TOTAL-LIABILITY-AND-EQUITY> 127,268
<SALES> 0
<TOTAL-REVENUES> 30,896
<CGS> 0
<TOTAL-COSTS> 18,468
<OTHER-EXPENSES> 7,934
<LOSS-PROVISION> 5,577
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,494
<INCOME-TAX> 2,006
<INCOME-CONTINUING> 2,488
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,488
<EPS-PRIMARY> 0.20<F1>
<EPS-DILUTED> 0.20
<FN>
<F1>EPS-PRIMARY IS EPS-BASIC.
</FN>

</TABLE>