ADVANCED COMMUNICATION SYSTEMS INC, S-1/A, 1997-05-06

ADVANCED COMMUNICATION SYSTEMS INC
S-1/A, 1997-05-06
COMPUTER INTEGRATED SYSTEMS DESIGN

Previous: FIRST SIERRA FINANCIAL INC, 8-A12G, 1997-05-06

Next: VISTA MEDICAL TECHNOLOGIES INC, S-1/A, 1997-05-06

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1997

REGISTRATION NO. 333-23959

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------

AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------

ADVANCED COMMUNICATION SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)

7373
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)

54-1421222
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)

10089 LEE HIGHWAY
FAIRFAX, VA 22030
(703) 934-8130
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

GEORGE A. ROBINSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ADVANCED COMMUNICATION SYSTEMS, INC.
10089 LEE HIGHWAY
FAIRFAX, VA 22030
(703) 934-8130
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
------------------

Copies to:

PETER J. WALLISON, ESQ.
GIBSON, DUNN & CRUTCHER LLP
1050 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036-5306
TELEPHONE: (202) 955-8500
FACSIMILE: (202) 467-0539

PETER B. TARR, ESQ.
BRENT B. SILER, ESQ.
HALE AND DORR LLP
1455 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-1008
TELEPHONE: (202) 942-8400
FACSIMILE: (202) 942-8484

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act of 1933 registration statement number
of the earlier effective registration statement for the same offering. [ ]
__________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. [ ] __________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

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

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

SUBJECT TO COMPLETION, DATED MAY 6, 1997

2,500,000 SHARES

ADVANCED COMMUNICATION SYSTEMS, INC.

COMMON STOCK
------------------
Of the 2,500,000 shares of Common Stock (the "Common Stock") offered
hereby, 1,850,000 shares are being sold by Advanced Communication Systems, Inc.
(the "Company") and 650,000 shares are being sold by the Selling Stockholders.
See "Principal and Selling Stockholders." The Company will receive no proceeds
from the sale of shares by the Selling Stockholders.

Prior to the offering, there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price will
be between $ and $ per share. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
Application has been made to have the Common Stock approved for quotation on the
Nasdaq National Market under the trading symbol "ACSC."
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) STOCKHOLDERS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
- --------------------------------------------------------------------------------------------------
Total (3)......................... $ $ $ $
==================================================================================================
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting estimated offering expenses of $ , all of which
will be paid by the Company.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 375,000 additional shares of Common Stock on the same terms and
conditions as set forth above solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
------------------
The Common Stock is offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them and subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer or to reject any orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made on or about ,
1997.

A.G. EDWARDS & SONS, INC. FERRIS, BAKER WATTS
Incorporated

THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE> 3

DESCRIPTION OF GRAPHIC

The chart is comprised of three rows of two boxes each. The top left box
has a photograph of a row of satellite dishes under the words "Communication
Systems." The top right box contains three bullet points: "Engineering;"
"Program Planning & Management;" and "Communication Networks." The middle left
box contains six bullet points: "Information Management Systems;" "Local/Wide
Area Networks;" "Database Services;" "Internet/Intranet Services;" "Web Page
Development;" and "Multimedia Training." The middle right box contains the words
"Information Technology" over a photograph of overlapping compact discs. The
bottom left box contains a photograph of a large computer under the words
"Systems Integration." The bottom right box contains four bullet points: "VME
Applications;" "BGIXS;" "ISALTS;" and "Value Added Resales."

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF A PENALTY BID.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and the Financial Statements
and Notes thereto appearing elsewhere in this Prospectus. Investors should
consider carefully the risk factors related to the purchase of the Common Stock
of the Company. See "Risk Factors." Unless otherwise indicated, the information
in this Prospectus assumes that the Underwriters' over-allotment option will not
be exercised and gives effect to a 675-for-1 stock split of the Common Stock, to
be paid in the form of a stock dividend. References herein to fiscal years are
to the Company's fiscal year which ends on September 30 of each year. For
example, the twelve months ended September 30, 1996 are referred to herein as
fiscal 1996. A glossary of acronyms used in this Prospectus appears on page 47.

THE COMPANY

Advanced Communication Systems, Inc. provides communications and
information technology services and solutions, predominantly to U.S. government
agencies and to a lesser extent commercial and international customers. The
Company operates primarily in three interrelated areas: communication systems
design and support, information technology services ("IT Services") and systems
integration. The Company believes that, from its inception in 1987, it has been
a leader in U.S. Navy satellite communications ("SATCOM"). Recently, using its
information management capabilities in such areas as network and database design
and support, the Company has begun to expand its services to the U.S. military
and to develop business with other federal agencies, state and local governments
and commercial and international customers. Revenues have increased each year
since fiscal 1987 and grew at a compound annual rate of 36.3% during the last
five fiscal years, reaching $31.7 million for fiscal 1996. Additionally, for the
six-month period ended March 31, 1997, the Company's revenues grew 62.1% over
the comparable six-month period of the prior year, reaching $21.1 million. The
Company's total backlog, including unfunded backlog, was $139.2 million as of
September 30, 1996.

The three main areas of the Company's business are as follows:

- COMMUNICATION SYSTEMS. The Company designs, engineers, develops,
integrates, installs and operates satellite and computer-based
communication systems. It provides SATCOM engineering and technical
services and program and system support primarily to program
directorates and field activities of the U.S. Navy. Recently, the
Company has expanded its communication systems business capabilities
to provide a full range of systems engineering procurement and
technical support for the Command, Control, Communication, Computer
and Intelligence ("C4I") initiatives of the Department of Defense (the
"DOD"). In addition, the Company has expanded its staff to include
experts in program and financial management, and now provides support
in these areas to its communication systems customers. The Company
believes this combination of skills and capabilities is one of the
factors that distinguishes it from its competitors in the
communication systems business. For fiscal 1996, the Company's
communication systems business represented 64.5% of revenues.

- IT SERVICES. The Company provides a full range of services and
support in the areas of information management technology, information
processing, network design and operations, database design and
management, Internet and intranet services and multimedia training
services. It provides these services to a wide range of customers,
including the DOD, other federal agencies and commercial enterprises.
The advanced technical capabilities gained by the Company while
performing services for government customers has provided expertise in
the information technology area, which the Company is leveraging to
develop its commercial business. The Company is currently focusing on
expanding its IT Services to commercial and international customers.
For fiscal 1996, the Company's IT Services business represented 25.3%
of revenues.

- SYSTEMS INTEGRATION. The Company provides systems integration
services for communication systems and, to a lesser extent, acts as a
value-added reseller of computer hardware and software to both
government and commercial customers. The Company's strategy in this
business area is to concentrate on providing total communication
systems integration solutions. Most of this communication systems
integration business is performed under its contract (the "GSA
Schedule

3
<PAGE> 5

Contract") with the General Services Administration ("GSA"), which
permits the Company to sell approved products to U.S. government
agencies and contractors without competitive bidding. The Company's
systems integration business represented 10.2% of revenues for fiscal
1996 and 23.7% of revenues for the six-month period ended March 31,
1997.

Growth in the Company's business is being driven in part by the increasing
trend in government and commercial organizations to focus on their core
competencies and to outsource non-core functions such as information technology.
In addition, the U.S. military is placing greater emphasis on increasing
productivity while using fewer resources by employing systems that act as "force
multipliers." Solutions and technologies such as those offered by the Company
permit the use of fewer personnel and assets and result in more effective
performance at lower levels of spending. Federal Sources, Inc., an independent
market research firm specializing in the U.S. federal market, estimates that the
U.S. government has budgeted $26.5 billion in its fiscal year 1997 for
information technology services and products. In addition, the fiscal year 1997
DOD budget for information technology in the classified command, control and
communication market is estimated to be approximately $9.8 billion. The Company
believes that the commercial information technology market is significantly
larger than the government market.

The Company believes it has established a reputation in the industry for
delivering creative solutions to complex problems through the use of highly
skilled personnel and the most current technology. The Company has managed large
and complex federal contracts and believes this capability positions it to
capitalize on the future growth in outsourcing, both in the United States and
internationally. To do so, the Company plans to employ the following strategies:
(i) maintain leadership in the military SATCOM industry; (ii) expand existing
services and customer base; (iii) develop additional commercial business; and
(iv) expand through strategic acquisitions and the use of teaming relationships.

Advanced Communication Systems, Inc. is a Delaware corporation incorporated
in 1987. Its principal executive offices are located at 10089 Lee Highway,
Fairfax, Virginia 22030, and its telephone number is (703) 934-8130.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company..................... 1,850,000 shares
Common Stock offered by the Selling Stockholders........ 650,000 shares
Common Stock to be outstanding after the offering (1)... 5,663,750 shares
Use of Proceeds......................................... Repayment of debt, including debt
incurred to finance S corporation
distributions, and general corporate
purposes, including possible
acquisitions. See "Use of Proceeds."
Proposed Nasdaq National Market symbol.................. "ACSC"
</TABLE>

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

(1) Does not include an aggregate of 713,500 shares of Common Stock reserved for
issuance by the Company upon the exercise of stock options. As of the date
of this Prospectus, there were options to purchase 263,500 shares of Common
Stock outstanding. See "Management -- Stock Plans and Agreements."

4
<PAGE> 6

SUMMARY FINANCIAL DATA

<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $8,679 $12,223 $19,106 $23,724 $31,665 $13,036 $21,130
Direct costs............................ 4,881 7,050 11,418 14,815 19,307 7,195 14,746
Indirect, general and administrative
expenses.............................. 3,194 4,612 7,177 8,202 10,253 4,774 5,025
------ ------- ------- ------- ------- ------- -------
Income from operations.................. 604 561 511 707 2,105 1,067 1,359
Other income (expense), net............. (49) (78) (73) (133) (200) (101) (90)
------ ------- ------- ------- ------- ------- -------
Net income.............................. $ 555 $ 483 $ 438 $ 574 $ 1,905 $ 966 $ 1,269
====== ======= ======= ======= ======= ======= =======
PRO FORMA STATEMENT OF OPERATIONS DATA (1):
Net income before taxes................. $ 555 $ 483 $ 438 $ 574 $ 1,905 $ 966 $ 1,269
Income taxes............................ 222 193 175 229 743 386 495
------ ------- ------- ------- ------- ------- -------
Net income.............................. $ 333 $ 290 $ 263 $ 345 $ 1,162 $ 580 $ 774
====== ======= ======= ======= ======= ======= =======
Net income per share (2)................ $ 0.27 $ 0.18
====== =====
Weighted average shares outstanding
(2)................................... 4,290 4,272
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED (3)
------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital................................................................ $ 3,680
Total assets................................................................... 15,671
Total debt..................................................................... --
Stockholders' equity........................................................... 5,682
</TABLE>

- ---------------
(1) For all periods presented, the Company elected to be treated as an S
corporation and was not subject to federal and certain state income taxes.
The Pro Forma Statement of Operations Data reflects federal and state income
taxes based on applicable tax rates, as if the Company had not elected S
corporation status for the periods indicated. See "S Corporation
Distribution and Termination of S Corporation Status."

(2) The pro forma weighted average shares outstanding is based on: (i) the
weighted average shares outstanding during the period, assuming the dilutive
effect of all options outstanding; (ii) stock options issued during the
twelve months immediately preceding the offering (using the treasury stock
method and an assumed initial public offering price of $ per share) for
all periods presented; and (iii) the assumed sale of a sufficient number of
shares of Common Stock necessary to provide funds to make a distribution of
all undistributed S corporation earnings as of March 31, 1997 in excess of
fiscal 1996 earnings.

(3) Gives effect to: (i) a distribution to the Company's current stockholders of
undistributed S corporation earnings, which totaled approximately $5.5
million as of March 31, 1997; (ii) the recording of a $1.1 million deferred
tax liability, which would have been required had the Company terminated its
S corporation status as of March 31, 1997; and (iii) the sale of the
1,850,000 shares of Common Stock offered by the Company hereby, at an
assumed initial public offering price of $ per share and after deducting
the estimated underwriting discount and offering expenses, and the
application of a portion of the net proceeds therefrom to repay indebtedness
as described under "Use of Proceeds." The actual amount of the deferred tax
liability to be recorded at the time of the distribution will depend upon a
number of factors. The Company intends, however, to structure the S
corporation distribution to minimize the deferred tax liability. See "S
Corporation Distribution and Termination of S Corporation Status."

5
<PAGE> 7

RISK FACTORS

Prospective investors should carefully consider the following risk factors
relating to the Company and the Common Stock, in addition to the other
information contained in this Prospectus. Certain statements contained in this
Prospectus that are not related to historical results are forward-looking
statements. Actual results may differ materially from those projected or implied
in the forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, the following risk factors.

CONCENTRATION OF REVENUES

For fiscal 1994, 1995 and 1996 and the six months ended March 31, 1997,
approximately 100%, 99%, 90% and 94%, respectively, of the Company's revenues
were derived from contracts or subcontracts funded by the U.S. government,
virtually all of which were funded by the DOD. The Company expects that U.S.
government contracts are likely to continue to account for a significant portion
of its revenues in the future. Accordingly, the Company's financial performance
may be directly affected by changing U.S. government procurement practices and
policies and declines in U.S. defense spending. Among the factors that could
have a material adverse effect upon the Company's ability to win new contracts
with the U.S. government, or retain existing contracts, are budgetary
constraints, changes in government funding levels, programs, policies or
requirements, technological developments, the adoption of new laws or
regulations and general economic conditions. In addition, certain of the
Company's contracts individually contribute a significant percentage of its
revenues. For fiscal 1996, one contract with the U.S. Navy generated
approximately 28% of the Company's revenues. For the six-month period ended
March 31, 1997, a different contract with the U.S. Navy generated approximately
36% of the Company's revenues. The Company's five largest contracts generated
approximately 69% and 83% of its revenues, respectively, for the same periods.
Although the Company intends to expand its non-military and non-government
sales, a relatively small number of large U.S. government contracts are likely
to continue to account for a significant percentage of the Company's revenues in
the future. Termination of these contracts or the Company's inability to renew
or replace them when they expire could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Government Contracts."

GOVERNMENT CONTRACTING RISKS

Government contracts, by their terms, generally can be terminated at any
time by the government without cause. If a government contract is so terminated,
the Company generally would be entitled to receive compensation for the services
provided or costs incurred up to the time of termination and a negotiated amount
of the profit on the contract to the date of termination. Termination of any of
its large government contracts could have a material adverse effect on the
Company's business, financial condition and results of operations.

Government contracts require compliance with various contract provisions
and procurement regulations. The adoption of new or modified procurement
regulations could have a material adverse effect on the Company's business,
financial condition and results of operations or increase its costs of competing
for or performing government contracts. Any violation of these regulations could
result in the termination of the contracts, imposition of fines and/or debarment
from award of additional government contracts. Most government contracts are
subject to modification or termination in the event of changes in funding, and
the Company's contract costs and revenues are subject to adjustment as a result
of audits by the Defense Contract Audit Agency (the "DCAA") and other government
auditors. The award of government contracts also is subject to protest by
competitors which can result in the re-opening of the bidding process,
unanticipated legal costs or the award of a contract to a competitor.

Government contracts generally are awarded to the Company through a formal
competitive bidding process in which the Company has many competitors. Upon
expiration, government contracts may be subject to a competitive rebidding
process. There can be no assurance that the Company will be successful in
winning contract awards or renewals in the future. The Company's failure to
renew or replace such contracts when they expire could have a material adverse
effect on its business, financial condition and results of operations.

6
<PAGE> 8

A significant portion of the Company's revenues in fiscal 1996
(approximately 45%) and in the six months ended March 31, 1997 (approximately
23%) was generated by U.S. government contracts awarded to the Company through
small business set-aside programs. The Company no longer is eligible to
participate in some of these programs and, as its revenues and size expand, it
will lose its eligibility to participate in more of these programs. There can be
no assurance that the Company will be able to replace revenues from these
contracts.

The Company also derives significant revenues from sales under the GSA
Schedule Contract. For fiscal 1996 and the six months ended March 31, 1997,
approximately 9% and 24%, respectively, of the Company's revenues were derived
from contracts under the GSA Schedule. The government has no obligation to
purchase any significant amount of goods or services under the contract and
there can be no assurance as to the actual level of sales that will be derived
from this contract. The GSA Schedule Contract is a fixed price contract, which
imposes greater financial risk on the Company than a cost reimbursement or time
and materials contract. Failure to anticipate technical problems, estimate costs
accurately or control costs during performance of a fixed price contract may
reduce the Company's profit or cause a loss. In addition, the GSA Schedule
Contract is a one year contract, renewable annually by the government. There can
be no assurance that the GSA Schedule Contract will be renewed, and the
Company's inability to renew or replace the GSA Schedule Contract could have a
material adverse effect on its business, financial condition and results of
operations. See "Business -- Government Contracts."

BACKLOG NOT INDICATIVE OF REVENUES

The estimated backlog under a government contract is not necessarily
indicative of revenues that will actually be realized under that contract.
Congress normally appropriates funds for a given program on a fiscal year basis,
even though actual contract performance may take many years. As a result,
contracts ordinarily are only partially funded at the time of award, and
additional monies are normally committed to the contract by the procuring agency
as appropriations are made by Congress in subsequent fiscal years. There can be
no assurance that Congress will appropriate funds or that procuring agencies
will commit funds to the Company's contracts for their anticipated terms. In
addition, most of the Company's government contracts have a base term of one
year and a number of option years. There can be no assurance that the government
will extend a contract through its option years. Many of the Company's large
contracts require that the Company supply services upon request, and the Company
receives no payments under these contracts until such services are requested and
performed. There can be no assurance that the Company's services under these
contracts will be requested at the anticipated levels in the future. See
"Business -- Government Contracts" and "Business -- Backlog."

VARIABILITY OF QUARTERLY OPERATING RESULTS

The Company's revenues and earnings may fluctuate from quarter to quarter
based on such factors as the number, size and scope of projects, expenditures
required by the Company, delays, employee utilization rates, adequacy of
provisions for losses, accuracy of estimates of resources required to complete
ongoing projects and general economic conditions. Demand for the Company's
products and services in each of the markets it serves can vary significantly
from quarter to quarter due to revisions in customer budgets or schedules and
other factors beyond the Company's control. Due to all of the foregoing factors,
it is possible that in some future period the Company's results of operations
will fall below the expectations of securities analysts and investors. In this
event, the market price of the Common Stock would likely be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Quarterly Results of Operations."

NEED TO ATTRACT AND RETAIN PROFESSIONAL STAFF

The Company's success will depend in part upon its ability to attract,
retain, train and motivate highly skilled employees, particularly in the area of
information technology. There is significant competition for employees with the
communication and information technology skills required to perform the services
the Company offers. In addition, the Company must often comply with provisions
in government contracts which

7
<PAGE> 9

require employment of persons with specified levels of education, work
experience and security clearances. There can be no assurance that the Company
will be successful in attracting a sufficient number of highly skilled employees
in the future. None of the Company's key personnel are subject to noncompetition
agreements. The loss of its key technical personnel or its inability in the
future to attract key employees or to relocate them as required by customers
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Employees."

INTERNATIONAL EXPANSION

As part of its growth strategy, the Company is seeking opportunities to
expand into international markets. To date, the Company has limited experience
in marketing and distributing its products internationally. In marketing its
products and services internationally, the Company will face new competitors,
some of which may have established a strong presence in those markets. In
addition, the ability of the Company to market its products in foreign countries
will be dependent on the Company's ability to adapt its products to operate in
foreign languages and to provide the functionality desired by customers in those
countries. There can be no assurance that the Company will be successful in so
adapting its products. In addition to the uncertainty as to the Company's
ability to establish an international presence, there are certain difficulties
and risks inherent in doing business on an international level, such as
compliance with regulatory requirements and changes in these requirements,
export restrictions, tariffs and other trade barriers, limited protection of
intellectual property rights, difficulties in staffing and managing
international operations, longer payment cycles, problems in collecting accounts
receivable, political instability, fluctuations in currency exchange rates and
potentially adverse tax consequences. There can be no assurance that one or more
of these factors will not have a material adverse effect on any international
operations established by the Company, and consequently, on the Company's
business, financial condition and results of operations. See
"Business -- Business Strategy."

RISKS ASSOCIATED WITH ENTRY INTO COMMERCIAL BUSINESS

The Company is pursuing a strategy to increase the sales of its services in
the commercial market, although the Company and its management have limited
experience in this market. To date, the Company's sales to customers other than
the U.S. government have been made largely to military agencies of other
countries and to a lesser extent civilian buyers. There can be no assurance that
the Company will be able to compete successfully in the civilian markets or
continue to make sales to defense agencies outside the United States.

Most of the Company's existing commercial contracts are fixed price
contracts, and the Company expects this will continue to be true with respect to
new commercial contracts. The Company may fail to anticipate technical problems,
estimate costs accurately or control costs during performance of a fixed price
contract, any of which may reduce the Company's profit or cause a loss under
such contracts. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview," "Business -- Business Strategy" and
"Business -- Government Contracts."

RISKS ASSOCIATED WITH ACQUISITION STRATEGY

A part of the Company's business strategy calls for growth through
acquisitions, although to date it has not completed any. Identifying and
pursuing future acquisition opportunities will require a significant amount of
management time and skill. There can be no assurance that the Company will be
able to identify suitable acquisition candidates, consummate any acquisition on
acceptable terms or successfully integrate acquired business operations. Future
acquisitions may entail the payment of consideration in excess of book value,
may result in the issuance of additional shares of the Company's Common Stock or
the incurrence of additional indebtedness and could have a dilutive effect on
the Company's net income per share. See "Business -- Business Strategy."

8
<PAGE> 10

MANAGEMENT OF GROWTH

The Company's revenues have increased over the past five fiscal years at a
compound annual rate of 36.3%. Continued growth could place a significant strain
on the Company's limited personnel, management, financial controls and other
resources. The Company's ability to manage any future expansion effectively will
require it to attract, retain, train, motivate and manage new employees
successfully, to integrate new management and employees into its overall
operations and to continue to improve its operational, financial and management
systems and controls and facilities. The Company's failure to manage any
expansion effectively could have a material adverse effect on the Company's
business, financial condition and results of operations.

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a significant degree on its key management
personnel, especially George A. Robinson, Charles G. Martinache, Thomas A.
Costello and Dev Ganesan. The loss of any one of these individuals could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company does not have employment agreements with any
of these individuals, except for Mr. Ganesan. See "Management -- Employment
Agreements." It maintains key man life insurance policies on Messrs. Robinson,
Martinache and Costello, each in the amount of $1,000,000.

COMPETITION

The Company experiences significant competition in all of the areas in
which it does business. In general, the markets in which it competes are not
dominated by a single company or a small number of companies; instead, a large
number of companies offer services that overlap and are competitive with those
offered by the Company. Many of its competitors are significantly larger and
have greater financial resources than the Company, and some of these competitors
are divisions or subsidiaries of large, diversified companies that have access
to the financial resources of their parent companies. The Company believes that
the principal competitive factors in the businesses in which it operates are
technical understanding, management capability, past contract performance,
personnel qualifications and price. In the federal government market,
procurement reforms over the past years have increased the importance of a
contractor's past performance in deciding new bid awards. There can be no
assurance that the Company will be able to compete successfully. See
"Business -- Competition."

PROPRIETARY INFORMATION

Much of the Company's business is derived from work product, software
programs, methodologies and other information in which it has a proprietary
interest. Although the Company seeks to protect this data with trademarks,
copyrights and confidentiality agreements, there can be no assurance that these
measures will prevent the unauthorized disclosure or use of the Company's
technical knowledge, practices or procedures, or that others may not
independently develop similar knowledge, practices or procedures. In addition,
the government may acquire certain proprietary rights to software programs and
other products that result from the Company's services under government
contracts or subcontracts and may disclose such information to third parties,
including competitors of the Company. Disclosure or loss of control over its
proprietary information could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company may also be
subject to litigation to defend against claimed infringement of the rights of
others or to determine the scope and validity of the intellectual property
rights of others. Any such litigation would be costly and divert management's
attention, either of which could have a material adverse effect on the Company's
business, financial condition and results of operations. Adverse determinations
in such litigation could result in the loss of the Company's proprietary rights,
subject the Company to significant liabilities, require the Company to seek
licenses from third parties or prevent the Company from selling its services,
any one of which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Intellectual
Property."

9
<PAGE> 11

CONTROL BY EXECUTIVE OFFICERS AND DIRECTORS; ANTI-TAKEOVER PROVISIONS

Upon the consummation of this offering, the founders and principal officers
of the Company, Messrs. George Robinson, Charles Martinache and Thomas Costello,
will beneficially own 50.1% of the outstanding shares of Common Stock. Messrs.
Robinson, Martinache and Costello, individually and as trustees for certain
trusts, also have entered into a Stockholders Agreement pursuant to which each
has agreed to vote the shares beneficially owned by him to elect each of the
others as a director of the Company and to vote on other matters as a block as
determined by a majority vote of their shares. This will permit Messrs.
Robinson, Martinache and Costello to control votes on matters that require
approval of the Company's stockholders. Purchasers of the Common Stock will be
minority stockholders of the Company and, although entitled to vote on any
matters that require stockholder approval, will not control the outcome of these
votes. See "Management -- Stockholders Agreement" and "Principal and Selling
Stockholders."

Upon the closing of the offering, the directors of the Company will be
authorized to issue, without stockholder approval, up to 1,000,000 shares of
Preferred Stock. Such Preferred Stock may have rights senior to the Common
Stock. This Preferred Stock may have the effect of delaying or preventing a
change in control, may decrease the amount of earnings and assets available for
distribution to the holders of the Common Stock or may adversely affect the
rights and powers, including voting rights, of the holders of the Common Stock.
In certain circumstances, such issuance could have the effect of decreasing the
market price of the Common Stock. Further, certain provisions of Delaware law
could delay or make more difficult a merger, tender offer or proxy contest
involving the Company. See "Description of Capital Stock -- Preferred Stock" and
"Description of Capital Stock -- Certain Provisions of Delaware Law."

BENEFITS OF THE OFFERING TO CURRENT STOCKHOLDERS

The current stockholders of the Company will receive certain benefits from
the sale of the Common Stock offered hereby. The offering will establish a
public market for the Common Stock and provide increased liquidity to the
current stockholders for the shares of Common Stock that they will own after the
offering, subject to certain limitations. See "Shares Eligible for Future Sale."
The Company intends to use approximately $5.5 million of the net proceeds from
the offering to finance the S Corporation Distribution to be paid to existing
stockholders of the Company upon termination of the Company's subchapter S
corporation status. See "S Corporation Distribution and Termination of S
Corporation Status" and "Use of Proceeds." The Selling Stockholders will sell
650,000 shares of Common Stock in the offering and will receive $ million
in net proceeds, based upon an initial offering price of $ per share, after
deducting the Selling Stockholders' proportionate share of the estimated
underwriting discount. Following this offering, the current stockholders of the
Company will own Common Stock with a market value of approximately $ ,
based upon an initial public market price of $ per share.

TERMINATION OF SUBCHAPTER S CORPORATION STATUS; PAYMENT OF SUBSTANTIAL OFFERING
PROCEEDS TO CURRENT STOCKHOLDERS

Since October 1989, the Company has been treated for federal and certain
state income tax purposes as a Subchapter S corporation under the Internal
Revenue Code of 1986, as amended (the "Code"). Prior to the closing of this
offering (the "Termination Date"), the Company will terminate its status as an S
corporation and will declare a dividend of $5.5 million to stockholders of
record (the "S Corporation Distribution"). This amount approximates the
Company's undistributed S corporation earnings through March 31, 1997. The S
Corporation Distribution will be paid using cash on hand, borrowings under the
existing line of credit and, if necessary, additional short-term borrowings. Any
amounts so borrowed will be repaid using a portion of the net proceeds of this
offering. Purchasers of Common Stock in this offering will not receive any
portion of this dividend. Had the Company terminated its S corporation status at
March 31, 1997, a deferred tax liability of $1.1 million would have been
recorded as a recurring charge. However, the Company intends to structure the S
Corporation Distribution to minimize the deferred tax liability that will be
recorded at the Termination Date. As of the Termination Date, the Company will
no longer be an S corporation and, accordingly, will become subject to federal
and state income taxes. See "S Corporation Distribution and Termination of S
Corporation Status" and "Use of Proceeds."

10
<PAGE> 12

SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of this offering, the Company will have 5,663,750 shares
of Common Stock outstanding. The 2,500,000 shares of Common Stock sold in this
offering will be freely tradable without restriction or limitation under the
Securities Act of 1933, except for shares purchased by "affiliates" (as defined
under the Securities Act of 1933). All of the remaining 3,163,750 shares of
Common Stock will become eligible for sale 90 days following the date of this
Prospectus, subject in some cases to the volume and other limitations of Rule
144 under the Securities Act. All of these shares are subject to lock-up
agreements under which their holders have agreed not to sell or otherwise
dispose of any of their shares for a period of 180 days after the date of this
Prospectus, without the prior written consent of A.G. Edwards & Sons, Inc. Upon
completion of this offering, the Company will have 713,500 shares of Common
Stock reserved for issuance upon the exercise of stock options, of which 263,500
shares are subject to currently outstanding options. Following the completion of
this offering, the Company intends to file one or more registration statements
on Form S-8 to register these shares. Sales of substantial amounts of Common
Stock in the public markets, pursuant to Rule 144 or otherwise, or the
availability of such shares for sale could adversely affect the prevailing
market prices for the Common Stock and impair the Company's ability to raise
additional capital through the sale of equity securities in the future. See
"Management -- Stock Plans and Agreements" and "Shares Eligible for Future
Sale."

DILUTION

Purchasers of Common Stock in this offering will experience an immediate
and substantial dilution of $ per share in the pro forma net tangible book
value of their Common Stock. See "Dilution."

ABSENCE OF A PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; VOLATILITY OF STOCK
PRICE

Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined
through negotiations between the Company and representatives of the
Underwriters. See "Underwriting" for a discussion of factors to be considered in
determining the initial public offering price. There can be no assurance that a
regular trading market for the Common Stock will develop after this offering or,
if developed, that a public trading market can be sustained. The initial public
offering price will not necessarily reflect, and may be higher than, the market
price of the Common Stock after the offering. There has historically been
significant volatility in the market price of securities of technology
companies. In addition, the stock market in recent years has experienced
significant price and volume fluctuations that often have been unrelated or
disproportionate to the operating performance of particular companies. Many
factors that have influenced trading prices, such as actual or anticipated
operating results, growth rates, changes in estimates by analysts, market
conditions in the industry, announcements by competitors, regulatory actions and
general economic conditions, will vary from period to period. As a result of the
foregoing, the Company's operating results from time to time may be below the
expectations of securities analysts and investors. Any such event would likely
result in a material adverse effect on the market price of the Common Stock. See
"Underwriting."

PAYMENT OF DIVIDENDS

Other than the S Corporation Distribution, the Company does not anticipate
declaring or paying cash dividends in the foreseeable future. In addition, the
Company's existing credit facility contains provisions which could have the
effect of limiting its ability to pay cash dividends.

11
<PAGE> 13

S CORPORATION DISTRIBUTION
AND TERMINATION OF S CORPORATION STATUS

Prior to this offering, the Company has been treated as a Subchapter S
corporation under the Code for federal and certain state income tax purposes. As
a result, the Company's earnings were taxed for federal and certain state tax
purposes directly to its stockholders. Effective as of the Termination Date, the
Company's status as an S corporation will be terminated and the Company will
become subject to federal and state income taxes.

Prior to the offering, the Board of Directors intends to declare a dividend
of $5.5 million to the existing stockholders. This amount approximates the
Company's undistributed S corporation earnings through March 31, 1997. The
Company will pay approximately 90% of the estimated amount of the S Corporation
Distribution immediately prior to the offering using cash on hand, borrowings
under the existing line of credit and, if necessary, additional short-term
borrowings. Any amounts so borrowed will be repaid using a portion of the net
proceeds of this offering. The balance of the S Corporation Distribution will be
paid when the actual amount is calculated. The purchasers of Common Stock in the
offering will not receive any portion of the S Corporation Distribution. See
"Use of Proceeds."

In connection with the S Corporation Distribution, the Company and each of
the stockholders receiving a portion of the S Corporation Distribution will
enter into cross-indemnification agreements pursuant to which the Company will
indemnify each stockholder and each stockholder will indemnify the Company from
and against adverse tax effects resulting from the reallocation of income and
expenses between Subchapter S corporation and Subchapter C corporation tax
years.

The termination of the Company's S corporation status may result in a
deferred tax liability which will be recorded as a non-recurring charge. Had the
Company terminated its S corporation status at March 31, 1997, the amount of
such deferred tax liability would have been $1.1 million. The actual amount of
the deferred tax liability and the related charge will depend upon a number of
factors, including timing of collection of accounts receivable and payments of
accounts payable and other expenses. The Company intends, however, to structure
the S Corporation Distribution to minimize the deferred tax liability.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
1,850,000 shares of Common Stock offered by it hereby are estimated to be
$ million ($ million if the over-allotment option granted to the
Underwriters is exercised in full) after deducting the estimated underwriting
discount and estimated expenses to be paid by the Company and assuming an
initial public offering price of $ per share. The Company will not receive
any of the proceeds from the sale of the 650,000 shares of Common Stock offered
by the Selling Stockholders.

The Company intends to use the net proceeds of the offering to repay the
outstanding balance on its line of credit, if any, including any amounts used to
fund the S Corporation Distribution, and any additional borrowings incurred by
the Company to fund the S Corporation Distribution. The Company's outstanding
principal line of credit bears interest at the bank's prime rate plus a
percentage, not more than 0.25%, which depends on the Company's historical
financial performance, and matures on February 28, 1998. There was no debt
outstanding under the line of credit as of March 31, 1997. Borrowings under the
bank line of credit to date have been used for working capital.

The remainder of the proceeds will be used for working capital and general
corporate purposes, including possible acquisitions of businesses complementary
to the Company's businesses. The Company does not currently have any agreements
or commitments with respect to any potential acquisitions, nor are any
negotiations regarding any acquisitions ongoing. Pending such uses, the Company
intends to invest the net proceeds from the offering in investment grade,
interest-bearing instruments.

12
<PAGE> 14

DIVIDEND POLICY

The Company historically has made distributions to its stockholders related
to its S corporation status and the resulting tax payment obligations imposed on
its stockholders, including a total of $27,650 since October 1, 1994. Other than
the S Corporation Distribution, the Company does not anticipate declaring or
paying cash dividends in the foreseeable future. In addition, the Company's
existing credit facility contains provisions which could have the effect of
limiting its ability to pay cash dividends.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1997 on an actual and pro forma as adjusted basis. This table should
be read in conjunction with the Consolidated Financial Statements and related
Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED (1)
-------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Total long-term debt................................................. $ -- $
-------- --------
Stockholders' equity (2):
Preferred stock, $.01 par value, 1,000,000 shares authorized, no
shares issued and outstanding, actual and pro forma as
adjusted.......................................................
Common Stock, $.01 par value, 40,000,000 shares authorized,
6,750,000 shares issued, 3,786,750 outstanding, actual,
8,600,000 shares issued, 5,636,750 outstanding, pro forma as
adjusted (3)................................................... 67
Paid-in capital and accretion................................... 16,506
Retained earnings............................................... 5,789
Adjustment for redemption value greater than amounts paid in by
stockholders................................................... (16,438)
Less cost of 2,963,250 shares of treasury stock................. (242)
-------- --------
Total stockholders' equity.................................... 5,682
-------- --------
Total capitalization....................................... $ 5,682 $
======== ========
</TABLE>

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

(1) Gives effect to: (i) a distribution to the Company's current stockholders of
undistributed S corporation earnings, which totaled approximately $5.5
million as of March 31, 1997; (ii) the recording of a $1.1 million deferred
tax liability, which would have been required had the Company terminated its
S corporation status as of March 31, 1997; (iii) the sale of the 1,850,000
shares of Common Stock offered by the Company hereby, at an assumed initial
public offering price of $ per share and after deducting the estimated
underwriting discount and offering expenses, and the application of a
portion of the net proceeds therefrom to repay indebtedness as described
under "Use of Proceeds;" and (iv) the cancellation of Stock Redemption
Agreements, resulting in elimination of the adjustment for redemption value
greater than amounts paid in by stockholders. See "S Corporation
Distribution and Termination of S Corporation Status" and Note 9 of Notes to
Financial Statements.

(2) Gives effect to an amendment to the Company's Certificate of Incorporation
which authorizes Preferred Stock and increases the number of authorized
shares of Common Stock.

(3) Does not include an aggregate of 740,500 shares of Common Stock reserved for
issuance at March 31, 1997 by the Company upon the exercise of stock
options, of which 27,000 have been issued upon an option exercise subsequent
to March 31, 1997. As of the date of this Prospectus, there were options
outstanding to purchase 263,500 shares of Common Stock at a weighted average
price of $5.34 per share, none of which are currently exercisable.

13
<PAGE> 15

DILUTION

Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution in the pro forma net tangible book value of their
Common Stock from the assumed initial public offering price. The net tangible
book value of the Company as of March 31, 1997 was $5.7 million, or $1.49 per
share. Net tangible book value per share represents the amount of total tangible
assets less total liabilities, divided by the number of shares of Common Stock
outstanding, including the effect of 27,000 shares of Common Stock which were
issued pursuant to the exercise of stock options in April 1997. The pro forma
net tangible book deficit of the Company as of March 31, 1997, after giving
effect to the distribution of undistributed S corporation earnings, which were
$5.5 million at March 31, 1997, and the related provision for deferred income
taxes, would have been $(918,000), or $(0.24) per share. After giving effect to
the sale by the Company of the 1,850,000 shares of Common Stock offered by it
hereby at an assumed initial public offering price of $ per share (after
deducting the estimated underwriting discount and estimated offering expenses),
the pro forma net tangible book value would have been approximately $
million, or $ per share. This represents an immediate increase in pro forma
net tangible book value of $ per share to existing stockholders and an
immediate dilution in pro forma net tangible book value of $ per share to
purchasers of Common Stock in this offering. The following table illustrates
this per share dilution in pro forma net tangible book value per share:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $
Net tangible book value per share at March 31, 1997............ $ 1.49
Decrease attributable to pro forma adjustments................. (1.73)
------
Pro forma net tangible book value per share at March 31,
1997.......................................................... (0.24)
Increase per share attributable to new investors...............
------
Pro forma net tangible book value per share after the offering......
------
Dilution per share to new investors................................. $
======
</TABLE>

The following table sets forth, as of May 5, 1997, certain information with
respect to the number of shares acquired, total consideration paid and the
average price paid per share by existing stockholders and by purchasers of the
shares offered hereby (assuming an initial public offering price of $ per
share and before deducting the estimated underwriting discount):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......................... 3,813,750 67.3% $150,810 % $0.04
New investors................................. 1,850,000 32.7 $
--------- ------ -------- ------
Total.................................... 5,663,750 100.0% $ 100.0%
========= ====== ======== ======
</TABLE>

The foregoing table assumes no exercise of stock options subsequent to May
5, 1997 or of the Underwriters' over-allotment option. As of the date of this
Prospectus, there were options outstanding to purchase 263,500 shares of Common
Stock at a weighted average price of $5.34 per share, none of which are
presently exercisable. To the extent such options become exercisable and are
exercised, there will be further dilution to new shareholders.

The sale of shares by the Selling Stockholders in this offering will reduce
the number of shares held by existing stockholders to 3,163,750 shares, or
approximately 55.9% of the total number of shares of Common Stock outstanding
immediately after this offering (52.4% if the Underwriters' over-allotment
option is exercised in full), and will increase the number of shares held by new
investors to 2,500,000 shares, or 44.1% of the total number of shares of Common
Stock outstanding immediately after this offering (47.6% if the Underwriters'
over-allotment option is exercised in full). See "Principal and Selling
Stockholders."

14
<PAGE> 16

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with
the Financial Statements and the Notes thereto included elsewhere herein. The
Statement of Operations Data set forth below with respect to fiscal 1994, 1995
and 1996 and the Balance Sheet Data as of September 30, 1995 and 1996 are
derived from, and are qualified by reference to, the financial statements of the
Company audited by Arthur Andersen LLP included elsewhere in this Prospectus.
The Statement of Operations Data set forth below with respect to fiscal 1992 and
1993 and the Balance Sheet Data as of September 30, 1992, 1993 and 1994 are
derived from reviewed financial statements of the Company not included in the
Prospectus. The unaudited Statement of Operations Data for the six months ended
March 31, 1996 and 1997 and the Balance Sheet Data as of March 31, 1997 are
derived from the unaudited financial statements of the Company included
elsewhere in this Prospectus, which, in the opinion of management, have been
prepared on the same basis as the audited financial statements and contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of operations for such periods.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------ ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $8,679 $12,223 $19,106 $23,724 $31,665 $13,036 $21,130
Direct costs............................ 4,881 7,050 11,418 14,815 19,307 7,195 14,746
Indirect, general and administrative
expenses.............................. 3,194 4,612 7,177 8,202 10,253 4,774 5,025
------ ------- ------- ------- ------- ------- -------
Income from operations.................. 604 561 511 707 2,105 1,067 1,359
Other income (expense), net............. (49) (78) (73) (133) (200) (101) (90)
------ ------- ------- ------- ------- ------- -------
Net income.............................. $ 555 $ 483 $ 438 $ 574 $ 1,905 $ 966 $ 1,269
====== ======= ======= ======= ======= ======= =======
PRO FORMA STATEMENT OF OPERATIONS DATA (1):
Net income before taxes................. $ 555 $ 483 $ 438 $ 574 $ 1,905 $ 966 $ 1,269
Income taxes............................ 222 193 175 229 743 386 495
------ ------- ------- ------- ------- ------- -------
Net income.............................. $ 333 $ 290 $ 263 $ 345 $ 1,162 $ 580 $ 774
====== ======= ======= ======= ======= ======= =======
Net income per share (2)................ $ 0.27 $ 0.18
======= =======
Weighted average shares outstanding
(2)................................... 4,290 4,272
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------------------------- MARCH 31,
1992 1993 1994 1995 1996 1997
------ ------- ------- ------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $2,234 $ 2,231 $ 2,616 $ 2,716 $ 5,387 $ 3,680
Total assets................................. 3,710 4,454 6,798 6,987 13,118 15,671
Total debt................................... 1,135 1,359 2,031 1,821 2,688 --
Stockholders' equity......................... 1,313 1,626 2,006 2,497 4,375 5,682
</TABLE>

15
<PAGE> 17

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

OVERVIEW

The Company provides communications and information technology services and
solutions, predominantly to U.S. government agencies and to a lesser extent
commercial and international customers. The Company operates primarily in three
interrelated areas: communication systems design and support, IT Services and
systems integration. The Company has been profitable since its inception in
1987, and has achieved a compound annual growth rate in revenues of 36.3% over
the past five fiscal years. With revenues of $31.7 million, fiscal 1996 was the
ninth consecutive year of revenue growth.

The Company's expansion has been achieved entirely through internal growth.
Prior to fiscal 1994, virtually all of the Company's revenues were derived from
contracts with the U.S. Navy for systems engineering, design, integration,
services and support for satellite communications. Beginning in fiscal 1994, the
Company began to develop applications for its technical capabilities outside its
traditional U.S. Navy business. The Company's GSA Schedule Contract has fueled
significant growth in the systems integration area as the U.S. government's
trend toward using readily available software and hardware expands the need for
systems integration services, such as those offered by the Company.

The Company's backlog, including both funded and unfunded backlog, was
$139.2 million at September 30, 1996. Two five-year U.S. Navy contracts awarded
in fiscal 1996 involve services estimated at approximately $120 million and were
the main contributors to the recent increase in backlog. Many of the Company's
contracts are funded from year to year, based primarily on the procuring
company's or agency's fiscal requirements. The Company believes that
approximately 26% of its backlog as of September 30, 1996 will result in
revenues in fiscal 1997. See "Risk Factors -- Backlog Not Indicative of
Revenues" and "Business -- Backlog."

Revenues, by dollar and percentage, from the Company's three interrelated
areas and three major types of customer are given below:

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, SIX MONTHS ENDED MARCH 31,
-------------------------------------------------- --------------------------------
1994 1995 1996 1996 1997
-------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SERVICES PROVIDED
Communication Systems... $16,046 84% $17,785 75% $20,422 64% $ 8,267 63% $12,415 59%
IT Services............. 3,059 16 4,634 19 8,008 26 3,900 30 3,697 17
Systems Integration..... 1 0 1,305 6 3,235 10 869 7 5,018 24
------- --- ------- --- ------- --- ------- --- ------- ---
Total.......... $19,106 100% $23,724 100% $31,665 100% $13,036 100% $21,130 100%
======== ==== ======== ==== ======== ==== ======== ==== ======== ====
CUSTOMER TYPE
U.S. Government......... $19,011 100% $23,483 99% $28,606 90% $11,406 87% $19,929 94%
Commercial.............. 95 0 219 1 849 3 322 3 403 2
International........... -- -- 22 0 2,210 7 1,308 10 798 4
------- --- ------- --- ------- --- ------- --- ------- ---
Total.......... $19,106 100% $23,724 100% $31,665 100% $13,036 100% $21,130 100%
======== ==== ======== ==== ======== ==== ======== ==== ======== ====
</TABLE>

The Company's operating margin is affected by, among other things, the mix
of contract types (cost reimbursement, fixed price or time and materials) as
well as the proportion of revenues from higher margin commercial and
international sales. A significant portion of the Company's contracts are cost
reimbursement contracts, under which the Company is reimbursed for all actual
costs, plus a fee or profit. The financial risks under these contracts generally
are lower than those associated with other types of contracts, and margins also
are typically lower. An increasing portion of the Company's services are
provided under fixed price contracts. Such contracts carry higher financial
risks because the Company must deliver the contracted services below the fixed
price in order to earn a profit. For those companies with low cost structures,
these contracts offer the

16
<PAGE> 18

opportunity for higher profit margins. The following table summarizes the
percentage of revenues attributable to each contract type for the periods
indicated:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------- ----------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Cost reimbursement................. 92% 77% 68% 65% 62%
Fixed price........................ 3 16 25 27 32
Time and materials................. 5 7 7 8 6
----- ----- ----- ----- -----
Total.................... 100% 100% 100% 100% 100%
===== ===== ===== ===== =====
</TABLE>

Revenues on cost plus fixed fee contracts are recognized to the extent of
costs incurred plus a proportionate amount of fees earned. Revenues on time and
materials contracts are recognized at the contractual rates as labor hours and
direct expenses are incurred. Revenues on fixed price contracts are recognized
on the percentage-of-completion method based on costs incurred in relation to
total estimated costs.

The Company's three significant U.S. Navy communication systems contracts
and programs accounted for approximately 52.1% of revenues for the six months
ended March 31, 1997. Although the Company intends to expand its commercial and
international sales, a relatively small number of contracts are likely to
continue to account for a significant percentage of the Company's future
revenues. Termination of these contracts or the Company's inability to renew or
replace them when they expire could have a material adverse effect on the
Company's business, financial condition and results of operations.

For fiscal 1996 and six months ended March 31, 1997, approximately 9% and
24%, respectively, of the Company's revenues were derived from sales under the
GSA Schedule Contract. The GSA Schedule Contract is a one year contract,
renewable annually by the government. The Company's inability to renew or
replace the GSA Contract Schedule could have a material adverse affect on its
business, financial condition and results of operations.

The Company has developed, or is in the process of developing,
communication systems and software products which have both military and
commercial applications. These include the Virtual Program Office, BGIXS,
ISALTS, and Pelican. In addition, the Company is evaluating possible replacement
technologies being developed by others for the VersaModule European technology.
Although the Company will continue to incur costs relating to these and other
products, the Company does not expect additional enhancements and marketing
efforts to have a material impact on its future financial condition or results
of operations.

The Company generally uses commercially available products in its systems
integration business, which are generally available from several sources. The
Company has generally been able to obtain adequate supplies from its current
suppliers in a timely manner. The Company believes that, in most cases,
alternate vendors can be found if its current suppliers are unable to fulfill
its needs.

During fiscal 1996 and the six months ended March 31, 1997, revenues from
international business amounted to 7% and 4%, respectively, of revenues. While
the Company expects that it will continue to have international business, there
can be no assurance that the current level of international sales will continue.
Because international business to date has had higher profit margins than U.S.
government business, an inability to obtain future international business would
adversely affect the Company's financial condition and results of operations.
Because both the Company's expenses and its revenues from its international
business are generally denominated in U.S. dollars, the Company does not believe
that its operations are subject to material risks associated with currency
fluctuations.

Since October 1989, the Company has elected to be treated, for federal and
certain state income tax purposes, as an S corporation under the Code. As a
result, the Company's earnings have been taxed, for federal and certain state
income tax purposes, directly to the Company's stockholders rather than to the
Company. The Company will terminate its S corporation status on the Termination
Date and will make a

17
<PAGE> 19

distribution of $5.5 million immediately prior to the offering. The termination
of the Company's S corporation status may result in a deferred tax liability
which will be recorded as a non-recurring charge. The actual amount of the
deferred tax liability and the related charge will depend upon a number of
factors, including timing of collection of accounts receivable and payments of
accounts payable and other expenses. The Company intends, however, to structure
the S Corporation Distribution to minimize the deferred tax liability. See "S
Corporation Distribution and Termination of S Corporation Status."

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data as a
percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
----------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Direct costs............................... 59.8 62.4 61.0 55.2 69.8
Indirect, general and administrative
expenses................................. 37.6 34.6 32.4 36.6 23.8
------- ------- ------- ------- -------
Income from operations..................... 2.6 3.0 6.6 8.2 6.4
Other income (expense), net................ (0.4) (0.6) (0.6) (0.8) (0.4)
Net income................................. 2.2 2.4 6.0 7.4 6.0
====== ====== ====== ====== ======
Pro forma income taxes..................... 0.9 1.0 2.3 3.0 2.4
Pro forma net income....................... 1.3% 1.4% 3.7% 4.4% 3.6%
====== ====== ====== ====== ======
</TABLE>

SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO SIX MONTHS ENDED MARCH 31, 1996

Revenues increased 62.1%, or $8.1 million, to $21.1 million for the six
months ended March 31, 1997, from $13.0 million for the same period in 1996. The
increase was due to a $4.0 million increase in revenues from communications
systems and IT Services, primarily under contracts with the U.S. Navy, and a
$4.1 million increase in revenues from systems integration services.

Direct costs include labor costs, related fringe benefits, subcontract
costs, material costs and other non-overhead costs directly related to a
contract. Direct costs increased to $14.7 million for the six months ended March
31, 1997 from $7.2 million for the same period in 1995. Direct costs, expressed
as a percentage of revenues, increased to 69.8% for the six months ended March
31, 1997 from 55.2% for the same period in 1996, primarily due to an increased
proportion of revenues coming from systems integration services. These services
have higher direct costs because the contracts generally require the Company to
purchase hardware components as part of the services.

Indirect, general and administrative expenses include fringe benefits,
overhead, selling and administrative costs, depreciation and amortization, bid
and proposal costs and research and development expenses. Indirect expenses
increased to $5.0 million for the six months ended March 31, 1997 from $4.8
million for the same period in 1996. The increase was due primarily to the
higher level of revenues discussed above. Indirect expenses, expressed as a
percentage of revenues, decreased to 23.8% for the six months ended March 31,
1997 from 36.6% for the six months ended March 31, 1996, due to the higher
proportion of systems integration revenues, which typically have lower
associated indirect expenses.

Income from operations increased 27.4%, to $1.4 million for the six months
ended March 31, 1997, from $1.1 million for the same period in 1996, primarily
due to increased revenues from U.S. Navy contracts and systems integration. As a
percentage of revenues, income from operations decreased to 6.4% for the six
months ended March 31, 1997, from 8.2% for the comparable period in the prior
year, primarily attributable to international revenues from the sale of ISALTS
products at a significantly higher margin in the same period in 1996.

18
<PAGE> 20

Other income (expense), net, consists of interest expense, offset in part
by interest income from short-term deposits of cash. Interest expense was
$134,000 and $127,000 for the six month periods ended March 31, 1997 and 1996,
respectively. Interest income was $44,000 and $26,000 during the six month
periods ended March 31, 1997 and 1996, respectively.

The Company's pro forma effective tax rate was 39.0% and 40.0% for the
three month periods ended March 31, 1997 and 1996, respectively.

FISCAL 1996 COMPARED TO FISCAL 1995

Revenues increased 33.3%, or $7.9 million, to $31.7 million for fiscal
1996, from $23.7 million for fiscal 1995. The increase was due to a $6.0 million
increase in revenues from communication systems and IT Services, primarily under
contracts with the U.S. Navy, and a $1.9 million increase in revenues from
systems integration services.

Direct costs increased to $19.3 million for fiscal 1996 from $14.8 million
for fiscal 1995. Direct costs, expressed as a percentage of revenues, decreased
to 61.0% for fiscal 1996 from 62.4% for fiscal 1995, primarily due to increased
revenues from international fixed price contracts which generally have lower
direct costs as a percentage of revenues. This decrease was partially offset by
the higher direct costs attributable to systems integration services.

Indirect expenses increased to $10.3 million for fiscal 1996 from $8.2
million for fiscal 1995. The increase was due primarily to the higher level of
revenues discussed above. Indirect expenses, expressed as a percentage of
revenues, decreased to 32.4% for fiscal 1996 from 34.6% for fiscal 1995, because
a higher proportion of revenues came from systems integration services.

Income from operations increased 197.7%, to $2.1 million for fiscal 1996,
from $707,000 for fiscal 1995. As a percentage of revenues, income from
operations increased to 6.6% in fiscal 1996 from 3.0% in fiscal 1995. This
increase was due primarily to a shift in the Company's revenue mix, with an
increased proportion of revenues coming from higher margin international,
systems integration and commercial sales.

Interest expense was $257,000 and $185,000 for fiscal 1996 and 1995,
respectively. Interest income was $57,000 and $52,000 for fiscal 1996 and 1995,
respectively.

The Company's pro forma effective tax rate was 39.0% and 40.0% for fiscal
1996 and 1995, respectively.

FISCAL 1995 COMPARED TO FISCAL 1994

Revenues increased 24.1%, or $4.6 million, to $23.7 million for fiscal
1995, from $19.1 million for fiscal 1994. This increase was due to a $3.3
million increase in revenues from communication systems and IT Services,
primarily under contracts with the U.S. Navy, and a $1.3 million increase in
revenues from the newly developed systems integration business.

Direct costs increased to $14.8 million for fiscal 1995 from $11.4 million
for fiscal 1994. Direct costs, expressed as a percentage of revenues, increased
to 62.4% for fiscal 1995, from 59.8% for fiscal 1994, primarily due to a higher
proportion of revenues coming from systems integration services.

Indirect expenses increased to $8.2 million for fiscal 1995 from $7.2
million for fiscal 1994. The increase was due primarily to the higher level of
revenues discussed above. Indirect expenses, expressed as a percentage of
revenues, decreased to 34.6% for fiscal 1995, from 37.6% for fiscal 1994, due to
the higher proportion of systems integration revenues.

Income from operations increased 38.4%, to $707,000 for fiscal 1995, from
$511,000 in fiscal 1994. As a percentage of revenues, income from operations
increased to 3.0% in fiscal 1995, from to 2.6% in fiscal 1994 due primarily to
increased revenues from systems integration and commercial business.

Interest expense was $185,000 and $125,000 during fiscal 1995 and 1994,
respectively. Interest income was $52,000 for both fiscal 1995 and 1994.

The Company's pro forma effective tax rate was 40.0% for both fiscal 1995
and 1994.

19
<PAGE> 21

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited statement of operations
data for the last nine quarters, and such data expressed as a percentage of
revenues for each quarter. This data has been derived from the Company's
unaudited quarterly financial statements. In management's opinion, these
quarterly financial statements have been prepared on a basis consistent with the
audited financial statement contained elsewhere herein, and include all
adjustments, consisting only of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the information presented, when
read in conjunction with the Company's audited Financial Statements and Notes
thereto appearing elsewhere in this Prospectus. The results of operations for
any quarter and any quarter-to-quarter trends are not necessarily indicative of
the results to be expected for any future periods. See "Risk
Factors -- Variability of Quarterly Operating Results."

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------------------------------
FISCAL 1995 FISCAL 1996 FISCAL 1997
------------------------------------------ ------------------------------------------ -------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1994 1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- -------- --------- -------- -------- -------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......... $4,512 $5,371 $6,495 $ 7,346 $5,775 $7,261 $7,215 $11,415 $9,066 $12,064
Direct costs...... 2,688 3,283 4,285 4,559 3,331 3,864 4,475 7,638 6,038 8,708
Indirect, general
and
administrative
expenses........ 1,664 1,980 2,047 2,511 2,027 2,748 2,358 3,121 2,442 2,583
-------- -------- -------- --------- -------- -------- -------- --------- -------- --------
Income from
operations...... 160 108 163 276 417 649 382 656 586 773
======= ======== ======= ======== ======= ======== ======= ======== ======= ========
</TABLE>

<TABLE>
<CAPTION>
(AS A PERCENTAGE OF REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0 %
Direct costs...... 59.6 61.1 66.0 62.1 57.7 53.2 62.0 66.9 66.6 72.2
Indirect, general
and
administrative
expenses........ 36.9 36.9 31.5 34.1 35.1 37.9 32.7 27.4 26.9 21.4
-------- -------- -------- --------- -------- -------- -------- --------- -------- --------
Income from
operations...... 3.5% 2.0% 2.5% 3.8% 7.2% 8.9% 5.3% 5.7% 6.5% 6.4 %
======= ======== ======= ======== ======= ======== ======= ======== ======= ========
</TABLE>

The Company's revenues and earnings may fluctuate from quarter to quarter
based on such factors as the number, size and scope of projects, expenditures
required by the Company, delays, employee utilization rates, adequacy of
provisions for losses, accuracy of estimates of resources required to complete
ongoing projects and general economic conditions. Demand for the Company's
products and services in each of the markets it serves can vary significantly
from quarter to quarter due to revisions in customer budgets or schedules and
other factors beyond the Company's control. Additionally, a change in revenue
mix from quarter to quarter may result in fluctuating earnings, as experienced
by the Company on the sale of higher margin products to international customers
in the quarters ending December 31, 1995 and March 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES

Since the Company's inception in 1987, it has generally financed its
working capital needs through internally generated funds, periodically
supplemented by borrowings under the Company's revolving credit facility with a
commercial bank.

The Company generated cash flow from operating activities of $3.2 million
for the six months ended March 31, 1997, resulting primarily from net income,
increases in accounts payable and accrued expenses, partially offset by
increases in contract receivables. The increase in contract receivables was due
to increased revenues from the two large U.S. Navy contracts awarded to the
Company during fiscal 1996 and from systems integration and resale business
under the GSA Schedule Contract. For the six months ended March 31, 1996, net
cash used in operating activities amounted to $1.1 million, resulting primarily
from increases in contract receivables and decreases in accounts payable and
accrued expenses, partially offset by net income.

The Company generated cash flow from operating activities of $165,000,
$545,000 and $469,000 for fiscal 1996, 1995 and 1994, respectively. Net cash
provided by operating activities for fiscal 1996 resulted primarily from net
income and increases in accounts payable and accrued expenses, partially offset
by increases in

20
<PAGE> 22

contract receivables. Net cash provided by operating activities in fiscal 1995
was primarily the result of net income, non-cash charges and increases in
accrued expenses, partially offset by increases in contract receivables and
decreases in accounts payable. Net cash provided by operating activities for
fiscal 1994 was due to net income and increases in accounts payable and accrued
expenses, partially offset by increases in contract receivables.

The principal use of cash for investing activities has been for the
purchase of computers and equipment. These purchases totaled $370,000, $270,000
and $382,000 for fiscal 1996, 1995 and 1994, respectively, and $350,000 and
$200,000 for the six months ended March 31, 1997 and 1996, respectively.
Further, the Company invested $240,000 and $446,000 in software development
costs for its SALTS products in fiscal 1995 and 1994, respectively.

During 1996, the Company had a line of credit with a commercial bank under
which it could borrow up to a maximum of $4.0 million. In March 1997, the
Company extended the line under more favorable terms. The new line permits
borrowing up to $5.0 million and bears interest, payable monthly, at the bank's
prime rate plus a percentage, not more than 0.25%, that depends on the Company's
historical financial performance. The line of credit expires on February 28,
1998. Borrowings are limited by specified percentages of specific contract
receivables and are secured by contract receivables. The credit agreement
contains various covenants requiring the Company to maintain certain financial
ratios, including tangible net worth, liabilities to tangible net worth, funded
debt to operating cash flow and debt service. The agreement also restricts the
payment of dividends. As of the end of fiscal 1996, the Company was in
compliance with all covenants contained in such agreement. As of March 31, 1997,
there was no debt outstanding under the Company's revolving credit facility.

The Company leases office space from 10089 Management, L.L.C., a Virginia
limited liability company ("10089 Management"), which has as its majority
members Messrs. Robinson, Martinache and Costello, the principal stockholders
and directors and officers of the Company. The Company had guaranteed 10089
Management's bank borrowings, but this guaranty will be terminated upon the
closing of this offering. See "Certain Transactions -- Transactions with
Directors and Executive Officers."

Inflation did not have a material impact on the Company's revenues or
income from operations in fiscal 1996, 1995 and 1994 and the six months ended
March 31, 1997 and 1996.

The Company currently anticipates that the net proceeds from this offering,
together with its current cash balances, amounts available under its credit
facility and net cash provided by operating activities, will be sufficient to
meet its working capital and capital expenditure requirements for at least the
next twelve months.

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation" was issued in October 1995. The Company adopted the new
standard for fiscal 1996. This standard establishes the fair value based method
(the "SFAS 123 Method") rather than the intrinsic value based method as the
preferred accounting methodology for stock based compensation arrangements.
Entities are allowed to: (i) continue to use the intrinsic value based
methodology in their basic financial statements and provide in the footnotes pro
forma net income and earnings per share information as if the SFAS 123 Method
had been adopted; or (ii) adopt the SFAS 123 Method. The Company adopted this
statement by providing the required pro forma disclosures in the footnotes. See
Note 9 of Notes to Financial Statements.

Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
changes the reporting requirements for earnings per share ("EPS") for publicly
traded companies by replacing primary EPS with basic EPS and changing the
disclosures associated with this change. The Company is required to adopt this
standard in fiscal 1998 and is currently evaluating the impact of this standard.

21
<PAGE> 23

BUSINESS

OVERVIEW

The Company believes that the following key attributes, in addition to
enabling it to maintain its strong position in the military SATCOM market, will
enhance its ability to expand its business.

SATCOM EXPERTISE. The Company believes that it is recognized as a leader
in systems engineering for U.S. Navy SATCOM and related systems technology. The
senior management of the Company has extensive experience in the technical and
managerial aspects of the Navy SATCOM business. While the Company initially
developed a staff of highly qualified communications engineers and systems
analysts to provide state-of-the-art engineering and technical support services,
it has expanded its staff to include experts in program and financial management
as well as professional support personnel with backgrounds in communication
systems. The Company believes this combination of skills and capabilities is one
of the key factors that distinguishes it from its competitors in the
communication systems market and has enabled it to retain customers such as the
U.S. Navy.

ABILITY TO APPLY TECHNOLOGY. The Company believes it has a reputation in
the industry for delivering creative solutions to complex problems through the
application of the most current technology available. Its technical specialties
cover a broad range of emerging technologies, such as computer-aided logistics
support, data security, rapid system development techniques, rapid massive data
transfer techniques and client/server applications. The Company intends to
continue its policy of ongoing development of new products and services.

ABILITY TO PROVIDE COST EFFECTIVE, TOTAL SOLUTIONS. The Company offers its
customers a full spectrum of information technology services, permitting the
tailoring of its offerings to customers' changing needs. It has developed a
number of readily available commercial software solutions that permit it to
provide quick, cost-effective solutions to its customers. Because the Company
has access to different products from many vendors, it is able to objectively
select the best products for the unique needs of its customers.

EXTENSIVE PROJECT MANAGEMENT EXPERIENCE. The Company believes that its
extensive experience with large and complex federal contracts has contributed to
its reputation for excellence in project management. The Company believes this
capability will position it to capitalize on the future growth in outsourcing,
both in the United States and internationally.

INDUSTRY OVERVIEW

For the past several years, a significant trend in both government and
business has been to seek greater productivity with fewer resources. Government
and business organizations increasingly have focused on their core competencies
and functions, and have begun to outsource non-core functions, such as
information technology and program management, in order to reduce staff and
overhead, use resources more efficiently and acquire expertise on an as-needed
basis. The outsourcing of information technology functions has given rise to a
significant opportunity for private contractors to offer services and support to
governments and businesses.

Federal Sources, Inc., an independent market research firm specializing in
the U.S. federal market, estimates that the U.S. government has budgeted $26.5
billion in its fiscal year 1997 for information

22
<PAGE> 24

technology services and products. Estimates for domestic commercial information
technology products and services are reported to be significantly larger than
those for the U.S. government's requirements.

The U.S. military is also seeking greater productivity through systems that
act as "force multipliers." These are solutions and technologies that enable
fewer personnel and assets and lower levels of military spending to produce more
effective performance. To further this strategy, military agencies are relying
on communications products and systems, such as those that provide secure and
reliable transmission of voice and data in demanding environments. In its fiscal
year 1997, the DOD budget for information technology in the classified command,
control and communications market is estimated to be $9.8 billion.

The federal government also is refocusing how it selects
contractors -- using a "best value" approach rather than price as the
determining factor, an approach the commercial sector has used for some time.
Under the best value approach, the government selects service providers based on
technical merit, reputation and past performance, not merely on price. Since the
late 1980s, the U.S. government also has made use of fewer, but larger-scale,
procurements to meet its information technology requirements, requiring
companies to have greater financial and technical resources in order to
participate in competitive bids. Companies have responded to this trend either
by increased use of teaming agreements among several firms in order to fulfill
the requirements of the larger procurements or through strategic mergers and
acquisitions of complementary businesses to consolidate operations and efforts
and permit competition against larger companies.

Government and business organizations also are increasingly demanding that
information technology systems be designed for interoperability with commercial
off-the-shelf computer hardware and software products and that such products be
usable with existing legacy systems. In addition, concerns over excessive
development costs and the rapid pace of technological change have led both
government and business organizations to demand flexible systems created by
adapting commercial off-the-shelf software and hardware, rather than systems
that have been built to customized specifications. This emphasis on system
flexibility using readily available commercial products creates extensive
systems integration opportunities.

BUSINESS STRATEGY

To capitalize on opportunities created by these industry developments, the
Company has adopted the following business strategies.

MAINTAIN LEADERSHIP IN MILITARY SATCOM INDUSTRY. Since its inception, the
Company has focused on being a leader in the military SATCOM industry. It now
seeks to expand its services in this market by continuing its early
identification of program needs, its support of government program offices in
formulating requirements and its incremental investments in development of lower
cost military products with shorter delivery times. The Company also believes it
can leverage its expertise with the U.S. Navy SATCOM to expand its presence as a
military SATCOM provider both within the Navy and other branches of the DOD.

EXPAND EXISTING SERVICES AND CUSTOMER BASE. The Company plans to continue
to expand its capabilities into new but related areas of technology which the
Company believes will allow it to both further penetrate its existing customer
base and develop new customers. For example, the Company has developed and is
marketing high speed data transfer technology and is currently enhancing that
technology to include high frequency communication capability with Internet and
intranet access. The Company's strategy also involves expanding its customer
base beyond the DOD. In particular, the Company seeks to capitalize on the U.S.
government's trend toward using readily available commercial products and
systems integration services by offering such products and services through its
GSA Schedule Contract. Finally, the Company plans to expand its services and
customer base by marketing internationally the technologies and capabilities it
has developed while performing U.S. military contracts. For example, the Company
has been successful in selling its Streamlined Automated Logistics Transmission
System ("SALTS") technology, which was originally developed for U.S. Navy
communication uses, to the United Kingdom Royal Navy (the "UK Royal Navy") and
the Royal Australian Navy.

DEVELOP ADDITIONAL COMMERCIAL BUSINESS. While servicing its government
customers, the Company has developed many advanced technical capabilities in
areas such as networking, local area network ("LAN")

23
<PAGE> 25

and wide area network ("WAN") services and database design and support. The
Company's strategy is to apply these skills and capabilities in selected
commercial markets, especially small and medium-sized businesses that are
outsourcing their increasingly complex information technology needs. For
example, the Company has used its information technology capabilities to
transfer the information technology operations of a large electric power company
from an old operating system with limited applications to a new operating system
with a wide range of office automation tools and flexible remote access, using
the World Wide Web. The Company has added experienced marketing staff to assist
its expansion into this market.

EXPAND THROUGH STRATEGIC ACQUISITIONS AND THE USE OF TEAMING
RELATIONSHIPS. Strategic acquisitions are an integral component of the
Company's growth strategy. Although it has not made any acquisitions to date,
the Company periodically evaluates potential acquisitions of businesses,
technologies and products which are complementary to its core communication
business. The Company believes that acquisitions will allow it to develop
technical services it does not currently provide, to target markets it does not
currently serve, to gain industry knowledge in such markets and to develop
relationships with additional customers. Additionally, the Company is pursuing
teaming relationships with significant industry participants in order to enhance
its ability to participate in additional large and complex procurement programs.
The Company currently participates in such programs, as both prime contractor
and subcontractor, with such major contractors as Computer Sciences Corporation
and Booz-Allen and Hamilton, Inc.

COMPANY OPERATIONS

The Company operates primarily in three interrelated areas: communications
systems, information technology services and systems integration.

COMMUNICATION SYSTEMS

The Company believes it is recognized as a leader in the SATCOM industry,
providing technical and program management services and support for satellite
communications systems to the U.S. military. It provides SATCOM engineering and
technical services and program and system support primarily to various program
directorates and field activities of the U.S. Navy. While the Company initially
developed a staff of highly qualified communications engineers and systems
analysts to provide state-of-the-art engineering and technical support services,
it has expanded its staff to include experts in program and financial management
as well as professional support personnel with backgrounds in communication
systems. The Company believes this combination of skills and capabilities is one
of the key factors that distinguishes it from its competitors in the
communication systems market. For fiscal 1996, the Company's communication
systems business represented 64.5% of revenues.

ENGINEERING. The Company provides comprehensive communications engineering
support to assist in the development of military communications systems. Many of
its contracts are not project specific, but require that it provide technical
services and support to a variety of projects and programs being run by a
particular Navy office. In particular instances, the Company may perform some or
all of the technical engineering and other support for a specific U.S. Navy
program or system, or may provide technical review and support services to
assist the Navy in evaluating or assessing engineering tasks. These services
cover a full range of engineering and technical support, including requirements
analyses, design, hardware and software engineering, studies and development.

The Company's skills and experience permit it to apply innovative solutions
to communications engineering problems. For example, the Company has developed
receiver, modulator and coder design alternatives for a major U.S. Navy
communication system and has defined satellite payload modifications for a major
military satellite program. The Company's expertise in both military and
commercial satellite programs has enabled it to develop innovative military uses
of commercial satellite systems. For instance, the Company developed the concept
which permitted the U.S. Navy to conduct its first worldwide video
teleconference, simultaneously linking all European, Atlantic and Pacific
commanders by satellite with the Pentagon and a major command ship at sea. In
addition, the Company's engineers have operational experience to translate a
user's requirements into practical technical specifications for a communication
system. This experience has

24
<PAGE> 26

enabled the Company's engineers to analyze major Navy communication systems,
such as High Speed Fleet Broadcast and the Communication Support System, and
project future needs and technology requirements. The Company's capability to
conduct high level theoretical engineering tasks, coupled with an intimate
knowledge of the system under investigation, permits the Company to assist its
customers in avoiding costly troubleshooting efforts on communication problems
related to natural phenomena. Many of these concepts and techniques which were
developed for the U.S. Navy have natural extensions to other military and
commercial applications.

As an extension of the Company's capability to provide total engineering
solutions, the Company supports communication systems after development with a
complete set of in-service engineering skills, which include planning for and
conducting installation, testing operational performance and providing training
and maintenance assistance. It provides this engineering support for a wide
variety of communications equipment, such as antennas, receivers, processors and
complete systems. For example, the Company provides installation check-out for
the U.S. Navy's extra high frequency terminals installed on-board ships and also
provides training for ship and submarine crews in their operation, both in port
and, when appropriate, at sea.

PROGRAM PLANNING AND MANAGEMENT. The Company assists DOD program managers
in planning and managing all facets of defense and military programs and
hardware procurement, from determining needs and objectives through
development, acquisition, integration, testing and fielding. These services
include procurement planning and management, financial management, cost
estimating and control and production support.

The Company has a staff specializing in financial management who have
worked with government managers in the Executive Office of the President,
national budget offices, Congressional committees, the Office of the Secretary
of Defense and the Office of the Secretary of the Navy. This staff has supported
several domestic and international government and commercial customers in
communication systems and other areas. The Company has tailored a variety of
project management techniques and tools to customer needs, such as developing
networks which enable simultaneous progressive tracking of over 100 acquisition
documents and developing dependency schedules to track the progress of
industrial manufacturing processes for a major U.S. Navy weapons system. The
dependency schedules were used to identify a production schedule problem for a
shipboard weapons control system, to conduct analyses of the system and to
develop a work-around alternative to maintain the schedule.

Additionally, the Company provides program support to U.S. and foreign
governments in the sale of U.S. military equipment to foreign governments. The
Company believes that this area of expertise presents significant potential for
growth as foreign governments upgrade their communication system capabilities.
The Company has established a presence in this niche market with its experience
in foreign military sales, including advising on compliance with licensing and
security requirements, preparing technical documentation, forecasting and
tracking equipment deliveries and funding obligations, providing program and
financial reviews and reconciling and closing foreign military sales cases. It
prepares schedules of available equipment and provides data for existing and new
technologies, recommendations for release of hardware and software, and guidance
on approval or disapproval of commercial export license requests. This
experience is also being applied to provide direct sales to foreign governments.
See "Business -- Products."

The Company's network management and satellite communications expertise
also permit it to develop systems for business users in geographically dispersed
locations. The Company believes that office locations of companies will continue
to become more geographically dispersed and that the commercial market for
systems to link these offices can be a significant opportunity for future
growth. The Company has created a product called Virtual Program Office ("VPO")
to capitalize on this emerging market of geographically dispersed companies. VPO
is a suite of user-friendly management tools designed to enable real-time voice,
video and data communications among geographically dispersed organizations and
users. Implemented as a business process reengineering strategy, VPO includes
Lotus Notes groupware, desktop video teleconferencing and a series of customized
integrated data management solutions.

25
<PAGE> 27

The following are significant communication systems contracts and programs,
which also include IT Services, emphasizing the nature of the Company's
interrelated business areas:

- The Company is the prime contractor under a five-year cost plus fixed
fee contract awarded by the U.S. Navy in March 1996 to provide
technical engineering and other support services to a U.S. Navy
command. Although there can be no assurance that the contract will
develop as it expects, the Company believes the contract has a
potential value of approximately $84 million over the five-year period
of the contract, which expires in fiscal 2001. The contract team
includes, as subcontractors, Computer Sciences Corporation, Booz-Allen
and Hamilton, Inc., Integrated Systems Control, Inc.,
Tele-Consultants, Inc. and others.

- The Company is the prime contractor under a five-year cost plus fixed
fee contract awarded by the U.S. Navy in August 1996 to provide
program management support, financial management support, cost and
schedule analysis, information management support, foreign military
sales support, installation and inventory management and configuration
management for the PD 70 Integrated Command, Control, Communication,
Computers and Intelligence ("IC4I") project and staff offices.
Although there can be no assurance that the contract will develop as
it expects, the Company believes that the contract could have a
potential value of approximately $36 million over the five-year
period, which expires in fiscal 2001.

- The Company is the prime contractor under a five-year cost plus fixed
fee contract awarded by the U.S. Navy that commenced in October 1993,
to provide program management support, financial management support,
cost and schedule analysis, configuration management for communication
systems, equipment integration support, specification and
standardization support, integrated logistics management support and
information management support to the Information Transfer Systems
Directorate of a U.S. Navy command. Although there can be no assurance
that the contract will develop as it expects, the Company believes
that the contract could have a potential value in excess of
approximately $8 million over the remaining two years of the contract,
which expires in fiscal 1998.

INFORMATION TECHNOLOGY SERVICES

Through its IT Services business, the Company offers a broad array of
professional information technology services and information systems to
commercial and government markets. The IT Services offered by the Company
include information management systems design and integration; LAN/WAN design,
installation and support; database design and real-time database management;
Internet and intranet services; and multi-media training development. The
advanced technical capabilities gained by the Company while performing services
for government customers has provided expertise in the information technology
area, which the Company is leveraging to develop its commercial business. The
Company is currently focusing on expanding its customer base to include
commercial and international customers. For fiscal 1996, the Company's IT
Services business represented 25.3% of revenues.

The Company designs and implements information management systems that
enable its customers to create integrated productivity software and
communication tools which allow uninterrupted transmission of information
throughout a customer's infrastructure. The Company has been designated as a
Microsoft Solution Provider, a Lotus Business Partner and a Novell Authorized
Reseller, designations which permit the Company to pursue some business
opportunities not available to all competitors because these certifications
frequently are cited as eligibility requirements for commercial bids.

The Company plans and creates conceptual designs, system designs and system
updates, including identifying functional requirements and creating database,
system and subsystem specifications. It performs feasibility and cost-benefit
studies on system alternatives and presents recommendations. It recently won a
competitively awarded contract to conduct a system design and requirements study
for the City of Imperial Beach, California. The Company believes that there is a
substantial demand for these kinds of services and is actively seeking to market
them to small and midsize companies and to municipalities.

26
<PAGE> 28

The Company also provides office automation system services. It analyzes
current office functions and matches them with appropriate office software and
provides integrated office tools to permit data sharing and improve office
efficiency. The Company established the first office automation system for a
major program directorate of the U.S. Navy ten years ago, using a central
computer with multiple processors and work station terminals, applying
then-available technology to an office environment. As it continued to provide
network services for that office, improving the system through advances in
technology, the Company implemented and now supports a 250 station LAN with five
servers. The Company has applied that same technology to several commercial
customers.

Additionally, the Company provides technical assistance to end users on
system configuration issues, software upgrades and functionality. In 1993, the
Company was awarded a contract to operate the network used by the International
Joint Commission, a quasi-government organization of the U.S. and Canada charged
with protecting the environmental conditions along the border between the two
countries. After successful completion of that three year contract, the Company
was awarded a multi-year contract to continue the network support with expanded
work scope, including software application training.

The Company provides a full range of database support using innovative
solutions to manage databases and present the information back to a variety of
end users at the level and detail specific to their needs. The Company has
extensive expertise in developing and implementing plans to migrate data from
legacy systems to modern technology products, as well as the design and
implementation of new applications. The Company recently completed a major
database task for the U.S. Army to provide access to Army databases using a data
warehousing approach. The Company believes that this successful implementation
will result in additional contracts from the U.S. Army to extend the data
warehousing to additional databases.

The Company has extensive hands-on experience designing complex management,
program and financial databases and graphical user interfaces ("GUI"). The
Defense Technical Information Center ("DTIC") awarded a contract to the Company
to provide a user-friendly interface to be used world-wide to access and search
the DTIC database, which contains data on virtually every technical study
completed for the Department of Defense. The Company has continued to receive
assignments to implement additional GUIs for the DTIC.

To permit its customers to communicate more efficiently, the Company
develops and implements both external (Internet) and internal (intranet)
connectivity solutions. It conducts needs analyses to define specific objectives
for web sites; designs marketing objectives and strategies; provides design
services for the appearance of web sites; provides technical and project
management services and support; hosts customer web sites on its server; and
provides web site promotional services to create the desired site traffic. An
example of a web page developed and hosted by the Company is the Children's
Hospice International home page, which can be viewed at
http://www.chionline.org.

The Company offers a wide range of training services utilizing innovative
techniques and tools, such as computer based training ("CBT") aids, training
videos and on-line performance tools, to promote increased productivity and
efficient use of installed systems. It prepares and conducts CBT seminars for
government and commercial customers and has developed CBT programs covering a
wide variety of subjects as required by customers, including, for example,
identifying persons driving while under the influence of alcohol (for the
National Highway Traffic Safety Administration) and training seamen on the
operation of on-board submarine communication systems. Activities the Company
undertakes as part of its multi-media training services include developing
customized training concepts and plans, including undertaking front-end analyses
of a customer's business and business processes to identify training
requirements and the appropriate training media; developing user and
administrator guides as well as self study work books, wall charts, training
videos and other materials; and surveying and updating curricula for training
courses.

SYSTEMS INTEGRATION

The Company provides systems integration for communication systems and to a
lesser extent acts as a value-added reseller of computer hardware, software and
integrated systems to both government and commercial customers. Sales to
government customers are through the Company's GSA Schedule Contract.

27
<PAGE> 29

Sales to commercial customers are through the GSA Schedule Contract (to
government contractors) or through direct contracts with other commercial
customers. The Company supports the systems and products it sells by providing
its customers a wide range of services, including employee training,
maintenance, repair and user assistance. The Company offers individual
components of its systems and other products from various vendors for resale
through the GSA Schedule Contract. The resale business often provides the
opportunity for additional systems integration business. The Company's systems
integration business represented 10.2% of revenues for fiscal 1996 and 23.7% of
revenues for the six month period ended March 31, 1997. See "-- Government
Contracts."

The Company believes that a market opportunity has developed as government
and commercial customers have begun to migrate to systems composed of commercial
off-the-shelf hardware and software components. Its strategy has been to
anticipate the systems needs of customers and to develop systems using readily
available commercial hardware and software. This strategy differs from that of
many of the Company's reseller competitors, which traditionally provide
individual hardware and software items for resale without integration, and many
of its integration competitors, which traditionally have developed entire
systems. The Company concentrates on relatively low quantity procurements which
are not cost-competitive for large systems integration companies, applying
system knowledge gained through following technology trends and providing ease
of procurement through a GSA Schedule Contract for government customers and
direct purchase for commercial customers. A recent example of this strategy
resulted in the sale to the U.S. Navy of over $4.0 million of integration work
for extra high frequency communications controllers.

The Company believes it has been successful as a system integrator because
it has targeted certain technologies and systems to offer through the GSA
Schedule Contract. Expecting that many government agencies were planning to use
VersaModule European ("VME") technology, the Company focused on offering VME
products and systems, which provide users with a versatile modular computer
system that allows users to combine products and functions. However, recognizing
that technology changes constantly, the Company is now targeting replacement
technology for some of the VME applications and will offer further technology
advances as appropriate. Because of the nature of this systems integration work,
the Company does not have a large investment in VME plant or equipment and can
continue to provide VME technology while pursuing additional technologies.

PRODUCTS

The Company has developed a set of communication systems and software
products which have both military and commercial applications. The Company has
identified potential applications for existing technology, developed systems to
implement the identified applications and then expanded the systems, using the
original technology, into multiple-use products. This process permits the
Company to sell products and systems off-the-shelf or to adapt them to specific
applications, depending on the needs of customers.

SALTS

The Company believes that its International Streamlined Automated Logistics
Transmission Systems ("ISALTS") and its Commercial Streamlined Automated
Logistics Transmission System ("CSALTS") programs, both of which are based on
the SALTS technology, are examples of its ability to adapt its military
expertise to commercial uses. The Company's SALTS technology is designed to
provide military and commercial organizations with the ability to store and
forward large amounts of administrative and logistics data in a compressed,
secure format using many forms of communication media. SALTS provides a near
real-time means of communicating mass data at minimum cost.

The SALTS technology originally was developed by the U.S. Navy as an
alternative data transmission system so that the transmission of logistics and
administrative data would not interfere with the transmission of tactical data
during the Persian Gulf war. Following the Persian Gulf war, the Navy contracted
with the Company to operate and enhance the SALTS system. Subsequently, the
Company has customized versions of SALTS for other specialized applications. For
example, the Army's 18th Airborne Corps and the troops occupying Haiti used it
to exchange accounting data. In addition, SALTS successfully conveyed mission

28
<PAGE> 30

support data during other major military operations and disaster relief efforts.
The Company's first commercial application of the SALTS technology was the
Company's USO-GRAM program, introduced in 1994, under which sailors at sea and
persons on shore can exchange e-mail messages.

The ISALTS and CSALTS programs are the Company's major commercial
applications of its SALTS technology. The Company has developed proprietary
ISALTS software which it is marketing to friendly foreign governments for their
military data transmission needs. The Company also provides readily available
commercial hardware, installation and ongoing maintenance, software upgrades and
other support services for its ISALTS customers. To date, the Company has
installed an ISALTS system for the UK Royal Navy and is in the process of
installing an ISALTS system for the Royal Australian Navy.

BGIXS

BGIXS ("Battle Group Information Exchange System") was developed by the
Company as a way to permit reliable and efficient data communication (as
compared to text communication only) between land, sea and air units in
half-duplex mode using a hub/spoke architecture. First marketed in 1993, BGIXS
uses commercial off-the-shelf technology to permit PC-to-PC transfer of tactical
data between a headquarters host and supporting forces using satellite links.
Additionally, BGIXS permits rapid file transfer with guaranteed delivery and
provides multimedia capability. The U.S. Navy and the UK Royal Navy have
purchased BGIXS systems, and the Company is actively marketing the product to
other foreign military organizations in friendly countries.

PELICAN

Pelican, which is currently under development, will couple the data
transfer capabilities of BGIXS with high frequency radio communications to
provide an integrated, self-contained communication system to those
organizations using high frequency radio rather than satellite communications.
Pelican is based on a commercial open systems architecture using readily
available commercial hardware and software that provides data compression and
packetization for efficient transmission. The Pelican communication protocol
provides maximum operational flexibility through the use of multiple modes of
transmission, on-demand push/pull of files to a distant host, store and forward
file transfer and silent broadcast by the distant host. Pelican is expected to
be available for sale in the second half of fiscal 1997.

SALTS, BGIXS and Pelican illustrate the Company's ability to build systems
to satisfy a particular customer's needs and then use the same technology in a
refined and augmented form to create salable products for a different, and
potentially wider, customer base. The Company believes that these technologies
have significant commercial applications.

FINANCIAL MANAGEMENT SOFTWARE

The Company develops and offers a variety of software products used to
support customers' financial functions. These include: PRECEPT 5000, a cost
estimating tool; FMIS, an Oracle-based financial management system; FTS, an
application for financial tracking which can be coupled with FMIS for a broader
financial management and tracking system; and EMT, an engineering management
tool that has functionality similar to FTS and can be tied to FMIS. These
software products can be customized or adapted to meet a particular customer's
needs.

MARKETING

The Company's operations group is primarily responsible for marketing its
services and products, including the development and execution of marketing
plans, proposal presentations and the performance of related tasks. The
Company's marketing activities are conducted by its professional managers who
have technical expertise and whose efforts are supplemented by the Company's
staff of engineers, scientists and analysts. Company personnel use customer
contacts, attend new business briefings sponsored by government agencies and
review publications such as Commerce Business Daily for contracting
opportunities and to learn

29
<PAGE> 31

of new business opportunities. The Company also participates in several major
trade shows, both domestic and international, that showcase applicable
technologies.

One of the Company's primary marketing strategies is to anticipate and
understand the changing needs of its customers and then to be prepared to meet
those needs as they arise in new programs or in new program functions. The
Company believes that its experience in providing services to the U.S. Navy
enhances its ability to understand and anticipate the U.S. Navy's needs. The
Company emphasizes customer satisfaction, as evidenced by its ability to retain
customers such as the U.S. Navy since the Company's inception. It recently won a
major contract recompetition as the prime contractor on an engineering services
and support contract for which it originally served as a subcontractor. Under
this recompete contract, the Navy awarded the extension to the Company as the
prime contractor, although the Company is substantially smaller than the prime
contractors on the original contracts.

GOVERNMENT CONTRACTS

In general, the Company's business with the government (as both a prime
contractor and a subcontractor) is performed under cost reimbursement contracts,
time and materials contracts or fixed price contracts. Cost reimbursement
contracts, including cost plus fixed fee contracts, provide for the
reimbursement of costs (to the extent allowed under federal regulations) plus
the payment of a fixed fee. Under time and materials contracts, the Company is
reimbursed for labor hours at negotiated hourly billing rates and is reimbursed
(without fee) for travel and other direct expenses at actual cost plus applied
indirect, general and administrative expense. Under fixed price contracts, it
agrees to perform certain work for a fixed price and, accordingly, realizes the
benefit or detriment to the extent that the actual cost of performing the work
differs from the contract price. The majority of the Company's revenues from
government contracts are derived from cost plus fixed fee contracts.

The Company has several multi-year contracts with U.S. government agencies
to provide communication systems services and support, information technology
services and systems integration services and support. Typically, these
contracts require the Company to provide a broad range of services and support,
as requested by the customer, which may include systems engineering, production
support, management information systems services and support and program
operational support. Each contract generally provides an estimate of the number
of staff years that the government agency believes will be utilized each year
under the contract. The Company receives specific work assignments under the
contract on an as-identified basis through the issuance by the government of
task orders setting out the specific work to be performed, the staff years
allocated to the task and the estimated cost, fee and travel allocated to such
task. Payments are made to the Company incrementally during the performance of
each task. In order to plan for orderly performance under a contract, it is not
unusual, prior to or at the commencement of each government fiscal year during
the term of the contract, for the government and the Company to define proposed
tasks to be completed under the contract during the coming fiscal year.

Under the Company's GSA Schedule Contract, government agencies may
purchase, at prices approved by the GSA, hardware and software integration,
systems engineering, automated data processing services, hardware and software,
repair (service and parts) and training, without further competitive bidding.
Products that the Company can provide under the GSA Schedule Contract must be
approved by the GSA prior to being offered to end-users. Also, at the time the
contract was initially awarded and at each contract renewal, prices to end-users
under the contract are set for the duration of the contract at a specified level
or specified levels varying over time. The contract does not have any pre-set
delivery schedules or minimum purchase schedules. The GSA Schedule Contract is
renewable annually. The Company believes that the GSA Schedule Contract will be
renewed, although there can be no assurance to this effect.

The Company's contracts and subcontracts with federal government agencies
are competitively bid and awarded on the basis of technical merit, personnel
qualifications, experience and price. The Company's business, financial
condition and results of operations could be materially affected by changes in
procurement policies, a reduction in funds available for the services provided
by it and other risks generally associated with federal government contracts.
New government contract awards also are subject to protest by competitors at

30
<PAGE> 32

the time of award which can result in the re-opening of the bidding process or
the award of a contract to a competitor. None of the Company's current
government contracts is the subject of a bid protest; however, there can be no
assurance that government contracts awarded to it in the future will not be
challenged by competitors.

The Company's contractual costs and revenues also are subject to audits and
adjustments by negotiation between it and the DCAA and other government
auditors. As part of the audit process, the DCAA verifies that all charges made
by a contractor against a contract are legitimate and appropriate. Audits may
result in recalculation of contract revenues and non-reimbursement of some
contract costs and fees. The Company was audited by DCAA for contract
performance through fiscal 1994 under all of its government contracts, which
resulted in immaterial adjustments to its revenues under the contracts audited.
However, there can be no assurance that future audits will not result in
material adjustments to the Company's revenues.

The Company's contracts with the government and its subcontracts with
government prime contractors are subject to termination for the convenience of
the government; termination, reduction or modification in the event of change in
the government's requirements or budgetary constraints; and, when it
participates as a subcontractor, termination for the failure or inability of the
prime contractor to perform its prime contract. If a termination for the
convenience of the government occurs, the government generally is obligated to
pay the costs incurred by the Company under the contract plus a pro rata fee
based upon the work completed.

In addition to the right to terminate, government contracts are conditioned
upon the continuing availability of Congressional appropriations. Congress
usually appropriates funds on a fiscal year basis even though contract
performance may take several years. Consequently, at the outset of a major
program, the contract is usually incrementally funded, and additional funds are
normally committed to the contract by the procuring agency as appropriations are
made by Congress for future fiscal years. In addition, contractors often
experience revenues uncertainties during the first quarter of the government's
fiscal year (beginning October 1) until differences between budget requests and
appropriations are resolved. To date, Congress has funded all years of the
multi-year major program contracts for which the Company has served as prime
contractor or a subcontractor, although there can be no assurance that this will
be the case in the future.

INTERNATIONAL CONTRACTS

The Company's international business is generally performed under fixed
price contracts. International business accounted for 7% of the Company's
revenues for fiscal 1996. The vast majority of the Company's international
business revenues are derived from sales of the Company's products, such as
ISALTS and BGIXS, to foreign navies and the performance of services related to
such sales.

As part of its growth strategy, the Company is seeking opportunities to
expand further into international markets. To date, the Company has limited
experience in marketing and distributing its products internationally. The
Company has one senior marketing employee dedicated to marketing and customer
support for international business. See "Risk Factors -- International
Expansion."

COMMERCIAL CONTRACTS

Commercial contracts accounted for 3% of the Company's revenues for fiscal
1996. The majority of the Company's revenues from commercial contracts are
earned in the information technology area. Typically, these contracts require
the Company to complete a specific task or provide a defined range of services
and support, such as designing and implementing information management systems;
planning and creating conceptual designs, systems designs and system updates;
performing feasibility and cost-benefit studies on system alternatives; and
providing office automation system services and training services which utilize
innovative techniques and tools. Payments are made to the Company incrementally
during the performance of each specific work assignment.

The Company is currently focusing on expanding its customer base and
increasing the sales of its services in the commercial market, although the
Company and its management have limited experience in this market.

31
<PAGE> 33

To date, the Company's sales to customers other than the U.S. government have
been made largely to military agencies of other countries and to a lesser extent
civilian buyers.

BACKLOG

Many of the Company's contracts are multi-year contracts and contracts with
option years, and portions of these contracts are carried forward from one year
to the next as part of the Company's contract backlog. The Company's total
contract backlog represents management's estimate of the aggregate unearned
revenues expected to be earned by the Company over the life of all of its
contracts, including option periods. Because many factors affect the scheduling
of projects, there can be no assurance as to when revenues will be realized on
projects included in the Company's backlog. In addition, although contract
backlog represents only business which is considered to be firm, there can be no
assurance that cancellations or scope adjustments will not occur. The majority
of backlog represents contracts under the terms of which cancellation by the
customer would entitle the Company to all or a portion of its costs incurred and
potential fees to the date of cancellation.

Many of the Company's contracts are funded from year to year, based
primarily on the procuring company's or agency's fiscal requirements. This
results in two different categories of contract backlog: funded and unfunded
backlog. "Funded backlog" represents the sum of contract amounts for which funds
have been specifically obligated to contracts by customers, which in the case of
a U.S. government contract requires appropriation by the U.S. Congress to the
applicable agency and allocation to the contract by the agency. "Unfunded
backlog" represents future contract or option amounts that have not been
specifically obligated by customers. "Backlog" is the total of funded and
unfunded backlog.

The following table summarizes the Company's funded and unfunded backlog at
the dates indicated:

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------
1994 1995 1996
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BACKLOG COMPONENT
Funded....................................... $ 5,303 $ 3,255 $ 6,437
Unfunded..................................... 35,556 29,920 132,804
------- ------- --------
Total.............................. $40,859 $33,175 $139,241
======= ======= ========
</TABLE>

The Company believes that approximately 26% of its backlog as of September
30, 1996 will result in revenues in fiscal 1997. However, the Company also
believes that backlog is not necessarily indicative of future revenues. The
Company's backlog typically is subject to large variations from quarter to
quarter as existing contracts are renewed or new contracts are awarded.
Additionally, all U.S. government contracts included in backlog, whether funded
or unfunded, may be terminated at the convenience of the government.

COMPETITION

Because its communication systems business is specialized and the Company
is a leader in the portion of the communication business it pursues, the market
for this business is somewhat less competitive than the

32
<PAGE> 34

markets for its systems integration and IT Services businesses. In SATCOM
systems and services, the Company competes against technical services companies
in the defense industry, including Computer Sciences Corporation, Science
Applications International Corporation, Booz-Allen and Hamilton, Inc. and
SEMCOR. In its other business areas, the Company competes against a vast array
of computer manufacturers, systems integrators and product resellers and
distributors. In the IT Services area, the Company frequently teams as a
subcontractor on large procurement programs with one of its larger competitors
since it can be very expensive to bid as a prime contractor on such large
procurement programs.

The Company believes that the principal competitive factors in the
businesses in which it operates are technical understanding, management
capability, past contract performance, personnel qualifications and price. In
the federal government market, procurement reforms over the past years have
increased the importance of a contractor's past performance in deciding new bid
awards.

INTELLECTUAL PROPERTY

The Company relies on a combination of contractual rights, copyrights,
trademarks and technical measures to establish and protect the ideas, concepts
and documentation of its proprietary technology and know-how. All of its current
employees have executed confidentiality agreements, and the Company includes
confidentiality and non-competition covenants in its software licensing
agreements and consulting agreements.

The Company believes that product recognition is an important competitive
factor in the information technology industry. Accordingly, it promotes the
ISALTS(TM), CSALTS(R), PRECEPT(TM) and FMIS(TM) names in connection with its
marketing activities and holds a U.S. trademark registration for the CSALTS name
and copyrights for several software products, including ISALTS, CSALTS, PRECEPT,
FMIS, BGIXS(TM) and others. The intellectual property protections employed by
the Company, however, may not afford complete protection, particularly in
foreign markets, and there can be no assurance that third parties will not
independently develop such know-how or obtain access to its know-how, ideas,
concepts and documentation.

Although the Company believes that its technology has been developed
independently and does not infringe on the proprietary rights of others, there
can be no assurance that the technology does not and will not infringe or that
third parties will not assert infringement claims against the Company in the
future. In the case of infringement, the Company would, under certain
circumstances, be required to modify its products or obtain a license. There can
be no assurance that it would be able to do either in a timely manner, upon
acceptable terms and conditions, or at all, or that it will have the financial
or other resources necessary to defend successfully a proprietary rights
infringement action. Failure to do any of the foregoing could have a material
adverse effect on the Company. Furthermore, if its products or technologies are
deemed to infringe upon the rights of others, it could become liable for
damages, which could have a material adverse effect on the Company.

The Company may also be subject to litigation to defend against claimed
infringement of the rights of others or to determine the scope and validity of
the intellectual property rights of others. Any such litigation would be costly
and would divert management's attention, either of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. Adverse determinations in such litigation could result in the loss
of the Company's proprietary rights, subject the Company to significant
liabilities, require the Company to seek licenses from third parties or prevent
the Company from selling its services, any one of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.

EMPLOYEES

The Company believes that is its employees and their knowledge and
capabilities are a major asset. The Company has been successful in attracting
and retaining employees skilled in its core business competencies. As of March
31, 1997, approximately 19% of the Company's technical employees had advanced
degrees. The Company intends to continue to employ highly skilled personnel, as
well as personnel knowledgeable concerning the needs and operations of its major
customers.

33
<PAGE> 35

As of March 31, 1997, the Company employed 310 people, 272 of whom were
directly involved in computer and information systems programming, design and
engineering, and 38 of whom were in executive and administrative functions. The
Company believes that its relations with its employees are good. None of the
Company's employees are covered by collective bargaining agreements.

FACILITIES

The Company's headquarters occupies approximately 22,200 square feet at
10089 Lee Highway, Fairfax, Virginia. This space is provided under the terms of
a lease from 10089 Management, a related party to the Company, that expires
August 31, 2003. See "Certain Transactions -- Transactions with Directors and
Executive Officers." In the United States, the Company occupies approximately
79,000 square feet in offices in Fairfax, Virginia; Arlington, Virginia;
Virginia Beach, Virginia; Charleston, South Carolina; and San Diego, California.
The Company also maintains an office near Plymouth, England. The Company
believes that its current facilities are adequate for its existing needs and
that additional suitable space will be available as required.

LEGAL PROCEEDINGS

The Company currently is not a party to any material legal proceedings.

34
<PAGE> 36

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth certain information regarding the directors,
executive officers and other key employees of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS:
George A. Robinson............ 59 President, Chief Executive Officer and Chairman of the Board of
Directors
Charles G. Martinache......... 56 Executive Vice President, Chief Operating Officer and Director
Thomas A. Costello............ 49 Executive Vice President, Chief Technology Officer, Secretary,
Treasurer and Director
Dev Ganesan................... 38 Chief Financial Officer

KEY EMPLOYEES:
Warren C. Willis.............. 57 Senior Vice President and Director of Washington Operations
Sharon K. Angelone............ 38 Vice President and Director of Charleston Operations
Raymond E. Shutters........... 67 Director of West Coast Operations
Douglas A. Benzel............. 51 Vice President and General Manager of San Diego Operations
William S. Hoffman............ 56 Vice President and Chief Engineer
Kevin R. Adams................ 40 Director of ACS Technologies
J. Herbert Dahm............... 59 Director of International Operations
Kevin S. Hopkins.............. 42 Assistant Vice President
</TABLE>

GEORGE A. ROBINSON. Mr. Robinson was a founder of the Company and has
served as President, Chief Executive Officer and Chairman of the Board of
Directors of the Company since its inception in 1987. From 1986 to 1987, Mr.
Robinson held the position of Vice President for East Coast Operations of
Advanced Digital Systems, Inc., a military communication software development
company. Prior to working at Advanced Digital Systems, Inc., Mr. Robinson spent
over 20 years as a civilian employee in the U.S. Navy Satellite communication
program, most recently as Deputy Director.

CHARLES G. MARTINACHE. Mr. Martinache was a founder of the Company and has
served as Chief Operating Officer and a Director of the Company since 1987. From
1987 to July 1992, Mr. Martinache also held the office of Vice President, and in
July 1992 was made Executive Vice President. From 1986 to 1987, Mr. Martinache
was a program manager for Advanced Digital Systems, Inc. Prior to that, Mr.
Martinache served 23 years in the U.S. Navy as a cryptologic officer.

THOMAS A. COSTELLO. Mr. Costello was a founder of the Company and has
served as Secretary, Treasurer and a Director of the Company since 1987. From
1987 to 1994, Mr. Costello held the positions of Senior Vice President and
Technical Director, and in 1995 was made Executive Vice President and Chief
Technology Officer of the Company. From 1983 to 1987, Mr. Costello was a Senior
Systems Engineer for Advanced Digital Systems, Inc. where, among other things,
he led the Integrated Navy SATCOM Architecture study to upgrade existing
information exchange subsystems.

DEV GANESAN. Mr. Ganesan joined the Company in February 1997 as Chief
Financial Officer. From June 1994 to January 1997, Mr. Ganesan was employed by
GSE Systems, Inc., a publicly held international software systems and technology
solutions developer, as Vice President of Finance and Accounting. From 1990 to
June 1994, Mr. Ganesan served as the Treasurer and Corporate Controller of U.S.
Lime & Minerals, Inc., a publicly held mineral resources company. From 1987 to
1990, Mr. Ganesan was with Deloitte & Touche, most recently as an audit manager.

WARREN C. WILLIS. Mr. Willis joined the Company in August 1993 as Senior
Vice President and Director of Washington Operations. Prior to joining the
Company, Mr. Willis spent over 24 years managing

35
<PAGE> 37

SATCOM acquisition programs for the U.S. Navy. From October 1992 to July 1993,
he served as the Chief Engineer for a U.S. Navy communications directorate, and
from October 1990 to September 1992 he was the Deputy Program Manager for the
U.S. Navy SATCOM program office.

SHARON K. ANGELONE. Ms. Angelone has been employed by the Company since
its inception in 1987 and has served in a variety of positions. Since July 1992,
Ms. Angelone has served as a Vice President and the Director of Charleston
Operations. From September 1986 to July 1987, Ms. Angelone was a Senior
Financial Analyst at Advanced Digital Systems, Inc.

RAYMOND E. SHUTTERS. Mr. Shutters joined the Company in June 1996 as the
Director of West Coast Operations. From August 1995 to May 1996, Mr. Shutters
was a member of the C4I technical staff of Sciences Application International
Corporation. From 1959 to August 1995, Mr. Shutters was employed at the Navy
Research and Development Laboratory Center ("NRaD"). From 1987 to March 1993,
Mr. Shutters was Head of the Surveillance Department at NRaD where he was
responsible for managing the undersea, surface and aerospace surveillance and
research and development programs. In March 1993, Mr. Shutters was promoted to
Deputy Executive Director and Business Manager of NRaD, a position which he held
until August 1995.

DOUGLAS A. BENZEL. Mr. Benzel joined the Company in July 1990. In October
1992, Mr. Benzel was made Department Manager of Super High Frequency Operations
and, in September 1995, was named General Manager of San Diego Operations. In
addition, Mr. Benzel has served as Vice President since December 1993. From 1986
to 1990, Mr. Benzel was the Satellite Division Manager for the Defense
Communications Agency, where he was a principal engineer in the development of
military satellite communications architecture.

WILLIAM S. HOFFMAN. Mr. Hoffman has been employed by the Company since its
founding in 1987 and has served as Vice President and Chief Engineer since 1990.
From 1983 to 1987, Mr. Hoffman was Senior Systems Engineer at Advanced Digital
Systems, Inc. where he headed a team of software engineering professionals who
provided direct systems engineering and program management support to a U.S.
Navy satellite communications program office.

KEVIN R. ADAMS. Mr. Adams joined the Company in September 1993 as a
Systems Engineer, and in September 1994 he was made Manager of VME Technologies.
In April 1996, Mr. Adams was promoted to Director of ACS Technologies, a
business unit of the Company focusing on systems integration work. From December
1991 to August 1993, Mr. Adams was employed as Lead Engineer by VisiCom
Laboratories, Inc., a software development company.

J. HERBERT DAHM. Mr. Dahm joined the Company in July 1993 as the Director
of International Operations. From October 1990 to July 1993, Mr. Dahm served in
the U.S. Navy where he helped to deploy SALTS systems throughout the Navy.

KEVIN S. HOPKINS. Mr. Hopkins joined the Company in April 1997 as
Assistant Vice President and JMCOMMS Program Manager. From 1995 to 1997, Mr.
Hopkins served as Managing Director at Darlington, Inc. From 1993 to 1995, he
was the General Manager at Scientific Research Corp. ("SRC"). Both Darlington
and SRC provide communication systems and integration and development services
to high technology engineering programs. Prior to this, Mr. Hopkins served in
the U.S. Navy for 18 years as a cryptologic officer.

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

The Bylaws of the Company provide that the number of members of the Board
of Directors shall be determined by the resolution of the Board. Each director
is elected for a one-year term at each annual meeting of the stockholders.
Officers are elected by the Board of Directors. Each officer serves at the
discretion of the Board of Directors. There are no family relationships among
any of the directors or executive officers.

The Company intends to add two independent members to its Board of
Directors within 90 days after the date of this Prospectus. It will be necessary
for the Company to appoint these directors within the 90 day time period in
order to maintain its Nasdaq National Market listing. Failure to appoint two
independent directors could result in a delisting of the Common Stock from the
Nasdaq National Market.

36
<PAGE> 38

STOCKHOLDERS AGREEMENT

On May 2, 1997, Messrs. Robinson, Martinache and Costello, individually and
as trustees of certain trusts, entered into a Stockholders Agreement pursuant to
which each has agreed to vote the shares beneficially owned by him to elect each
other as directors of the Company and on other matters as a block as determined
by the affirmative vote of the majority of their shares. This Stockholders
Agreement will allow Messrs. Robinson, Martinache and Costello to control votes
on matters that require approval of the Company's stockholders.

COMMITTEES OF THE BOARD OF DIRECTORS

Upon consummation of this offering and the appointment of the two new
independent directors, the Board of Directors will establish a Compensation
Committee and an Audit Committee. The Compensation Committee will be comprised
of the two independent directors and will have the authority to determine the
compensation of the Company's executive officers and to administer the 1996
Stock Incentive Plan. The Audit Committee will be composed of the two
independent directors and one additional director. The Audit Committee will have
the authority to make recommendations concerning the engagement of independent
public accountants, review with the independent public accountants the plan and
results of the audit engagement, review the independence of the independent
public accountants, consider the range of audit and non-audit fees and review
the adequacy of the Company's internal accounting controls.

DIRECTOR COMPENSATION

Directors who are employees of the Company do not receive any compensation
for their service as directors. Following this offering, the Company will pay
each director who is not an employee of the Company a stipend of $ for
attending each meeting of the Board of Directors and will reimburse each such
director for his out-of-pocket expenses for attending these meetings. At the
discretion of the Board of Directors, independent directors will be granted
options to purchase Common Stock at the then-prevailing fair market value during
each calendar year in which such director serves on the Board of Directors.

EXECUTIVE COMPENSATION

The following table presents certain information concerning compensation
earned for services rendered in all capacities to the Company for the year ended
September 30, 1996 by the Chief Executive Officer and each of the other
executive officers (the "Named Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND -------------------- ALL OTHER
PRINCIPAL POSITIONS SALARY BONUS COMPENSATION
- --------------------------------------------------------- -------- ------- ------------
<S> <C> <C> <C>
George A. Robinson....................................... $250,000 $79,440 $ 4,333(1)
President, Chief Executive Officer and Chairman of the
Board of Directors
Charles G. Martinache.................................... 225,000 79,440 23,233(2)
Executive Vice President, Chief Operating Officer and
Director
Thomas A. Costello....................................... 225,000 79,440 4,967(1)
Executive Vice President, Chief Technology Officer,
Secretary, Treasurer and Director
</TABLE>

- ---------------
(1) Represents matching 401(k) plan contributions by the Company.
(2) Includes matching 401(k) plan contribution by the Company of $4,967 and
$18,266 in moving expenses paid by the Company.

37
<PAGE> 39

None of the Named Officers were granted options to purchase shares of the
Company's Common Stock in fiscal 1996, exercised options in fiscal 1996 or held
options to purchase shares of Common Stock as of September 30, 1996.

EMPLOYMENT AGREEMENTS

Mr. Ganesan serves as the Chief Financial Officer of the Company pursuant
to the terms of an employment agreement which continues in effect until Mr.
Ganesan's termination or separation from the Company. Under the terms of the
employment agreement, Mr. Ganesan receives an annual salary of $120,000 and was
given a one-time signing bonus of $25,000 upon commencing work with the Company
on February 1, 1997. Mr. Ganesan is eligible to receive a first-year bonus of
$25,000 upon the accomplishment of certain mutually agreed upon objectives. In
addition, under the terms of the employment agreement, Mr. Ganesan received
options to purchase 115,000 shares of the Company's Common Stock. Such options
have an exercise price of $6.50 per share, a term of eight years and become
exercisable in four equal annual installments beginning on January 1, 1998.

Mr. Willis serves as Senior Vice President and the Director of Washington
Operations pursuant to the terms of an employment agreement which continues in
effect until Mr. Willis' termination or separation from the Company. Under the
terms of the employment agreement, Mr. Willis currently receives an annual
salary of approximately $129,000 and an annual bonus in the amount of 0.25% of
Washington Operations Area revenues. In addition, Mr. Willis is eligible to
receive bonus amounts based on the accomplishment of specific objectives.

STOCK PLANS AND AGREEMENTS

1996 STOCK INCENTIVE PLAN

The 1996 Stock Incentive Plan of the Company (the "1996 Plan") was adopted
by the Company's Board of Directors in July 1996. Options for a total of 263,500
shares were granted under the 1996 Plan, all of which remain outstanding. The
Board of Directors has determined not to award any additional options under the
1996 Plan.

1997 STOCK INCENTIVE PLAN

The 1997 Stock Incentive Plan of the Company (the "1997 Plan") was adopted
by the Company's Board of Directors effective March 1997. The Company has
reserved 450,000 shares of Common Stock for issuance pursuant to grants under
the 1997 Plan. To date, no grants have been made under the 1997 Plan. The 1997
Plan has a term of 10 years. The 1997 Plan provides for the grant of stock
options, stock appreciation rights, restricted stock or "performance shares" to
directors, employees (including officers) and consultants of the Company and its
subsidiaries. Pursuant to the 1997 Plan, options may be incentive stock options
within the meaning of Section 422 of the Code or nonstatutory stock options,
although incentive stock options may be granted only to employees. Generally,
options granted under the 1997 Plan are immediately exercisable but remain
subject to repurchase by the Company for all exercised unvested shares under a
vesting schedule established by the Board or committee. All incentive stock
options are nontransferable other than by will or the laws of descent and
distribution.

STOCK OPTION AGREEMENTS

The Company has entered into nonqualified option agreements with three
employees, providing for the purchase of an aggregate of 101,250 shares of
Common Stock, all of which have been exercised as of the date of this
Prospectus. These options were not granted under any stock option plan. The per
share exercise price of such options was at least 100% of the fair market value
of a share of Common Stock as of the respective dates of grant.

38
<PAGE> 40

TERMINATION AGREEMENTS

Immediately prior to the consummation of the offering, the Company, Messrs.
Robinson, Martinache and Costello, as the majority stockholders, and Sharon K.
Angelone, Douglas A. Benzel, Thomas and Margaret M. Costello, Alvin L. Franson,
Terrence E. and Diane M. Hileman, Jr., William and Diane Hoffman, Charles and
Helen Martinache, George and Barbara Robinson and Warren C. Willis will enter
into Termination Agreements pursuant to which certain Stock Redemption
Agreements previously entered into by and between the Company and each other
party to the Termination Agreement will be terminated.

INDEMNIFICATION ARRANGEMENTS

Prior to the completion of this offering, the Company will enter into
indemnification agreements pursuant to which it will agree to indemnify certain
of its directors and officers against judgments, claims, damages, losses and
expenses incurred as a result of the fact that any director or officer, in his
capacity as such, is made or threatened to be made a party to any suit or
proceeding. Such persons will be indemnified to the fullest extent now or
hereafter permitted by the Delaware General Corporation Law, as amended (the
"DGCL"). The indemnification agreements will provide for the advancement of
certain expenses to such directors and officers in connection with any such suit
or proceeding. The Company will amend and restate its Certificate of
Incorporation and Bylaws to provide for the indemnification of the Company's
directors and officers to the fullest extent permitted by the DGCL.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors has not had a Compensation Committee prior to this
offering, and the functions of the Compensation Committee have been performed by
the Board of Directors as a whole. The Compensation Committee will become
effective following the closing of the offering and the appointment of the two
new independent directors. For information concerning certain transactions and
relationships among the Company and the current members of the Board of
Directors, see "Certain Transactions."

39
<PAGE> 41

CERTAIN TRANSACTIONS

TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS

In 1993, the Company entered into a ten year lease with 10089 Management,
the members of which include, among others, Messrs. Robinson, Martinache and
Costello, who collectively own 91% of 10089 Management. Under the terms of the
lease, the Company leases approximately 22,200 square feet at 10089 Lee Highway,
Fairfax, Virginia from 10089 Management for use as the Company's headquarters at
a current rental rate of approximately $26,000 per month. The monthly rental
rate increases annually based upon the annual increase in the Consumer Price
Index. The tenant also pays for insurance for the premises and for increases in
real estate taxes over 1993 real estate taxes for the building. The lease
expires on August 31, 2003. This arrangement, in contrast to outright ownership
of the building by the Company, enables the Company to allocate the cost of its
facilities to its government contracts. The Company believes that the terms of
the lease, including the rental rate, are at least as favorable to the Company
as those which could have been negotiated with an unaffiliated third party.

10089 Management purchased the Company's headquarters building in 1993
using, in part, a loan in the amount of $1,125,000 from a third party
institutional lender, which loan was guaranteed by the Company. The guaranty
will be terminated effective as of the closing of the offering. Also in
connection with 10089 Management's acquisition of the Company's headquarters
building, the Company lent to each of Messrs. Robinson, Martinache and Costello
approximately $119,000 for use as part of the purchase price for the building.
Other employees of the Company borrowed smaller amounts. All loans are evidenced
by promissory notes accruing interest at a rate of 7.0% per annum. The
promissory notes all become due and payable in August 1998, and each maker has
agreed to repay his loan in full from the proceeds received by him from the S
Corporation Distribution. See "S Corporation Distribution and Termination of S
Corporation Status."

Mr. Martinache also received a loan from the Company in 1996 in the amount
of $50,000, bearing interest at a rate equal to 8.75% per annum. The term of the
loan is five years and the loan is secured by a recorded lien against Mr.
Martinache's home in Charleston, South Carolina. Mr. Martinache has agreed to
repay this loan in full with proceeds received by him from the S Corporation
Distribution. See "S Corporation Distribution and Termination of S Corporation
Status."

FAIRFAX COMMUNICATIONS LTD.

Effective as of April 1, 1997, Fairfax Communications Ltd., a private
limited company organized under the laws of England ("Fairfax Communications
Ltd."), became a subsidiary of the Company pursuant to a transaction in which
the Company purchased all of its outstanding shares of stock. Each of Messrs.
Robinson, Martinache and Costello had owned 26.8% of the outstanding share
capital of Fairfax Communications Ltd. The Company purchased all of the ordinary
shares of Fairfax Communications Ltd. for $46,500 in a transaction intended to
qualify as a tax free reorganization under the Code. The proceeds of the sale
will be distributed to the stockholders of Fairfax Communications Ltd., which
stockholders include, among others, Messrs. Robinson, Martinache and Costello,
who each will receive $12,500.

S CORPORATION DISTRIBUTION

A portion of the proceeds of this offering will be used to fund the S
Corporation Distribution. See "S Corporation Distribution and Termination of S
Corporation Status."

40
<PAGE> 42

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of May 5, 1997 by (i) each person
known by the Company to beneficially own five percent or more of the outstanding
shares of Common Stock, (ii) each director and Named Officer of the Company,
(iii) all executive officers and directors as a group and (iv) all Selling
Stockholders. The address of the stockholders listed below as beneficially
owning more than five percent of the Common Stock is that of the Company's
principal executive offices. Except as indicated in the footnotes to the table,
the persons named in the table have sole voting and investment power with
respect to all shares beneficially owned.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE
OWNED PRIOR TO BENEFICIALLY OWNED
OFFERING NUMBER OF AFTER OFFERING (1)
-------------------- SHARES --------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- --------------------------------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS, DIRECTORS AND 5%
STOCKHOLDERS:
George A. and Barbara Robinson (2)......... 1,147,500 30.1% 200,000 947,500 16.7%
Charles G. and Helen Martinache (3)........ 1,147,500 30.1 200,000 947,500 16.7
Thomas A. and Margaret M. Costello (4)..... 1,147,500 30.1 200,000 947,500 16.7
All executive officers and directors as a
group (4 persons)....................... 3,442,500 90.3 600,000 2,842,500 50.1
OTHER SELLING STOCKHOLDERS:
Sharon K. Angelone......................... 33,750 * 5,000 28,750 *
Alvin L. Franson........................... 67,500 1.8 11,000 56,500 1.0
Terrence E. and Diane M. Hileman, Jr....... 67,500 1.8 11,000 56,500 1.0
William and Diane Hoffman.................. 135,000 3.5 23,000 112,000 2.0
</TABLE>

- ---------------
* Represents less than 1%.

(1) Assumes no exercise of the Underwriters' over-allotment options.

(2) Shares beneficially owned prior to the offering and beneficially owned after
the offering include 473,750 and 473,750 shares owned by the Robinson 1997
Trust No. 1 and the Robinson 1997 Trust No. 2, respectively, of which George
A. Robinson is the sole trustee.

(3) Shares beneficially owned prior to the offering and beneficially owned after
the offering include 216,000 and 216,000 shares owned by the Martinache 1997
Trust No. 1 and the Martinache 1997 Trust No. 2, respectively, of which
Charles G. Martinache is the sole trustee.

(4) Shares beneficially owned prior to the offering and beneficially owned after
the offering include 300,000 and 300,000 shares owned by the Costello 1997
Trust No. 1 and the Costello 1997 Trust No. 2, respectively, of which
Margaret M. Costello and Thomas A. Costello are trustees.

41
<PAGE> 43

DESCRIPTION OF CAPITAL STOCK

Upon the closing of this offering, the Company's authorized capital stock
will consist of 40,000,000 shares of Common Stock, par value $.01 per share, and
1,000,000 shares of Preferred Stock, par value $.01 per share. The following
brief description of the Company's capital stock does not purport to be complete
and is subject in all respects to applicable law and the provisions of the
Company's Certificate of Incorporation and Bylaws, copies of which have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part. Immediately prior to the closing of this offering, the Company will have
3,813,750 shares of Common Stock outstanding, held of record by nine
stockholders.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that holders
of more than 50% of the shares voted for the election of directors can elect all
of the directors. The holders of Common Stock are entitled to receive dividends
ratably when, as and if declared by the Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining available for distribution to them after payment of liabilities
and after provision has been made for each class of stock, if any, having
preference over the Common Stock. The outstanding shares of Common Stock are,
and the shares offered by the Company in this offering will be, when issued and
paid for, fully paid and nonassessable. Holders of Common Stock do not have
preemptive rights. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.

Upon completion of this offering, the Company's existing stockholders will
beneficially own 55.9% of the outstanding shares of Common Stock (52.4% if the
Underwriters' over-allotment option is exercised in full) and will therefore be
able to elect the entire Board of Directors and control all matters submitted to
stockholders for a vote. In addition, the three major stockholders, Messrs.
Robinson, Martinache and Costello, individually and as trustees of certain
trusts, have entered into a Stockholders Agreement pursuant to which they each
has agreed to vote the shares beneficially owned by him to elect each other as
directors and to vote their shares on other matters as a block as determined by
majority vote of their shares. This Stockholders Agreement will allow Messrs.
Robinson, Martinache and Costello to control votes on matters that require
stockholder approval. See "Management -- Stockholders Agreement."

PREFERRED STOCK

Preferred Stock may be issued from time to time in one or more classes or
series with such designations, powers, preferences, rights, qualifications,
limitations and restrictions as may be fixed by the Company's Board of Directors
without stockholder approval. The Board of Directors could issue the Preferred
Stock with voting and/or conversion rights and thereby dilute the voting power
and equity of the holders of the Common Stock and adversely effect the market
price of such stock. The issuance of Preferred Stock could also be used as an
antitakeover measure by the Company without any further action by the
stockholders. The Company has no present plans to issue shares of Preferred
Stock.

CERTAIN PROVISIONS OF DELAWARE LAW

The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law ("Section 203"). In general, Section 203
prevents an "interested stockholder" (defined generally as a person owning 15%
or more of the Company's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with the Company for three years
following the date that person became an interested stockholder unless: (i)
before that person became an interested stockholder, the Board approved the
transaction in which the interested stockholder became an interested stockholder
or approved the business combination; (ii) upon completion of the transaction
that resulted in the interested stockholders becoming an interested stockholder,
the interested stockholder owned at least 85% of the voting

42
<PAGE> 44

stock of the Company outstanding at the time the transaction commenced
(excluding stock held by directors who are also officers of the Company and by
employee stock plans that do not provide employees with the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer); or (iii) on or following the date on which that
person became an interested stockholder, the business combination is approved by
the Company's Board and authorized at a meeting of stockholders by the
affirmative vote of the holders of at least 66.7% of the outstanding voting
stock of the Company not owned by the interested stockholder.

Under Section 203, these restrictions do not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of one of certain extraordinary transactions involving the Company
and a person who was not an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the directors who were directors before any person became an interested
stockholder in the previous three years or who were recommended for election or
elected to succeed such directors by a majority of such directors then in
office.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock will be Continental
Stock Transfer & Trust Company.

43
<PAGE> 45

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have outstanding
5,663,750 shares of Common Stock (assuming no exercise of the underwriters'
over-allotment option or options outstanding under the Company's stock option
plans). Of these shares, the 2,500,000 shares sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act of 1933, unless they are purchased by "affiliates" of the Company as that
term is defined in Rule 144 under the Securities Act of 1933 (which sales would
be subject to certain limitations and restrictions described below). All of the
remaining 3,163,750 shares of Common Stock may be sold in the public market
commencing 90 days following the date of this Prospectus, subject in some cases
to the volume and other limitations of Rule 144 promulgated under the Securities
Act of 1933. The holders of all of these remaining shares have executed 180-day
lock-up agreements with A.G. Edwards & Sons, Inc. See "Underwriting."

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned shares for at least one year (including the holding
period of any prior owner except an affiliate) is entitled to sell in "brokers'
transactions" or to market makers, within any three-month period a number of
shares that does not exceed the greater of (i) one percent of the number of
shares of Common Stock then outstanding (approximately 57,000 shares immediately
after this offering) or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the required filing of a Form 144
with respect to such sale. Sales under Rule 144 are subject to the availability
of current public information about the Company. Under Rule 144(k), a person who
is not deemed to have been an affiliate of the Company at any time during the 90
days preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least two years, is entitled to sell such shares without having to
comply with the manner of sale, public information, volume limitation or notice
filing provisions of Rule 144. Under Rule 701 under the Securities Act, persons
who purchase shares upon exercise of options granted prior to this offering are
entitled to sell such shares 90 days after this offering in reliance on Rule
144, without having to comply with the holding period requirements of Rule 144
and, in the case of nonaffiliates, without having to comply with the volume
limitation or notice filing provisions of Rule 144.

After the completion of this offering, the Company intends to file one or
more registration statements on Form S-8 under the Securities Act to register an
aggregate of 713,500 shares of Common Stock subject to outstanding stock options
and Common Stock issuable pursuant to the Company's stock option plans. After
the date of such filing, if not otherwise subject to a lock-up agreement, shares
purchased pursuant to these plans generally would be available for resale in the
public market. The Company has outstanding options to purchase an aggregate of
263,500 shares of Common Stock, none of which are currently exercisable. See
"Management -- Stock Plans and Agreements."

44
<PAGE> 46

UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company and the Selling Stockholders have agreed to sell to each
of the underwriters named below (the "Underwriters"), for whom A.G. Edwards &
Sons, Inc. and Ferris, Baker Watts, Incorporated are acting as representatives
(the "Representatives"), and each of the Underwriters has severally agreed to
purchase from the Company and the Selling Stockholders, the respective number of
shares of Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
----------------------------------------------------------------- ---------
<S> <C>
A.G. Edwards & Sons, Inc. .......................................
Ferris, Baker Watts, Incorporated................................

---------
Total.................................................. 2,500,000
=========
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all 2,500,000 shares of
Common Stock offered hereby if any such shares of Common Stock are purchased. In
the event of a default by any Underwriter, the Underwriting Agreement provides
that, in certain circumstances, purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may be terminated.

The Company and the Selling Stockholders have been advised by the
Representatives that the several Underwriters propose initially to offer such
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow and such
dealers may re-allow a concession not in excess of $ per share to other
dealers. After the initial public offering, the public offering price and such
concessions may be changed.

The Company has granted to the Underwriters an option, expiring 30 days
from the date of this Prospectus, to purchase up to an aggregate of 375,000
additional shares of Common Stock at the public offering price less underwriting
discount set forth on the cover page of this Prospectus. The Underwriters may
exercise such option solely to cover overallotments, if any, made in connection
with the sale of shares of Common Stock that the Underwriters have agreed to
purchase. To the extent the Underwriters exercise such option, each of the
Underwriters will have a firm commitment, subject to certain conditions, to
purchase a number of option shares proportionate to such Underwriter's initial
commitment.

The Company has agreed that it will not sell, without the consent of A.G.
Edwards & Sons, Inc., any Common Stock or any securities convertible into Common
Stock, during the 180 days following the date of this Prospectus except for the
Common Stock offered in this offering. In addition, each current stockholder of
the Company, including each officer and director and the Selling Stockholders,
has agreed not to sell, without the consent of A.G. Edwards & Sons, Inc., any
Common Stock for the 180 day period. A.G. Edwards & Sons, Inc. will not consent
to any shortening of such periods unless, in its judgment, the timing of the
sales and the number of shares of Common Stock sold as a result of any such
consent would not have a material adverse

45
<PAGE> 47

effect on the market for the Common Stock. In such event, such sales would not
necessarily be preceded by a public announcement by the Company or A.G. Edwards
& Sons, Inc. that such consent has been given.

Prior to the offering, there has been no public market for the Common
Stock. The initial public offering price for the shares of Common Stock included
in this offering will be determined by negotiation among the Company and the
Representatives. Among the factors to be considered in determining such price
will be the history of and prospects for the Company's business and the industry
in which it operates, an assessment of the Company's management, past and
present revenues and earnings of the Company, the prospects for growth of the
Company's revenues and earnings and currently prevailing conditions in the
securities markets, including current market valuations of publicly traded
companies which are comparable to the Company.

The Representatives have advised the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.

In connection with the offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the offering than
they are committed to purchase from the Company and the Selling Shareholders,
and in such case may purchase Common Stock in the open market following
completion of the offering to cover all or a portion of such short position. The
Underwriters may also cover all or a portion of such short position, up to
375,000, shares of Common Stock, by exercising the Underwriters' over-allotment
option referred to above. In addition, A.G. Edwards & Sons, Inc., on behalf of
the Underwriters, may impose "penalty bids" under contractual arrangements with
the Underwriters whereby it may reclaim from an Underwriter (or dealer
participating in the offering) for the account of the other Underwriters, the
selling concession with respect to Common Stock that is distributed in the
offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Common Stock at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and, if they are undertaken, they may be
discontinued at any time.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

LEGAL MATTERS

The validity of the securities offered hereby will be passed upon for the
Company by Gibson, Dunn & Crutcher LLP, Washington, D.C. Certain legal matters
relating to the offering will be passed upon for the Underwriters by Hale and
Dorr LLP, Washington, D.C.

EXPERTS

The audited financial statements of the Company for the three years ended
September 30, 1996 included in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report, and
are included herein in reliance upon the authority of said firm as experts in
giving such reports.

46
<PAGE> 48

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement," which term shall include all amendments, exhibits, annexes and
schedules thereto) under the Securities Act of 1933 with respect to the shares
of Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement. Certain items are omitted
in accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is hereby made to such Registration Statement, including exhibits,
schedules and reports filed as part thereof. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1204, Washington,
D.C. 20549, and at the Commission's Regional Offices located at Seven World
Trade Center, 13th Floor, New York, New York, 10048 and the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material may be obtained at prescribed rates by mail from the Public
Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company. The address is http://www.sec.gov.

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

47
<PAGE> 49

GLOSSARY OF ACRONYMS

<TABLE>
<CAPTION>
ACRONYM DEFINITION PAGE
- ------------- ----------------------------------------------------------------------- -----
<S> <C> <C>
BGIXS Battle Group Information Exchange System............................... 29
C4I command, control, communications, computer and intelligence............ 3
CBT computer based training................................................ 27
CSALTS Commercial Streamlined Automated Logistics Transmission System......... 28
DCAA Defense Contract Audit Agency.......................................... 6
DGCL Delaware General Corporate Law......................................... 39
DOD Department of Defense.................................................. 3
DTIC Defense Technical Information Center................................... 27
GSA General Services Administration........................................ 4
GUI graphical user interface............................................... 27
IC4I integrated command, control, communications, computers and
intelligence........................................................... 26
ISALTS International Streamlined Automated Logistics Transmission System...... 28
IT Services information technology services........................................ 3
LAN local area network..................................................... 23
NRaD Navy Research and Development Laboratory Center........................ 36
SALTS Streamlined Automated Logistics Transmission System.................... 23
SATCOM satellite communications............................................... 3
VME Versa-Module European.................................................. 28
VPO Virtual Program Office................................................. 25
WAN wide area network...................................................... 24
</TABLE>

48
<PAGE> 50

ADVANCED COMMUNICATION SYSTEMS, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Balance Sheets as of September 30, 1995 and 1996 and March 31, 1997 (unaudited)....... F-3
Statements of Operations for the Years Ended September 30, 1994, 1995 and 1996 and the
Six Month Periods Ended March 31, 1996 and 1997 (unaudited)......................... F-4
Statements of Changes in Stockholders' Equity for the Years Ended September 30, 1994,
1995 and 1996 and the Six Month Periods Ended March 31, 1996 and 1997 (unaudited)... F-5
Statements of Cash Flows for the Years Ended September 30, 1994, 1995 and 1996 and the
Six Month Periods Ended March 31, 1996 and 1997 (unaudited)......................... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>

F-1
<PAGE> 51

AFTER THE RECAPITALIZATION AND STOCK DIVIDEND DISCUSSED IN NOTE 9 IN THE
ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS OF ADVANCED COMMUNICATION
SYSTEMS, INC. ARE EFFECTED, WE EXPECT TO BE IN A POSITION TO RENDER THE
FOLLOWING AUDIT REPORT.

/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
February 28, 1997

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Advanced Communication Systems, Inc.:

We have audited the accompanying balance sheets of Advanced Communication
Systems, Inc. (a Delaware corporation), as of September 30, 1995 and 1996, and
the related statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended September 30, 1996. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advanced Communication Systems,
Inc. as of September 30, 1995 and 1996, and the results of its operations and
its cash flows for each of the three years in the period ended September 30,
1996, in conformity with generally accepted accounting principles.

F-2
<PAGE> 52

ADVANCED COMMUNICATION SYSTEMS, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 30, MARCH 31,
----------------- MARCH 31, 1997
1995 1996 1997 (NOTE 2)
------ ------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE
DATA)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 592 $ 1,177 $ 1,413 $ 1,413
Contract receivables................................... 4,659 9,987 11,544 11,544
Other receivables...................................... 51 69 197 197
Prepaid expenses....................................... 83 208 515 515
------ ------- ---------- ----------
Total current assets.............................. 5,385 11,441 13,669 13,669
------ ------- ---------- ----------
Property and equipment, net............................ 463 571 788 788
Other assets:
Notes receivable, stockholders......................... 393 443 443 443
Other related party receivables........................ 101 138 261 261
Software development costs, net........................ 598 461 393 393
Other assets........................................... 47 63 117 117
------ ------- ---------- ----------
Total other assets................................ 1,139 1,105 1,214 1,214
------ ------- ---------- ----------
Total assets................................. $6,987 $13,117 $ 15,671 $ 15,671
====== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 686 $ 2,125 $ 4,403 $ 4,403
Accrued expenses....................................... 1,602 3,476 5,050 5,050
Billings in excess of revenue.......................... 283 362 445 445
Income taxes payable................................... 7 -- -- --
Deferred income tax liability.......................... 91 91 91 275
Payable to stockholders................................ -- -- -- 5,500
------ ------- ---------- ----------
Total current liabilities......................... 2,669 6,054 9,989 15,673
Line of credit......................................... 1,821 2,688 -- --
Deferred income tax liability.......................... -- -- -- 916
------ ------- ---------- ----------
Total liabilities................................. 4,490 8,742 9,989 16,589
------ ------- ---------- ----------
Commitments and contingencies (Notes 7, 9, 10 and 11)
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares issued and outstanding......... -- -- -- --
Common stock, $.01 par value, 40,000,000 shares
authorized, 6,750,000 shares issued at September 30,
1995 and 1996, and March 31, 1996.................... 67 67 67 67
Paid-in capital and accretion.......................... 5,457 16,506 16,506 68
Retained earnings (deficit)............................ 2,642 4,520 5,789 (811)
Adjustment for redemption value greater than amounts
paid in by stockholders.............................. (5,389) (16,438) (16,438) --
Less -- Treasury stock, 3,017,250 shares at September
30, 1995 and 1996, and 2,963,250 shares at March 31,
1997, at cost........................................ (280) (280) (242) (242)
------ ------- ---------- ----------
Total stockholders' equity (deficit).............. 2,497 4,375 5,682 (918)
------ ------- ---------- ----------
Total liabilities and stockholders' equity... $6,987 $13,117 $ 15,671 $ 15,671
====== ======= ======== ========
</TABLE>

The accompanying notes are an integral part of these balance sheets.

F-3
<PAGE> 53

ADVANCED COMMUNICATION SYSTEMS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
----------------------------- ----------------------
1994 1995 1996 1996 1997
------- ------- ------- ----------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues..................................... $19,106 $23,724 $31,665 $13,036 $21,130
Direct costs................................. 11,418 14,815 19,307 7,195 14,746
Indirect, general and administrative
expenses................................... 7,177 8,202 10,253 4,774 5,025
------- ------- ------- ----------- -------
Income from operations....................... 511 707 2,105 1,067 1,359
Interest expense............................. (125) (185) (257) (127) (134)
Other income, net............................ 52 52 57 26 44
------- ------- ------- ----------- -------
Net income................................... $ 438 $ 574 $ 1,905 $ 966 $ 1,269
======= ======= ======= ========= =======
Pro forma statements of operations data
(unaudited): (Note 2)
Net income, as reported................. $ 1,905 $ 1,269
Pro forma income tax provision.......... 743 495
------- -------
Pro forma net income.................... $ 1,162 $ 774
======= =======
Pro forma net income per share.......... $ 0.27 $ 0.18
======= =======
Pro forma weighted average shares
outstanding........................... 4,290 4,272
======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 54

ADVANCED COMMUNICATION SYSTEMS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
ADJUSTMENT FOR
REDEMPTION
VALUE GREATER
COMMON STOCK THAN AMOUNTS
------------------ PAID-IN RETAINED PAID IN BY TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCKHOLDERS STOCK TOTAL
--------- ------ ------- -------- --------------- -------- ------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1993.... 6,750,000 $ 67 $ 3,780 $1,630 $ (3,712) $ (139) $1,626
Net income....................... -- -- -- 438 -- -- 438
Sale of treasury stock........... -- -- -- -- -- 10 10
Purchase of treasury stock....... -- -- -- -- -- (68) (68)
Adjustment for redemption value
greater than amounts paid in by
stockholders................... -- -- 1,084 -- (1,084) -- --
--------- --- ------- ------ --------- ------ ------
BALANCE AT SEPTEMBER 30, 1994.... 6,750,000 67 4,864 2,068 (4,796) (197) 2,006
Net income....................... -- -- -- 574 -- -- 574
Sale of treasury stock........... -- -- -- -- -- 5 5
Purchase of treasury stock....... -- -- -- -- -- (88) (88)
Adjustment for redemption value
greater than amounts paid in by
stockholders................... -- -- 593 -- (593) -- --
--------- --- ------- ------ --------- ------ ------
BALANCE AT SEPTEMBER 30, 1995.... 6,750,000 67 5,457 2,642 (5,389) (280) 2,497
Net income....................... -- -- -- 1,905 -- -- 1,905
Stockholder distributions........ -- -- -- (27) -- -- (27)
Adjustment for redemption value
greater than amounts paid in by
stockholders................... -- -- 11,049 -- (11,049) -- --
--------- --- ------- ------ --------- ------ ------
BALANCE AT SEPTEMBER 30, 1996.... 6,750,000 67 16,506 4,520 (16,438) (280) 4,375
Net income (unaudited)........... -- -- -- 1,269 -- -- 1,269
Sale of treasury stock
(unaudited).................... -- -- -- -- -- 38 38
--------- --- ------- ------ --------- ------ ------
BALANCE AT MARCH 31, 1997
(unaudited).................... 6,750,000 $ 67 $16,506 $5,789 $ (16,438) $ (242) $5,682
========= === ======= ====== ========= ====== ======
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE> 55

ADVANCED COMMUNICATION SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
--------------------------- ------------------
1994 1995 1996 1996 1997
------- ----- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 438 $ 574 $ 1,905 $ 966 $ 1,269
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization.................. 181 330 402 181 201
Loss on property and equipment................. -- 4 2 -- --
Changes in assets and liabilities:
Contract receivables........................ (1,307) (282) (5,328) (1,656) (1,557)
Other receivables........................... (12) (3) (18) (24) (128)
Prepaid expenses............................ (103) 50 (125) (62) (307)
Other related party receivables............. (48) (53) (37) (14) (123)
Other assets................................ 28 17 (21) (75) (54)
Accounts payable............................ 644 (476) 1,439 (410) 2,278
Accrued expenses............................ 635 306 1,874 (157) 1,574
Billings in excess of revenue............... 13 78 79 164 83
Income taxes payable........................ -- 7 (7) (7) --
Deferred income taxes payable............... -- (7) -- 7 --
------- ----- ------- ------- -------
Net cash provided by (used in)
operating activities................. 469 545 165 (1,087) 3,236
------- ----- ------- ------- -------
Cash flows from investing activities:
Collection (advances) of loans to stockholders... -- 7 (50) -- --
Purchases of property and equipment.............. (382) (270) (370) (200) (350)
Capitalized software development costs........... (446) (240) -- -- --
Insurance proceeds from loss of property and
equipment...................................... -- 23 -- -- --
------- ----- ------- ------- -------
Net cash used in investing
activities........................... (828) (480) (420) (200) (350)
------- ----- ------- ------- -------
Cash flows from financing activities:
Net borrowings (repayments) under line of
credit......................................... 672 (209) 867 1,314 (2,688)
Purchase of treasury stock....................... (68) (88) -- -- --
Sale of treasury stock........................... 10 5 -- -- 38
Stockholders' distributions...................... -- -- (27) -- --
------- ----- ------- ------- -------
Net cash provided by (used in)
financing activities................. 614 (292) 840 1,314 (2,650)
------- ----- ------- ------- -------
Net increase (decrease) in cash.................. 255 (227) 585 27 (236)
Cash and cash equivalents, beginning of year..... 564 819 592 592 1,177
------- ----- ------- ------- -------
Cash and cash equivalents, end of year........... $ 819 $ 592 $ 1,177 $ 619 $ 1,413
======= ===== ======= ======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the year for --
Interest....................................... $ 125 $ 175 $ 251 $ 101 $ 134
======= ===== ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE> 56

ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION:

Advanced Communication Systems, Inc. (the "Company") was incorporated in 1987 in
the state of Delaware. The Company provides communications and information
technology services and solutions, predominantly to U.S. government agencies and
to a lesser extent commercial and international customers. The Company focuses
its operations in three interrelated areas: communication systems design and
support, information technology services and systems integration. The Risk
Factors on Pages 6 to 11 of this Registration Statement are incorporated by
reference.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRO FORMA NET INCOME PER SHARE (UNAUDITED)

Pro forma net income is based on the assumption that the Company's S corporation
status was terminated at the beginning of each year. Pro forma net income per
share has been computed by dividing pro forma net income by the pro forma
weighted average number of common shares outstanding during each period.

The pro forma weighted average shares outstanding is based on: (i) the weighted
average shares outstanding during the period assuming the dilutive effect of all
options outstanding; (ii) stock options issued during the twelve months
immediately preceding the offering date (using the treasury stock method and an
assumed initial public offering price of $ per share) for all periods
presented; and (iii) the assumed sale of a sufficient number of shares
of the Company's common stock necessary to fund the distribution of
all undistributed S corporation earnings as of March 31, 1997 in excess of
fiscal 1996 earnings. (Note 11)

Pro forma fully diluted net income per share approximates primary net income per
share for all periods presented.

PRO FORMA BALANCE SHEET (UNAUDITED)

The pro forma balance sheet gives effect to: (i) a distribution of $5,500,000 to
the Company's shareholders, representing estimated S corporation accumulated
earnings as of March 31, 1997, assuming the Company had terminated its S
corporation status as of that date, to be paid from the Company's pre-offering
working capital; (ii) the creation of a deferred tax liability of $1,100,000
assuming the Company had terminated its S corporation status as of March 31,
1997, and (iii) the cancellation of the Stock Redemption Agreements, resulting
in elimination of the adjustment for redemption value greater than amounts paid
in by stockholders. (Note 11)

INTERIM REPORTING

The financial information as of March 31, 1997 and for the six months ended
March 31, 1996 and 1997 has been prepared by the Company, without audit, and
includes, in the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the interim period
results. Operating results for any interim period are not necessarily indicative
of the results for any other period or for an entire year.

MANAGEMENT'S USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

F-7
<PAGE> 57

ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
REVENUE RECOGNITION

The Company provides services, primarily to the U.S. government, on a
contractual basis. Revenue on cost plus fixed fee contracts is recognized to the
extent of costs incurred plus a proportionate amount of fees earned. Revenue on
time and materials contracts is recognized at the contractual rates as labor
hours and direct expenses are incurred. Revenue on fixed price contracts is
recognized on the percentage-of-completion method based on costs incurred in
relation to total estimated costs. Anticipated contract losses are recognized as
soon as they become known and estimable.

The Company also provides off-the-shelf hardware and software products to the
U.S. government under the General Services Administration schedule contact and
to commercial companies. Related revenue is recognized when products are shipped
or when customers have accepted the products, depending on contractual terms.

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist of cash and cash equivalents and contract
receivables. The Company maintains cash and cash equivalents in a high credit
quality financial institution. The credit risk with respect to accounts
receivable is mitigated because the majority of the Company's contract
receivables are due from agencies of the U.S. government.

For the years ending September 30, 1994, 1995, 1996 and for the six months ended
March 31, 1996 and 1997, approximately $19,011,000, $23,483,000, $28,607,000,
$11,406,000, and $19,929,000 of the Company's revenues were derived from
contracts or subcontracts funded by the U.S. government, virtually all of which
were funded by the Department of Defense.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include short-term investments with original
maturities of three months or less.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and are depreciated over their
estimated useful lives, five to seven years, using an accelerated method.
Leasehold improvements are amortized on a straight-line basis over the shorter
of the useful life of the asset or the lease terms.

SOFTWARE DEVELOPMENT COSTS

In compliance with Statement of Financial Accounting Standards ("SFAS") No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed, certain software development costs are capitalized in the accompanying
balance sheets. Capitalization of software development costs begins upon the
establishment of technological feasibility. Capitalization ceases and
amortization of capitalized costs begins when the software product is
commercially available for general release to customers. Amortization of
capitalized software development costs is computed using the straight-line
method over the remaining estimated economic life of the product, not to exceed
five years.

RESEARCH AND DEVELOPMENT EXPENSES

The Company expenses research and development costs as they are incurred.
Research and development expenses for all periods presented were not material.

F-8
<PAGE> 58

ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews its long-lived assets, including software development costs
and property and equipment, for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. To determine recoverability of its long-lived assets, the Company
evaluates the probability that future undiscounted net cash flows, without
interest charges, will be less than the carrying amount of the assets. The
Company has determined that as of September 30, 1995 and 1996 and March 31,
1997, there has been no impairment in the carrying value of long-lived assets.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments are defined as cash, evidence of an ownership interest in
an entity, or a contract that imposes an obligation to deliver cash or other
financial instruments to a second party. The carrying amounts of current assets
and current liabilities in the accompanying financial statements approximate
fair value due to the short maturity of these instruments. As of September 30,
1996, the fair value of the stockholders' notes receivable approximated $416,000
based on the Company's borrowing rate of 8.75%. The line of credit has a
floating interest rate that varies with current indices, and, as such, the
recorded value approximates fair value.

INCOME TAXES

From inception through September 30, 1989, the Company was subject to corporate
income taxes. On October 1, 1989, the Company elected to be treated as an S
corporation under Subchapter S of the Internal Revenue Code. The Company
recorded a deferred tax liability for the built-in gain on the cumulative
accrual to cash difference as of September 30, 1989. As of September 30, 1996,
the deferred tax liability remaining is $91,000.

As an S corporation, the Company's earnings have been taxed, for federal and
certain state income tax purposes, directly to the Company's stockholders rather
than to the Company. Therefore, no provision for income taxes has been provided
in the accompanying statements of operations.

In connection with the proposed initial public offering (Note 11), the Company
will terminate its S corporation status and will become subject to corporate
income taxes. Accordingly, the accompanying consolidated statements of
operations include unaudited pro forma adjustments for income tax expense, which
would have been recorded had the Company been subject to federal and state
corporate income taxes.

A pro forma deferred tax liability, resulting primarily from accrual to cash
differences, has been recorded as if the Company terminated its S corporation
status on March 31, 1997. The actual deferred tax liability may differ from the
pro forma liability based on the differences in financial reporting and tax
basis assets and liabilities at the date of termination of the Company's S
corporation status. Upon termination, the actual deferred tax liability will be
recorded as a nonrecurring charge and will be payable in equal installments over
the next four years.

F-9
<PAGE> 59

ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. CONTRACT RECEIVABLES:

Contract receivables consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- MARCH 31,
1995 1996 1997
------ ------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. government:
Amounts billed................................ $2,422 $4,103 $ 2,057
Recoverable costs and accrued profit on
progress completed; not billed.............. 2,146 5,187 8,181
------ ------ --------
Subtotal................................. 4,568 9,290 10,238
Commercial customers:
Amounts billed................................ 65 123 119
Recoverable costs and accrued profit on
progress completed; not billed.............. 26 574 1,187
------ ------ --------
Subtotal................................. 91 697 1,306
------ ------ --------
Total.................................... $4,659 $9,987 $ 11,544
====== ====== ========
</TABLE>

4. PROPERTY AND EQUIPMENT:

Property and equipment consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- MARCH 31,
1995 1996 1997
------ ------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Furniture and equipment............................ $1,185 $1,561 $ 1,916
Leasehold improvements............................. 27 13 8
------ ------ --------
1,212 1,574 1,924
Less -- Accumulated depreciation and
amortization..................................... 749 1,003 1,136
------ ------ --------
Total property and equipment, net.................. $ 463 $ 571 $ 788
====== ====== ========
</TABLE>

5. SOFTWARE DEVELOPMENT COSTS:

Software development costs consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- MARCH 31,
1995 1996 1997
------ ------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Cost............................................... $ 685 $ 685 $ 686
Accumulated amortization........................... 87 224 293
------ ------ --------
Total software development costs, net.............. $ 598 $ 461 $ 393
====== ====== ========
</TABLE>

Software development costs capitalized were $446,000 and $240,000 in the years
ended September 30, 1994 and 1995, respectively. Amortization expense for the
years ended September 30, 1994, 1995, 1996 and the six months ended March 31,
1996 and 1997 were $0, $88,000, $137,000, $68,000 and $68,000, respectively.

F-10
<PAGE> 60

ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. ACCRUED EXPENSES:

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- MARCH 31,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Accrued salaries, benefits and related taxes..... $ 636 $ 833 $ 833
Accrued vacation................................. 357 411 389
Accrued bonuses.................................. 415 387 292
Accrued subcontractor costs...................... 126 1,726 3,180
Other............................................ 68 119 356
------ ------ -------
Total accrued expenses........................... $1,602 $3,476 $ 5,050
====== ====== =======
</TABLE>

7. RELATED-PARTY TRANSACTIONS:

In 1993, the Company entered into a ten-year lease with a real estate management
company ("10089 Management") to lease its headquarters facility. The owners of
10089 Management include the principal stockholders of the Company. The lease
requires current rental payments of approximately $26,000 per month, increased
annually based on the Consumer Price Index, and expires on August 31, 2003.

10089 Management purchased the headquarters facility, using in part a loan of
$1,125,000 from a third-party lender, which is guaranteed by the Company. In
March 1997, the loan agreement was amended to cancel the guarantee upon an
initial public offering resulting in net proceeds to the Company of at least
$10,000,000. The mortgage requires monthly principal payments of $6,000 plus
interest and a balloon payment for the balance of $750,000 in 1998. The
outstanding balance as of September 30, 1995 and 1996, and March 31, 1997, was
$969,000, $894,000 and $856,000, respectively. The remaining purchase price was
financed through promissory notes from various stockholders due to the Company.

Stockholders' notes receivable at September 30, 1995 and 1996 and March 31, 1997
were $393,000, $443,000 and $443,000, respectively. The loans bear interest at
rates ranging from 7.0% to 8.75% per annum and have maturity dates ranging from
1998 to 2001. Interest is due annually on the anniversary date of the loans,
with principal due at maturity. One loan for $50,000 is secured by a lien on
real estate. Accrued interest receivable at September 30, 1995 and 1996 and
March 31, 1997 of $56,000, $83,000 and $99,000, respectively, is included in
other related-party receivables in the accompanying balance sheets.

The Company also provides management services for 10089 Management at no cost.
Included in other related-party receivables are amounts due from the 10089
Management for reimbursable operating expenses paid for by the Company. The
reimbursable operating expenses included in other related-party receivables at
September 30, 1995 and 1996 and March 31, 1997 were $46,000, $0 and $0,
respectively.

A common group of stockholders hold a substantial interest in both Fairfax
Communications Ltd., and the Company. As of September 30, 1996 and March 31,
1997, the Company had a receivable of $54,000 and $162,000, respectively, due
from Fairfax Communications Ltd. for payroll services which the Company performs
on its behalf. (Note 11)

8. LINE OF CREDIT:

The Company has a line of credit arrangement with a commercial bank under which,
at December 31, 1996, it could borrow up to a maximum of $4,000,000. The
borrowings are limited by 80% of the eligible receivables, as defined, and 90%
of eligible government receivables, as defined, bearing interest at the bank's
prime rate

F-11
<PAGE> 61

ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. LINE OF CREDIT -- (CONTINUED)

plus 1/2%, payable monthly. The borrowings are collateralized by accounts
receivable, and the credit arrangement contains affirmative and negative
covenants, including, among other things, financial covenants regarding
maintenance of stated amount of debt to net worth, specific liquidity and
solvency ratios. The line was to expire on February 28, 1997. In March 1997, the
Company extended the arrangement through February 28, 1998, and, accordingly,
the line has been classified as long-term debt. The new line is for $5,000,000,
bears interest at the bank's prime rate plus a percentage, not more than 0.25%
and currently zero, that is based on the Company's historical financial
performance and expires on February 28, 1998. The agreement contains various
covenants requiring the Company to maintain certain financial ratios, each as
defined, including tangible net worth, liabilities to tangible net worth, funded
debt to operating cash flow, and debt service. The agreement also restricts the
payment of dividends.

At September 30, 1995 and 1996 and March 31, 1997, the Corporation had
$1,821,000, $2,688,000 and $0, respectively, outstanding under this arrangement.
For the years ended September 30, 1994, 1995 and 1996 and the six months ended
March 31, 1996 and 1997, interest expense under this line of credit was
$125,000, $185,000, $249,000, $114,000 and $134,000, respectively, at weighted
average interest rates of 7.21%, 9.20%, 8.87%, 9.02% and 8.70%, respectively.

9. STOCKHOLDERS' EQUITY:

RECAPITALIZATION AND STOCK SPLIT

In connection with the proposed initial public offering (Note 11), the Company
will amend and restate its Certificate of Incorporation to increase the number
of authorized shares to 40,000,000 shares of Common Stock, par value $.01 per
share, and 1,000,000 shares of Preferred Stock, par value $.01 per share. The
Board of Directors approved a 675-for-1 stock split of the Common Stock to be
paid in the form of a stock dividend to the stockholders. The change in the
Company's Common Stock for the stock dividend has been given retroactive effect
for all periods presented.

STOCK REDEMPTION AGREEMENTS

All of the outstanding shares of common stock and options, upon exercise, are
subject to Stock Redemption Agreements. Under certain circumstances, the Company
is required to buy back the stock at a price equal to fair value, as determined
by the Board of Directors. Adjustment for redemption value greater than amounts
paid in by stockholders represents the change in the redemption value per share
of outstanding Common Stock in each period. The redemption value per share,
based on the fair market value, was $1.48, $4.44 and $4.44 as of September 30,
1995 and 1996 and March 31, 1997, respectively. The Stock Redemption Agreements
will be terminated in connection with the initial public offering. All treasury
stock purchases were a result of the provisions of these Stock Redemption
Agreements.

STOCK PLANS AND AGREEMENTS

The 1996 Stock Incentive Plan of the Company (the "1996 Plan") was adopted
by the Company's Board of Directors and approved by the Company's stockholders
effective July 1996. The Company may grant options, stock appreciation rights,
"performance" awards and restricted and unrestricted stock (collectively, the
"Awards") to purchase up to 337,500 shares of Common Stock to participants in
the 1996 Plan. The 1996 Plan has a term of 10 years. Options granted under the
1996 Plan can have an exercise period of up to 10 years. The 1996 Plan provides
for the grant of stock options to directors, employees (including officers) and
consultants of the Company and its subsidiaries. Pursuant to the 1996 Plan,
options may be incentive stock options within the meaning of Section 422 of the
Code or nonstatutory stock options, although incentive stock

F-12
<PAGE> 62

ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. STOCKHOLDERS' EQUITY -- (CONTINUED)

options may be granted only to employees. All incentive stock options are
nontransferable other than by will or the laws of descent and distribution.

In 1996, the Board of Directors granted options under the 1996 Plan to purchase
148,500 shares of Common Stock. These options have an exercise price of $4.44
per share and become exercisable in three equal annual increments beginning on
October 1, 1997, and the options expire on the earlier of January 1, 2000 or
termination of employment.

On January 2, 1997, the Company granted a stock option under the 1996 Plan to
purchase 115,000 shares of Common Stock. The option has an exercise price of
$6.50 per share, a term of eight years and becomes exercisable in four equal
annual installments beginning on January 1, 1998. This option has been included
in the weighted average shares outstanding computation for all periods
presented.

Options under the 1996 Plan were granted with exercise prices at or above fair
value on the date of grant as determined by an independent appraisal and,
therefore, no compensation expense has been recognized.

The Board of Directors has determined not to grant any additional awards under
the 1996 Plan.

The Company has entered into nonqualified option agreements with various
employees. The per share exercise price of such options was at least 100% of the
fair market value, as determined by the Board of Directors, of a share of Common
Stock as of the respective dates of grant. Shares purchased through the exercise
of these options are subject to Stock Repurchase Agreements.

In 1993, the Board of Directors granted options to purchase 101,250 shares of
Common Stock to various employees. The employees were fully vested in the
options upon granting, and the options expire on the earlier of January 1, 1998
or termination of employment. As of September 30, 1994, 1995 and 1996, these
options were exercisable in the amounts of 87,750, 81,000 and 81,000 shares,
respectively. All sales of treasury stock were a result of the exercise of
options.

The following table summarizes the activity of all the Company's stock
options:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
EXERCISE PRICE
NUMBER PRICE PER PER
OF SHARES SHARE SHARE
--------- -------------- --------
<S> <C> <C> <C>
Shares under option, September 30, 1993..... 101,250 $0.70 $ 0.70
Options exercised...................... (13,500) 0.70 0.70
------- ------------- ------
Shares under option, September 30, 1994..... 87,750 0.70 0.70
Options exercised...................... (6,750) 0.70 0.70
------- ------------- ------
Shares under option, September 30, 1995..... 81,000 0.70 0.70
Options granted........................ 148,500 4.44 4.44
Options exercised...................... -- 0.70 0.70
------- ------------- ------
Shares under option, September 30, 1996..... 229,500 0.70 - 4.44 3.12
Options granted (unaudited)............ 115,000 6.50 6.50
Options exercised (unaudited).......... (54,000) 0.70 0.70
------- ------------- ------
Shares under option, March 31, 1997
(unaudited)............................ 290,500 $0.70 - $6.50 $ 4.91
======= ============= ======
</TABLE>

F-13
<PAGE> 63

ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

9. STOCKHOLDERS' EQUITY -- (CONTINUED)

Options outstanding at September 30, 1996 had a weighted average remaining
contractual life of 2.73 years. The fair value per share of all options issued
in 1996, estimated on the date of grant using the Black-Scholes option pricing
model, is $1.76.

The Company adopted the disclosure requirements of SFAS No. 123, Accounting for
Stock-Based Compensation, effective for the Company's September 30, 1996
financial statements. The Company applies Accounting Principles Board Opinion
No. 25 and related interpretations in accounting for its stock plans. No
compensation cost has been recognized for its stock plans based on the intrinsic
value of the stock options at date of grant (i.e., the difference between the
exercise price and the fair value of the Common Stock). Had compensation cost
for the Company's stock-based compensation plans been determined based on the
fair value at the grant dates under those plans consistent with the method of
FASB Statement 123, the Company's pro forma net income and pro forma net income
per share would have been reduced to the amounts indicated below:

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1996
-------------
<S> <C>
Pro forma net income (in thousands) --
As reported................................................ $ 1,162
SFAS No. 123 pro forma..................................... $ 881
Pro forma net income per share --
As reported................................................ $ 0.27
SFAS No. 123 pro forma..................................... $ 0.21
</TABLE>

The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for
grants in 1996: no dividend yield; expected volatility of 49.5%; risk-free
interest rates of approximately 6.3%; and expected lives of three years. The
volatility factor was based on the volatility percentage of comparable publicly
traded companies because the Company, as a private company, does not have a
sufficient history of stock transactions.

10. COMMITMENTS AND CONTINGENCIES:

LEASE COMMITMENTS

The Company leases office space and equipment under various operating lease
agreements expiring through August 2003. Most leases include a provision for
annual rent adjustments based on changes in various economic indices. Future
minimum lease payments under noncancelable operating leases as of September 30,
1996 were as follows:

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, (IN THOUSANDS)
-------------------------------------------------------------- ---------------
<S> <C>
1997.......................................................... $ 1,432
1998.......................................................... 1,060
1999.......................................................... 772
2000.......................................................... 463
2001.......................................................... 361
Thereafter.................................................... 714
-------
Total.................................................... $ 4,802
=======
</TABLE>

F-14
<PAGE> 64

ADVANCED COMMUNICATION SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)

During 1993, the Company entered into a lease agreement for office space with a
related party which includes the principal stockholders of the Company (Note 7).
For the years ended September 30, 1994, 1995 and 1996 and the six months ended
March 31, 1996 and 1997, rent expense related to this lease totaled $278,000,
$299,000, $309,000, $149,000 and $158,000, respectively. Amounts representing
aggregate rent expense on all operating leases, excluding the related party
lease, totaled $940,000, $1,014,000 and $1,183,000 for the years ended September
30, 1994, 1995 and 1996, and $532,000 and $526,000 for the six months ended
March 31, 1996 and 1997, respectively.

PROFIT-SHARING PLAN

The Company provides a profit-sharing plan (401(k) plan) which covers
substantially all employees. Under the terms of the plan, the Company may make
discretionary profit-sharing contributions and discretionary matching
contributions, each determined annually by the Board of Directors. Contributions
charged to expense for the years ended September 30, 1994, 1995 and 1996, and
for the six months ended March 31, 1996 and 1997 were $247,000, $320,000,
$368,000, $163,000 and $60,000, respectively.

11. SUBSEQUENT EVENTS:

1997 STOCK INCENTIVE PLAN

The 1997 Stock Incentive Plan of the Company (the "1997 Plan") was adopted
by the Company's Board of Directors effective March 1997. The Company may grant
options, stock appreciation rights, "performance" awards and restricted and
unrestricted stock (collectively, the "Awards") to purchase up to 450,000 shares
of Common Stock to participants in the 1997 Plan. To date, no Awards have been
granted under the 1997 Plan. The 1997 Plan has a term of 10 years. Options
granted under the 1997 Plan can have an exercise period of up to 10 years. The
1997 Plan provides for the grant of stock options to directors, employees
(including officers) and consultants of the Company and its subsidiaries.
Pursuant to the 1997 Plan, options may be incentive stock options within the
meaning of Section 422 of the Code or nonstatutory stock options, although
incentive stock options may be granted only to employees. All incentive stock
options are nontransferable other than by will or the laws of descent and
distribution.

ACQUISITION

The Company intends to acquire all the outstanding stock of Fairfax
Communication Ltd. for a cash price of $46,500. Revenues and net income of
Fairfax Communications Ltd. for the year ended September 30, 1996 were $97,000
(unaudited) and $4,000 (unaudited), respectively.

EVENTS RELATED TO AN INITIAL PUBLIC OFFERING

The Company contemplates an initial public offering of approximately 1,850,000
shares of Common Stock. In connection with the initial public offering,
subsequent to September 30, 1996, the following transactions are anticipated to
occur:

(i) termination of S corporation status and creation of a deferred tax
liability to the extent that financial reporting net assets exceed tax
basis net assets (Note 2);

(ii) distribution to the current stockholders of undistributed S corporation
earnings (Note 2);

(iii) a 675-for-1 stock split in the form of a stock dividend (Note 9);

(iv) elimination of the guarantee on the debt of a related party (Note 7);

(v) cancellation of all Stock Redemption Agreements (Note 9); and

(vi) repayment of all related party notes (Note 7).

F-15
<PAGE> 65

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

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 6
S Corporation Distribution and
Termination of S Corporation Status.... 12
Use of Proceeds.......................... 12
Dividend Policy.......................... 13
Capitalization........................... 13
Dilution................................. 14
Selected Financial Data.................. 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 16
Business................................. 22
Management............................... 35
Certain Transactions..................... 40
Principal and Selling Stockholders....... 41
Description of Capital Stock............. 42
Shares Eligible for Future Sale.......... 44
Underwriting............................. 45
Legal Matters............................ 46
Experts.................................. 46
Available Information.................... 47
Glossary of Acronyms..................... 48
Index to Financial Statements............ F-1
</TABLE>

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

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

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

2,500,000 SHARES

ADVANCED COMMUNICATION SYSTEMS, INC.
COMMON STOCK

------------------------
PROSPECTUS

------------------------
A.G. EDWARDS AND SONS, INC.

FERRIS, BAKER WATTS
Incorporated
, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 66

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth an estimate of the expenses expected to be
incurred in connection with the issuance and distribution of the securities
being registered, other than underwriting compensation, all of which will be
paid by the Company:

<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission............ $ 9,583
Filing Fee -- National Association of Securities Dealers, Inc..... 3,663
Listing Fee -- Nasdaq National Market............................. *
Transfer Agent and Registrar Fees and Expenses.................... *
Blue Sky Fees and Expenses (including legal fees)................. *
Legal Fees and Expenses........................................... *
Accounting Fees and Expenses...................................... *
Printing and Engraving Expenses................................... *
Miscellaneous..................................................... *
--------
Total........................................................ $500,000
========
</TABLE>

- ---------------
* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company is organized under the laws of the State of Delaware. The DGCL
provides that a Delaware corporation has the power generally to indemnify its
directors, officers, employees and other agents (each, a "Corporate Agent")
against expenses and liabilities (including amounts paid in settlement) in
connection with any proceeding involving such person by reason of his being a
Corporate Agent, other than a proceeding by or in the right of the corporation,
if such person 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 respect to
any criminal proceeding, such person had no reasonable cause to believe his
conduct was unlawful. In the case of an action brought by or in the right of the
corporation, indemnification of a Corporate Agent against expenses is permitted
if such person acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation; however, no
indemnification is permitted in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation,
unless and only to the extent that the Court of Chancery or the court in which
such proceeding 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 such indemnification. To the
extent that a Corporate Agent has been successful on the merits of such
proceeding, whether or not by or in the right of the corporation, or in the
defense of any claim, issue or matter therein, the corporation is required to
indemnify the Corporate Agent for expenses in connection therewith. Expenses
incurred by a Corporate Agent in connection with a proceeding may, under certain
circumstances, be paid by the corporation in advance of the final disposition of
the proceeding as authorized by the board of directors. The power to indemnify
and advance the expenses under the DGCL does not exclude other rights to which a
Corporate Agent may be entitled to under the certificate of incorporation,
bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

The Company's Amended and Restated Certificate of Incorporation and Amended
and Restated Bylaws provide for the indemnification of Corporate Agents for
certain expenses, judgments, fines and payments incurred by them in connection
with the defense or settlement of claims asserted against them in their
capacities as Corporate Agents to the fullest extent authorized by the DGCL,
provided that such indemnification is authorized (i) by a majority vote of the
directors who are not parties to the action, suit or proceeding, even though
less than a quorum, or (ii) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (iii) by the
stockholders, or (iv) by a court of competent

II-1
<PAGE> 67

jurisdiction in the State of Delaware. To the extent, however, that a director
or officer of the Company has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith, without the necessity of authorization in the specific
case. In addition, expenses incurred by a director or officer in defending or
investigating a threatened or pending action, suit or proceeding may be paid by
the Company, upon the determination by the Board of Directors, in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the Company, provided the Company approves in advance counsel
selected by the director or officer, which approval shall not be unreasonably
withheld. The Company will also enter into indemnification agreements to the
same effect with each of its officers and directors.

The Company's Amended and Restated Certificate of Incorporation also
contain provisions which limit the personal liability of directors for monetary
damages for breach of their fiduciary duties as directors, except to the extent
such limitation of liability is prohibited by the DGCL. In accordance with the
DGCL, these provisions do not limit the liability of any director for any breach
of the director's duty of loyalty to the Company or its stockholders; for acts
of omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; for certain unlawful payments of dividends or stock
repurchases under Section 174 of the DGCL; or for any transaction from which the
director derives an improper personal benefit. These provisions do not limit the
rights of the Company or any stockholder to seek an injunction or any other non-
monetary relief in the event of a breach of a director's fiduciary duty. In
addition, these provisions apply only to claims against a director arising out
of his or her role as a director and do not relieve a director from liability
for violations of statutory law, such as certain liabilities imposed on a
director under the federal securities laws.

Under the DGCL, a Delaware corporation has the power to purchase and
maintain insurance on behalf of any Corporate Agent against any liabilities
asserted against and incurred by him in such capacity, whether or not the
corporation has the power to indemnify him against such liabilities under the
DGCL. The Company intends to purchase directors' and officers' insurance.

Reference is made to Sections 102(b)(7) and 145 of the DGCL, in connection
with the above summary of indemnification, insurance and limitation of
liability.

The purpose of these provisions is to assist the Company in retaining
qualified individuals to serve as officers, directors or other Corporate Agents
of the Company by limiting their exposure to personal liability for serving as
such.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since October 1, 1993, the Company has issued and sold the following
unregistered securities (adjusted to give effect to the anticipated 675-for-1
stock split).

1. On October 26, 1993, the Company granted options to purchase, in
the aggregate, a total of 101,250 shares of Common Stock to Sharon
Angelone, Douglas Benzel and Warren Willis, employees of the Company, at an
exercise price of $0.70 per share.

2. On September 1, 1994, Douglas Benzel and Warren Willis, employees
of the Company, exercised options to purchase, in the aggregate, 13,500
shares of Common Stock, at an exercise price of $0.70 per share.

3. On September 29, 1995, Sharon Angelone, an employee of the Company,
exercised an option to purchase 6,750 shares of Common Stock, at an
exercise price of $0.70 per share.

4. On July 15, 1996, the Company granted options to purchase, in the
aggregate, a total of 148,500 shares of Common Stock to 17 employees of the
Company, at an exercise price of $4.44 per share.

II-2
<PAGE> 68

5. On December 13, 1996, Douglas Benzel, an employee of the Company,
exercised an option to purchase 27,000 shares of Common Stock, at an
exercise price of $0.70 per share.

6. On January 2, 1997, the Company granted options to purchase 115,000
shares of Common Stock to Dev Ganesan, Chief Financial Officer, at an
exercise price of $6.50 per share.

7. On February 13, 1997, Sharon Angelone, an employee of the Company,
exercised an option to purchase 27,000 shares of Common Stock, at an
exercise price of $0.70 per share.

8. On April 1, 1997, Warren Willis, an employee of the Company,
exercised an option to purchase 27,000 shares of Common Stock, at an
exercise price of $0.70 per share.

No underwriters were engaged in connection with the foregoing sales and/or
issuances of securities. Such sales were made in reliance upon the exemption
from the registration provisions of the Securities Act of 1933 set forth in Rule
701 and/or in Section 4(2) thereof as transactions not involving a public
offering. The respective purchasers thereof have acquired such shares for their
respective accounts without a view to the distribution thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<C> <S>
1.1 -- Underwriting Agreement.*
3.1 -- Certificate of Incorporation of the Company.+
3.2 -- Bylaws of the Company.+
3.3 -- Amended and Restated Certificate of Incorporation of the Company.
3.4 -- Amended and Restated Bylaws of the Company.
4.1 -- Specimen Common Stock Certificate.*
5.1 -- Opinion of Gibson, Dunn & Crutcher LLP.*
10.1 -- Employment Agreement, dated June 18, 1993, between the Company and Warren C.
Willis.+
10.2 -- Employment Agreement, dated as of January 2, 1997, between the Company and Dev
Ganesan.+
10.3 -- 1996 Stock Incentive Plan.
10.4 -- 1997 Stock Incentive Plan.*
10.5 -- Form of Indemnification Agreement between the Company and each of its directors and
executive officers.*
10.6 -- Revolving Credit and Security Agreement and Revolving Promissory Note, dated as of
March 1, 1997, between First Union Commercial Corporation and the Company.+
10.7 -- Lease Agreement, dated July 16, 1993, including Amendment 1, dated December 1, 1993,
Amendment 2, dated January 15, 1994, and Amendment 3, dated March 15, 1994.+
10.8 -- Contract No. N00039-96-C-0066, effective March 14, 1996, by and between the Company
and Space and Naval Warfare Systems Command.**+
10.9 -- Contract No. N00039-96-C-0097, effective August 29, 1996, by and between the Company
and Space and Naval Warfare Systems Command.**+
10.10 -- Form of Tax Indemnification Agreement to be entered into by the Company and each of
its existing Stockholders.*
10.11 -- Stockholders Agreement.
11.1 -- Computation of Per Share Earnings.
21.1 -- List of Subsidiaries of the Registrant.*
23.1 -- Consent of Gibson, Dunn & Crutcher LLP (included in its opinion filed as Exhibit
5.1).*
23.2 -- Consent of Arthur Andersen LLP.
24.1 -- Power of Attorney.+
</TABLE>

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

** Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.

+ Previously filed.

II-3
<PAGE> 69

(b) Financial Statement Schedules

The financial statement schedules for which provision is made in the
applicable accounting regulations of the Commission are either not required
under the related instructions or are inapplicable, and therefore have been
omitted.

ITEM 17. UNDERTAKINGS.

The Company hereby undertakes to provide to the Underwriters at the closing
specified in the underwriting agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

The undersigned Registrant hereby undertakes (1) that for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of a Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
of 1933 shall be deemed to be part of this Registration Statement as of the time
it was declared effective and (2) that for the purpose of determining any
liability under the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 70

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Fairfax,
Virginia, on the 6th day of May, 1997.

ADVANCED COMMUNICATION SYSTEMS, INC.

By: /s/ GEORGE A. ROBINSON
-------------------------------------
GEORGE A. ROBINSON
Chairman, President and Chief
Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------- ------------
<S> <C> <C>

/s/ GEORGE A. ROBINSON President, Chief Executive May 6, 1997
- --------------------------------------------- Officer and Chairman (Principal
GEORGE A. ROBINSON Executive Officer)

/s/ DEV GANESAN Chief Financial Officer May 6, 1997
- --------------------------------------------- (Principal Financial and
DEV GANESAN Accounting Officer)

/s/ CHARLES G. MARTINACHE Director May 6, 1997
- ---------------------------------------------
CHARLES G. MARTINACHE

/s/ THOMAS A. COSTELLO Director May 6, 1997
- ---------------------------------------------
THOMAS A. COSTELLO
</TABLE>

II-5
<PAGE> 71

ADVANCED COMMUNICATION SYSTEMS, INC.

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
PAGE IN
SEQUENTIAL
EXHIBIT NUMBERING
NO. SYSTEM
------- -----------
<C> <S> <C>
1.1 Underwriting Agreement*..........................................
3.1 Certificate of Incorporation of the Company+.....................
3.2 Bylaws of the Company+...........................................
3.3 Amended and Restated Certificate of Incorporation of the
Company..........................................................
3.4 Amended and Restated Bylaws of the Company.......................
4.1 Specimen Common Stock Certificate*...............................
5.1 Opinion of Gibson, Dunn & Crutcher LLP*..........................
10.1 Employment Agreement, dated June 18, 1993, between the Company
and Warren C. Willis+............................................
10.2 Employment Agreement, dated as of January 2, 1997, between the
Company and Dev Ganesan+.........................................
10.3 1996 Stock Incentive Plan........................................
10.4 1997 Stock Incentive Plan*.......................................
10.5 Form of Indemnification Agreement between the Company and each of
its directors and executive officers*............................
10.6 Revolving Credit and Security Agreement and Revolving Promissory
Note, dated as of March 1, 1997, between First Union Commercial
Corporation and the Company+.....................................
10.7 Lease Agreement, dated July 16, 1993, including Amendment 1,
dated December 1, 1993, Amendment 2, dated January 15, 1994, and
Amendment 3, dated March 15, 1994+...............................
10.8 Contract No. N00039-96-C-0066, effective March 14, 1996, by and
between the Company and Space and Naval Warfare Systems
Command**+.......................................................
10.9 Contract No. N00039-96-C-0097, effective August 29, 1996, by and
between the Company and Space and Naval Warfare Systems
Command**+.......................................................
10.10 Form of Tax Indemnification Agreement to be entered into by the
Company and each of its existing Stockholders*...................
10.11 Stockholders Agreement...........................................
11.1 Computation of Per Share Earnings................................
21.1 List of Subsidiaries of the Registrant*..........................
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in its opinion
filed as Exhibit 5.1)*...........................................
23.2 Consent of Arthur Andersen LLP...................................
24.1 Power of Attorney+...............................................
</TABLE>

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

** Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.

+ Previously filed.

<PAGE> 1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ADVANCED COMMUNICATIONS SYSTEMS, INC.

(Pursuant to Section 245 of the General
Corporation Law of the State of Delaware)

The undersigned, George A. Robinson and Thomas A. Costello, are
President and Secretary, respectively, of Advanced Communication Systems, Inc.,
a corporation duly organized and existing under the General Corporation Law of
the State of Delaware (the "Corporation"). The Corporation was originally
incorporated as Advanced Communications Systems, Inc.

The undersigned, as President and Secretary of the Corporation, do
hereby certify that:

1. The Corporation's original Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware on March 20, 1987, as
amended on September 16, 1987 and twice on September 27, 1994.

2. The Board of Directors of the Corporation, by unanimous written
consent, duly adopted a resolution pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware proposing that this Amended and
Restated Certificate of Incorporation be approved and declaring the adoption of
such Amended and Restated Certificate of Incorporation to be advisable.

3. The stockholders of the Corporation, by written consent, duly
adopted this Amended and Restated Certificate of Incorporation in accordance
with Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware.

4. The Amended and Restated Certificate of Incorporation of the
Corporation, upon its filing with the Secretary of State of the State of
Delaware, shall read in its entirety as follows:

FIRST: NAME. The name of the corporation is Advanced Communication
Systems, Inc. (the "Corporation").

SECOND: REGISTERED OFFICE AND REGISTERED AGENT. The address of the
Corporation's registered office in the State of Delaware is 1013 Centre Road,
Wilmington, Delaware, 19805, in New Castle County. The name of the registered
agent of the Corporation at such address is The Prentice-Hall Corporation
System, Inc.

THIRD: PURPOSE. The purpose for which the Corporation is organized is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware (the "GCL").

FOURTH: CAPITALIZATION. The total number of shares of capital stock
which the Corporation is authorized to issue is 41,000,000 divided into two
classes as follows:

<PAGE> 2
(1) 40,000,000 shares of common stock, par value $.01 per
share ("Common Stock"); and

(2) 1,000,000 shares of preferred stock, par value $.01 per
share ("Preferred Stock").

The designations, preferences, qualifications, limitations,
restrictions and the special or relative rights granted to or imposed upon the
Common Stock and Preferred Stock of the Corporation are as follows:

(a) Provisions Relating to the Common Stock

(1) Each holder of Common Stock shall be entitled to one vote
for each share of Common Stock outstanding in such holder's name on the
records of the Corporation on each matter submitted to a vote of the
stockholders.

(2) Subject to the rights of the holders of the Preferred
Stock, the holders of the Common Stock shall be entitled to receive
when, as, and if declared by the Board of Directors of the Corporation,
out of funds legally available therefor, dividends payable in cash,
stock or otherwise.

(3) Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, and after the holders of
the Preferred Stock and the holders of any bonds, debentures, or other
obligations of the Corporation shall have been paid in full the amounts
to which they shall be entitled (if any), or a sum sufficient for such
payment in full shall have been set aside, the remaining net assets of
the Corporation shall be distributed pro rata to the holders of the
Common Stock in accordance with their respective rights and interests,
to the exclusion of the holders of the Preferred Stock and any bonds,
debentures, or other obligations of the Corporation.

(4) No holder of shares of Common Stock shall be entitled to
preemptive or subscription rights.

(b) Provisions Relating to the Preferred Stock

(1) The Preferred Stock may be issued from time to time in one
or more classes or series, the shares of each class or series to have
such designations and powers, preferences and rights, and the
qualifications, limitations, and restrictions thereof as are stated and
expressed herein and in the resolution or resolutions providing for the
issuance of such class or series adopted by the Board of Directors of
the Corporation as hereafter prescribed.

(2) Authority is hereby expressly granted to and vested in the
Board of Directors of the Corporation to authorize the issuance of the
Preferred Stock from time to time in one or more classes or series, and
with respect to each such class or series of the Preferred Stock, to
fix and state by the resolution or resolutions from time to time
adopted providing for the issuance thereof the following:

2
<PAGE> 3
(i) Whether or not such class or series
is to have voting rights, full, special, or limited, or is to
be without voting rights, and whether or not such class or
series is to be entitled to vote as a separate class either
alone or together with the holders of one or more other
classes or series of stock;

(ii) the number of shares to constitute
such class or series and the designations thereof;

(iii) the preferences, and relative,
participating, optional, or other special rights, if any, and
the qualifications, limitations, or restrictions thereof, if
any, with respect to any such class or series;

(iv) whether or not the shares of any such
class or series shall be redeemable at the option of the
Corporation or the holders thereof or upon the happening of
any specified event, and, if redeemable, the redemption price
or prices (which may be payable in the form of cash, notes,
securities, or other property), and the time or times at
which, and the terms and conditions upon which, such shares
shall be redeemable and the manner of redemption;

(v) whether or not the shares of such
class or series shall be subject to the operation of
retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement, and, if such
retirement or sinking fund or funds are to be established,
the annual amount thereof, and the terms and provisions
relative to the operation thereof;

(vi) the dividend rate, whether dividends
are payable in cash, stock of the Corporation, or other
property, or a combination thereof, the conditions upon which
and the times when such dividends are payable, the preference
to or the relation to the payment of dividends payable on any
other class or classes or series of stock, whether such
dividends shall be cumulative or noncumulative, and if
cumulative, the date or dates from which such dividends shall
accumulate;

(vii) the preferences, if any, and the
amounts thereof which the holders of any such class or series
shall be entitled to receive upon the voluntary and
involuntary dissolution of, or upon any distribution of the
assets of, the Corporation;

(viii) whether or not the shares of any such
class or series, at the option of the Corporation or the
holder thereof or upon the happening of any specified event,
shall be convertible into or exchangeable for the shares of
any other class or classes or of any other series of the same
or any other class or classes of stock, securities, or other
property of the Corporation, and the conversion price or
prices, ratio or ratios, or the rate or rates at which such
exchange may be made, with such adjustments,

3
<PAGE> 4
if any, shall be stated and expressed or provided for in such
resolution or resolutions; and

(ix) such other special rights and
provisions with respect to any such class or series as may
seem advisable to the Board of Directors of the Corporation.

(3) The shares of each class or series of the
Preferred Stock may vary from the shares of any other class or
series thereof in any or all of the foregoing respects. The
Board of Directors of the Corporation may increase the number
of shares of Preferred Stock designated for any existing class
or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not
designated for any other class or series. The Board of
Directors of the Corporation may decrease the number of shares
of the Preferred Stock designated for any existing class or
series by a resolution, subtracting from such series unissued
shares of the Preferred Stock designated for such class or
series, and the shares to subtracted shall become authorized,
unissued, and undesignated shares of the Preferred Stock.

(1) Subject to the foregoing provisions of this
Amended and Restated Certificate of Incorporation, the
Corporation may issue shares of its Preferred Stock and Common
Stock from time to time for such consideration (in any form,
but not less in value than the par value thereof) as may be
fixed by the Board of Directors of the Corporation, which is
expressly authorized to fix the same in its absolute and
uncontrolled discretion subject to the foregoing conditions.
Shares so issued for which the consideration shall have been
paid or delivered to the Corporation shall be deemed fully
paid stock and shall not be liable to any further call or
assessment thereon, and the holders of such shares shall not
be liable for any further payments in respect of such shares.

(2) The Corporation shall have authority to create
and issue rights and options entitling their holders to
purchase or otherwise acquire shares of the Corporation's
capital stock of any class or series or other securities of
the Corporation, and such rights and options shall be
evidenced by instrument(s) approved by the Board of Directors
of the Corporation or any committee thereof. The Board of
Directors of the Corporation or any committee thereof shall be
empowered to set the exercise price, duration, times for
exercise, and other terms of such options or rights; provided,
however, that the consideration to be received (which may be
in any form) for any shares of capital stock subject thereto
shall have a value not less than the par value thereof.

FIFTH: TRANSACTIONS WITH OFFICERS, DIRECTORS OR STOCKHOLDERS. No
contract or transaction between the Corporation and one or more of its
directors, officers, or stockholders or between the Corporation and any person
(as used herein "person" means any other corporation,

4
<PAGE> 5
partnership, association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers, or stockholders are directors, officers, or stockholders, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors or committee which authorizes the contract or
transaction, or solely because his, her or their votes are counted for such
purpose, if: (a) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed to or are known by the Board
of Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (b) the material facts as to his or her relationship
or interest and as to the contract or transaction are disclosed to or are known
by the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (c) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved, or ratified by the Board of Directors, a committee thereof
(to the extent permitted by applicable law), or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.

SIXTH: INDEMNIFICATION. The Corporation shall have the power to
indemnify to the fullest extent authorized or permitted by law (as now or
hereafter in effect) any person who is or was made, or threatened to be made, a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, including, without
limitation, an action by or in the right of the Corporation to procure a
judgment in its favor, by reason of the fact that such person, or a person of
whom such person is the legal representative, is or was a director or officer of
the Corporation, or is or was serving in any capacity at the request of the
Corporation for any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise (an "Other Entity"), against
judgments, fines, penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees and disbursements). Persons who
are not directors or officers of the Corporation may be similarly indemnified in
respect of service to the Corporation to the extent the Board of Directors at
any time specifies that such persons are entitled to the benefits of this
Article.

SEVENTH: AMENDMENT OF BYLAWS. All the powers of the Corporation,
insofar as the same may be lawfully vested by this Amended and Restated
Certificate of Incorporation in the Board of Directors, are hereby conferred
upon the Board of Directors. In furtherance and not in limitation of that power,
the Board of Directors shall have the power, upon the affirmative vote of a
majority of the Common Stock Directors (as hereinafter defined) at a meeting
lawfully convened, to make, adopt, alter, amend, and repeal from time to time by
Bylaws of the Corporation and to make from time to time new Bylaws of the
Corporation, subject to the right of the stockholders entitled to vote thereon
to adopt, alter, amend, and repeal Bylaws made by the Board of Directors or to
make new Bylaws.

EIGHTH: RESERVATION OF RIGHT TO AMEND THE CERTIFICATE OF
INCORPORATION. Except for the provisions of Articles SIXTH and EIGHTH herein,
the Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Amended and Restated Certificate of Incorporation
in the manner now or hereafter prescribed by law and all rights conferred on
officers, directors, and stockholders herein are granted subject to this
reservation.

5
<PAGE> 6
NINTH: LIABILITY OF DIRECTORS. A director of the Corporation shall
not be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (a)
for any breach of the director's duty of loyalty to the Corporation or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (c) under Section 174 of
the GCL, or (d) for any transaction from which the director derived an improper
personal benefit. Any repeal or amendment of this Article by the stockholders
of the Corporation shall be prospective only, and shall not adversely affect
any limitation on the personal liability of a director of the Corporation
arising from an act or omission occurring prior to the time of such repeal or
amendment. In addition to the circumstances in which a director of the
Corporation is not personally liable as set forth in the foregoing provisions
of this Article, a director shall not be liable to the Corporation or its
stockholders to such further extent as permitted by any law hereafter enacted,
including without limitation any subsequent amendment to the GCL.

TENTH: BOARD OF DIRECTORS.

(a) The number of directors constituting the Board of Directors shall
be fixed by, or in the manner provided in, the Amended and Restated Bylaws of
the Corporation, provided that such number shall be no fewer than three (3) and
no more than ten (10) (plus such number of directors as may be elected from time
to time pursuant to the terms of any series of Preferred Stock that may be
issued and outstanding from time to time). The directors of the Corporation
(exclusive of directors who are elected pursuant to the terms of, and serve as
representatives of the holders of, any series of Preferred Stock) shall be
referred to herein as "Common Stock Directors."

(b) Notwithstanding the foregoing, whenever the holders of any one or
more classes or series or Preferred Stock issued by the Corporation shall have
the right, voting separately by series or by class (excluding holders of Common
Stock), to elect directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies, and other features of such
directorships shall be governed by the terms of this Article TENTH and any
amendment to this Amended and Restated Certificate of Incorporation that
designates a series of Preferred Stock.

(c) Any or all Common Stock Directors may be removed, with cause, at
any annual or special meeting of stockholders, upon the affirmative vote of the
holders of a majority of the outstanding shares of each class of capital stock
of the Corporation then entitled to vote in person or by proxy at an election of
such Common Stock Directors, provided that notice of the intention to act upon
such matter shall have been given in the notice calling such meeting.

(d) Election of directors need not be by written ballot.

ELEVENTH: BUSINESS COMBINATIONS. The Corporation expressly elects to be
governed by Section 203 of the GCL.

TWELFTH: SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of
stockholders of the Corporation may be called by the Board of Directors pursuant
to a resolution adopted by a majority of the Common Stock Directors then
serving, by the Chairman of the Board, or by any holder or holders of at least
forty percent (40%) of the outstanding shares of

6
<PAGE> 7
capital stock of the Corporation then entitled to vote on any matter for which
the respective special meeting is being called.

THIRTEENTH: DURATION. The duration of the Corporation shall be
perpetual.

IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Amended and Restated Certification of Incorporation to
be executed by George A. Robinson, its President and Chief Executive Officer,
and Thomas A. Costello, its Executive Vice President, Chief Technology Officer
and Secretary, this 5th day of May, 1997.

By: /s/ GEORGE A. ROBINSON
----------------------------------
George A. Robinson
President and Chief Executive Officer

ATTEST:

By: /s/ THOMAS A. COSTELLO
-----------------------------------
Thomas A. Costello
Executive Vice President,
Chief Technology Officer and Secretary

<PAGE> 1
AMENDED AND RESTATED

BYLAWS

ADVANCED COMMUNICATION SYSTEMS, INC.

PREAMBLE

These Bylaws are subject to, and governed by, the General Corporation
Law of the State of Delaware (the "GCL") and the Amended and Restated
Certificate of Incorporation, as may be amended from time to time (the
"Certificate of Incorporation"), of Advanced Communication Systems, Inc., a
Delaware corporation (the "Corporation"). In the event of a direct conflict
between the provisions of these Bylaws and the mandatory provisions of the GCL
or the provisions of the Certificate of Incorporation, such provisions of the
GCL or the Certificate of Incorporation, as the case may be, will be
controlling.

ARTICLE I: OFFICES

1.1 Registered Office and Agent. The registered office and registered
agent of the Corporation shall be as designated from time to time by the
appropriate filing by the Corporation in the office of the Secretary of State of
the State of Delaware.

1.2 Other Offices. The Corporation may also have offices at such other
places, both within and without the State of Delaware, as the Board of Directors
may from time to time determine or as the business of the Corporation may
require.

ARTICLE II: MEETINGS OF STOCKHOLDERS

2.1 Annual Meeting. An annual meeting of stockholders of the
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting or in a duly executed waiver of notice of such
meeting. At such meeting, the stockholders shall elect directors and transact
such other business as may be properly brought before the meeting.

2.2 Special Meeting. A special meeting of the stockholders may be
called by the Board of Directors pursuant to a resolution adopted by a majority
of the Common Stock Directors (as defined in Section 3.2 hereof) then serving,
by the Chairman of the Board, or by any holder or holders of record of at least
forty percent (40%) of the outstanding shares of capital stock of the
Corporation then entitled to vote on any matter for which the respective special
meeting is being called (considered for this purpose as one class). A special
meeting shall be held on such date and at such time as shall be designated by
the person(s) calling the meeting and stated in the notice of the meeting or in
a duly executed waiver of notice of such meeting. Only such business shall be
transacted at a special meeting as may be stated or indicated in the notice of

<PAGE> 2
such meeting given in accordance with these Bylaws or in a duly executed waiver
of notice of such meeting.

2.3 Time and Place of Meetings. All meetings of the stockholders shall
be held at such times and places, within or without the State of Delaware, as
may from time to time be fixed by the Board of Directors or by the President
with respect to special meetings, or as shall be specified or fixed in the
respective notices or waivers of notice thereof.

2.4 Notice. Written or printed notice stating the place, day, and time
of each meeting of the stockholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary, or the officer or person(s) calling the meeting, to each stockholder
of record entitled to vote at such meeting. If such notice is to be sent by
mail, it shall be directed to such stockholder at his or her address as it
appears on the records of the Corporation, unless he or she shall have filed
with the Secretary of the Corporation a written request that notices to him or
her be mailed to some other address, in which case it shall be directed to him
or her at such other address. Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall attend such meeting in person
or by proxy and shall not, at the beginning of such meeting, object to the
transaction of any business because the meeting is not lawfully called or
convened, or who shall, either before or after the meeting, submit a signed
waiver of notice, in person or by proxy.

2.5 Notice Of Stockholder Business; Nomination of Director Candidates.

(a) At annual or special meetings of the stockholders, only
such business shall be conducted as shall have been brought before
meetings (i) pursuant to the Corporation's notice of meeting, (ii) by
or at the direction of the Board of Directors, or (iii) by any
stockholder of the Corporation who is a stockholder of record at the
time of giving of notice provided for in this Section 2.5, who shall
be entitled to vote at such meeting, and who complies with the notice
procedures set forth in this Section 2.5.

(b) Only persons who are nominated in accordance with the
procedures set forth in these Bylaws shall be eligible to serve as
directors. Nominations of persons for election to the Board of
Directors may be made at an annual or special meeting of stockholders
(i) by or at the direction of the Board of Directors, or (ii) by any
stockholder of the Corporation who is a stockholder of record at the
time of giving of notice provided for in this Section 2.5, who shall
be entitled to vote for the election of directors at the meeting, and
who complies with the notice procedures set forth in this Section 2.5.

(c) A stockholder must give timely, written notice to the
Secretary of the Corporation to nominate directors at an annual or
special meeting pursuant to Section 2.5(b) hereof or to propose
business to be brought before an annual or special meeting pursuant to
clause (iii) of Section 2.5(c) hereof. To be timely in the case of an
annual meeting, a stockholder's notice must be received at the
principal executive offices of the Corporation not less than
one-hundred twenty (120) days before the first

2
<PAGE> 3
anniversary of the preceding year's annual meeting. To be timely in the
case of a special meeting or in the event that the date of the annual
meeting is changed by more than thirty (30) days from such anniversary
date, a stockholder's notice must be received at the principal
executive offices of the Corporation no later than the close of
business on the tenth (10th) day following the earlier of the day on
which notice of the meeting date was mailed or public disclosure of the
meeting date was made. Such stockholder's notice shall set forth (i)
with respect to each matter, if any, that the stockholder proposes to
bring before the meeting, a brief description of the business desired
to be brought before the meeting and the reasons for conducting such
business at the meeting, (ii) with respect to each person, if any, whom
the stockholder proposes to nominate for election or re-election as a
director, all information relating to such person (including such
person's written consent to being named in the proxy statement as a
nominee and to serving as a director) that is required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii)
the name and address, as they appear on the Corporation's records, of
the stockholder proposing such business or nominating such persons (as
the case may be), and the name and address of the beneficial owner, if
any, on whose behalf the proposal or nomination is made, (iv) the class
and number of shares of capital stock of the Corporation that are owned
beneficially and of record by such stockholder of record and by the
beneficial owner, if any, on whose behalf the proposal or nomination is
made, and (v) any material interest or relationship that such
stockholder of record and/or the beneficial owner, if any, on whose
behalf the proposal or nomination is made may respectively have in such
business or with such nominee. At the request of the Board of
Directors, any person nominated for election as a director shall
furnish to the Secretary of the Corporation the information required to
be set forth in a stockholder's notice of nomination which pertains to
the nominee.

(d) Notwithstanding anything in these Bylaws to the contrary,
no business shall be conducted, and no person shall be nominated to
serve as a director, at an annual or special meeting of stockholders,
except in accordance with the procedures set forth in this Section 2.5
and elsewhere in these Bylaws. The chairman of the meeting shall, if
the facts warrant, determine that business was not properly brought
before the meeting, or that a nomination was not made, in accordance
with the procedures prescribed by these Bylaws and, if he or she shall
so determine, he or she shall so declare to the meeting, and any such
business not properly brought before the meeting shall not be
transacted and any defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of these Bylaws, a stockholder
shall also comply with all applicable requirements of the Exchange Act,
and the rules and regulations thereunder with respect to the matters
set forth in this Section 2.5.

2.6 Voting List. At least ten (10) days prior to each meeting of
stockholders, the Secretary or other officer of the Corporation who has
responsibility of the Corporation's stock ledger, either directly or through
another officer appointed by him or her or through a transfer agent appointed by
the Board of Directors, shall prepare a complete list of stockholders entitled
to vote thereat, arranged in alphabetical order and showing the address of each
stockholder and number of shares of capital stock registered in the name of each
stockholder. To the extent

3
<PAGE> 4
required by law, such list shall be kept on file at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
meeting or a duly executed waiver of notice of such meeting or, if not so
specified, at the place where the meeting is to be held and shall be open to
examination by 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. Such list shall be produced at such meeting and kept at the meeting at
all times during such meeting and may be inspected by any stockholder who is
present.

2.7 Quorum. The holders of a majority of the outstanding shares of
capital stock entitled to vote on a matter, present in person or by proxy, shall
constitute a quorum at any meeting of stockholders, except as otherwise provided
by law, the Certificate of Incorporation, or these Bylaws. If a quorum shall not
be present, in person or by proxy, at any meeting of stockholders, the
stockholders entitled to vote thereat who are present, in person or by proxy
(or, if no stockholder entitled to vote is present, any officer of the
Corporation), may adjourn the meeting from time to time until a quorum shall be
present, in person or by proxy. It shall not be necessary to notify any
stockholder of any adjournment of less than thirty (30) days if the time and
place of the adjourned meeting are announced at the meeting at which adjournment
is taken, unless after the adjournment a new record date is fixed for the
adjourned meeting. At the adjourned meeting, the Corporation may transact any
business which might have been transacted at the original meeting.

2.8 Required Vote; Withdrawal of Quorum. When a quorum is present at
any meeting, the vote of the holders of at least a majority of the outstanding
shares of capital stock entitled to vote thereat who are present, in person or
by proxy, shall decide any question brought before such meeting, unless the
question is one on which, by express provision of law, the Certificate of
Incorporation, or these Bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question. The
stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.

2.9 Method of Voting; Proxies. Except as otherwise provided in the
Certificate of Incorporation or by law, each outstanding share of capital stock,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote at a meeting of stockholders. Elections of directors need not be by written
ballot. At any meeting of stockholders, every stockholder having the right to
vote may vote either in person or by a proxy executed in writing by the
stockholder or by his or her duly authorized attorney-in-fact. Each such proxy
shall be filed with the Secretary of the Corporation before or at the time of
the meeting. No proxy shall be valid after three (3) years from the date of its
execution, unless otherwise provided in the proxy. If no date is stated on a
proxy, such proxy shall be presumed to have been executed on the date of the
meeting at which it is to be voted. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power or unless otherwise made
irrevocable by law.

2.10 Record Date. For the purpose of determining stockholders entitled
(a) to notice of or to vote at any meeting of stockholders or any adjournment
thereof, (b) to receive payment of any dividend or other distribution or
allotment of any rights, or (c) to exercise any rights in

4
<PAGE> 5
respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, for any such determination of
stockholders, such date in any case to be not more than sixty (60) days and not
less than ten (10) days prior to such meeting nor more than sixty (60) days
prior to any other action. If no record date is fixed:

(i) 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 day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.

(ii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto.

(iii) A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.

2.11 Conduct of Meeting. The Chairman of the Board, if such office has
been filled, and, if not or if the Chairman of the Board is absent or otherwise
unable to act, the Vice-Chairman of the Board, if such office has been filled,
and, if not or if the Vice Chairman of the Board is absent or otherwise unable
to act, the President shall preside at all meetings of stockholders. The
Secretary shall keep the records of each meeting of stockholders. In the absence
or inability to act for any such officer, such officer's duties shall be
performed by the officer given the authority to act for such absent or
non-acting officer under these Bylaws or by some person appointed by the
meeting.

2.12 Inspectors. The Board of Directors may, in advance of any meeting
of stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If any of the inspectors so appointed shall fail to appear
or act, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his or her ability. The
inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, and the validity and
effect of proxies and shall receive votes, ballots, or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count, and tabulate all votes, ballots, or consents, determine the
results, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting, the
inspectors shall make a report in writing of any challenge, request, or matter
determined by them and shall execute a certificate of any fact found by them. No
director or candidate for the office of director shall act as an inspector of an
election of directors. Inspectors need not be stockholders.

5
<PAGE> 6
ARTICLE III: DIRECTORS

3.1 Management. The business and property of the Corporation shall be
managed by the Board of Directors. Subject to the restrictions imposed by law,
the Certificate of Incorporation, or these Bylaws, the Board of Directors may
exercise all the powers of the Corporation.

3.2 Number; Election; Term. The Board of Directors shall consist of
five (5) directors (plus such number of directors as may be elected from time to
time pursuant to the terms of any series of preferred stock that may be issued
and outstanding from time to time). The directors of the Corporation (exclusive
of directors who are elected pursuant to the terms of, and serve as
representatives of the holders of, any series of preferred stock of the
Corporation) shall be referred to herein as "Common Stock Directors." The
directors shall be elected at each annual meeting.

Whenever the holders of any one or more classes or series of preferred
stock issued by the Corporation shall have the right, voting separately by
series or by class (excluding holders of common stock), to elect directors at an
annual or special meeting of stockholders, the election, term of office, filling
of vacancies, and other features of such directorships shall be governed by the
terms of the Certificate of Incorporation and this Section 3, as may be amended
from time to time, including any amendment to the Certificate of Incorporation
that designates a series of preferred stock.

3.3 Change in Number. No decrease in the number of directors
constituting the entire Board of Directors shall have the effect of shortening
the term of any incumbent director.

3.4 Removal; Vacancies.

(a) Any or all Common Stock Directors may be removed, with
cause, at any annual or special meeting of stockholders, upon the
affirmative vote of the holders of a majority of the outstanding
shares of each class of capital stock of the Corporation then entitled
to vote in person or by proxy at an election of such Common Stock
Directors, provided that notice of the intention to act upon such
matter shall have been given in the notice calling such meeting. Newly
created directorships resulting from any increase in the authorized
number of Common Stock Directors, and any vacancies occurring in the
Board of Directors, whether caused by death, resignation, retirement,
disqualification, removal or other termination from office of any
Common Stock Director or otherwise, may be filled by the vote of a
majority of the Common Stock Directors then in office, though less
than a quorum, or by the affirmative vote, at any annual meeting or
any special meeting of the stockholders called for the purpose of
filling such directorship, of the holders of a majority of the
outstanding shares of each class of capital stock then entitled to
vote in person or by proxy at an election of such Common Stock
Directors. Each successor Common Stock Director so chosen shall hold
office until the next election of the class for which such director
shall have been chosen and until his or her respective successor shall
have been duly elected and qualified.

6
<PAGE> 7
(b) Unless otherwise provided by the terms of the Certificate
of Incorporation (including any amendment thereto that designates a
series of preferred stock), any or all directors other than Common
Stock Directors may be removed, with or without cause, at any annual or
special meeting of stockholders, upon the affirmative vote of the
holders of a majority of the outstanding shares of each class of
capital stock then entitled to vote in person or by proxy at an
election of such directors, provided that notice of the intention to
act upon such matter shall have been given in the notice calling such
meeting. Unless otherwise provided by the terms of the Certificate of
Incorporation (including any amendment thereto that designates a series
of preferred stock), any vacancies occurring in the Board of Directors
caused by death, resignation, retirement, disqualification, removal or
other termination from office of any directors other than Common Stock
Directors may be filled by the vote of a majority of the Board of
Directors then in office, though less than a quorum, or by the
affirmative vote, at any annual meeting or any special meeting of the
stockholders called for the purpose of filling such directorship, of
the holders of a majority of the outstanding shares of each class of
capital stock then entitled to vote in person or by proxy at an
election of such directors. Each successor director so chosen shall
hold office until the next annual meeting of the stockholders and until
his or her respective successor, shall have been duly elected and
qualified.

3.5 Place of Meetings. The directors may hold their meetings and may
have an office and keep the records of the Corporation, except as otherwise
provided by law, in such place or places within or without the State of Delaware
as the Board of Directors may from time to time determine or as shall be
specified in the notice of such meeting or duly executed waiver of notice of
such meeting.

3.6 Annual Meeting. The Board of Directors may hold an annual meeting,
if a quorum is present, immediately after and at the same place as the annual
meeting of stockholders, and no notice of such meeting shall be necessary.

3.7 Election of Officers. At the first meeting of the Board of
Directors after each annual meeting of stockholders at which a quorum shall be
present, the Board of Directors shall elect the officers of the Corporation.

3.8 Regular Meetings. Regular meetings of the Board of Directors shall
be held at such times and places as shall be designated from time to time by
resolution of the Board of Directors. Notice of such regular meetings shall not
be required.

3.9 Special Meetings. Special meetings of the Board of Directors shall
be held whenever called by the Chairman of the Board, the Vice-Chairman of the
Board, the Chief Executive Officer, the President, or any two directors.

3.10 Notice. Notice of each special meeting shall be given to each
director at least twenty-four (24) hours before the meeting. Notice of any such
meeting need not be given to any director who, either before or after the
meeting, submits a signed waiver of notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of notice to him

7
<PAGE> 8
or her. The purpose of any special meeting shall be specified in the notice or
waiver of notice of such meeting.

3.11 Quorum; Majority Vote. At all meetings of the Board of Directors,
a majority of the directors fixed in the manner provided in these Bylaws shall
constitute a quorum for the transaction of business. If at any meeting of the
Board of Directors there is less than a quorum present, a majority of those
present or any director solely present may adjourn the meeting from time to time
without further notice. Unless the act of a greater number is required by law,
the Certificate of Incorporation, or these Bylaws, the act of a majority of the
directors present at a meeting at which a quorum is in attendance shall be the
act of the Board of Directors. At any time that the Certificate of Incorporation
provides that directors elected by the holders of a class or series of stock
shall have more or less than one vote per director on any matter, every
reference in these Bylaws to a majority or other proportion of directors shall
refer to a majority or other proportion of the votes of such directors.

3.12 Procedure. At meetings of the Board of Directors, business shall
be transacted in such order as from time to time the Board of Directors may
determine. The Chairman of the Board, if such office has been filled, and, if
not or if the Chairman of the Board is absent or otherwise unable to act, the
Vice-Chairman of the Board, if such office has been filled, and, if not or if
the Vice-Chairman of the Board is absent or otherwise unable to act, the
President shall preside at all meetings of the Board of Directors. In the
absence or inability to act of either such officer, a chairman shall be chosen
by the Board of Directors from among the directors present. The Secretary of the
Corporation shall act as the secretary of each meeting of the Board of Directors
unless the Board of Directors appoints another person to act as secretary of the
meeting. The Board of Directors shall keep regular minutes of its proceedings
which shall be placed in the minute book of the Corporation.

3.13 Presumption of Assent. A director of the Corporation who is
present at the meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his or her dissent shall be entered in the minutes of the meeting or
unless he or she shall file his or her written dissent to such action with the
person acting as secretary of the meeting before the adjournment thereof or
shall forward any dissent by certified or registered mail to the Secretary of
the Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.

3.14 Compensation. The Board of Directors shall have the authority to
fix the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the Board of
Directors or any committee thereof; provided, that nothing contained herein
shall be construed to preclude any director from serving the Corporation in any
other capacity or receiving compensation therefor.

8
<PAGE> 9
ARTICLE IV: COMMITTEES

4.1 Designation. The Board of Directors may, by resolution adopted by a
majority of the entire Board of Directors, designate one or more committees,
including without limitation an Executive Committee, Audit Committee and
Compensation Committee as hereinafter described.

4.2 Number; Qualification; Term. Each committee shall consist of one
(1) or more directors appointed by resolution adopted by a majority of the
entire Board of Directors. The number of committee members may be increased or
decreased from time to time by resolution adopted by a majority of the entire
Board of Directors. Each committee member shall serve as such until the earliest
of (i) the expiration of his or her term as director, (ii) his or her
resignation as a committee member or as a director, or (iii) his or her removal
as a committee member or as a director.

4.3 Authority. Each committee, to the extent expressly provided in the
resolution establishing such committee, shall have and may exercise all of the
authority of the Board of Directors in the management of the business and the
property of the Corporation except to the extent expressly restricted by such
resolution or by law, the Certificate of Incorporation, or these Bylaws.

4.4 Committee Changes. The Board of Directors shall have the power at
any time to fill vacancies in, to change the membership of, and to discharge any
committee.

4.5 Alternate Members of Committees. The Board of Directors may
designate one or more directors as alternate members of any committee. Any such
alternate member may replace any absent or disqualified member at any meeting of
the committee. If no alternate committee members have been so appointed to a
committee or each such alternate committee member is absent or disqualified, the
member or members of such committee 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 of Directors to act at the
meeting in the place of any such absent or disqualified member.

4.6 Regular Meetings. Regular meetings of any committee may be held
without notice at such time and place as may be designated from time to time by
the committee and communicated to all members thereof.

4.7 Special Meeting. Special meetings of any committee may be held
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least two (2) days before such special meeting. Neither the business to be
transacted at, nor the purpose of, any special meeting of any committee need be
specified in the notice or waiver of notice of any special meeting.

4.8 Quorum; Majority Vote. At meetings of any committee, a majority of
the number of members designated by the Board of Directors shall constitute a
quorum for the transaction of business. If a quorum is not present at a meeting
of any committee, a majority of the members

9
<PAGE> 10
present may adjourn the meeting from time to time, without notice other than an
announcement at the meeting, until a quorum is present. The act of a majority of
the members present at any meeting at which a quorum is in attendance shall be
the act of a committee, unless the act of a greater number is required by law,
the Certificate of Incorporation, or these Bylaws.

4.9 Minutes. Each committee shall cause minutes at its proceedings to
be prepared and shall report the same to the Board of Directors upon the request
of the Board of Directors. The minutes of the proceedings of each committee
shall be delivered to the Secretary of the Corporation for placement in the
minute books of the Corporation.

4.10 Compensation. Committee members may, by resolution of the Board of
Directors, be allowed a fixed sum and expenses of attendance, if any, for
attending any committee meetings or a stated salary.

4.11 Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the Board of
Directors or any director of any responsibility imposed upon it or such director
by law.

4.12 Executive Committee. The Board of Directors may, by resolution,
designate one (1) or more of its members to constitute an Executive Committee.
The Executive Committee shall have and may exercise all of the authority of the
Board of Directors in the management of the business and affairs of the
Corporation within the limits permitted by law, including without limitation,
the power and authority: (i) to authorize the seal of the Corporation to be
affixed to all papers; (ii) to declare a dividend; (iii) to authorize the
issuance of stock; (iv) to adopt a certificate of ownership and merger pursuant
to Section 253 of the GCL; and (v) to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors, to fix any of the preference rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of shares for, shares of any
other class or classes or any other series of the same of any other class or
classes of stock of the Corporation.

4.13 Audit Committee. The Board of Directors may, by resolution,
designate not less than two (2) of the directors then in office to constitute an
Audit Committee. All of such directors must be independent of management and
free from any relationship that, in the opinion of the Board of Directors, would
interfere with such directors' exercise of independent judgment as a committee
member. The Audit Committee, if established, shall at a minimum (i) consider and
make recommendations to the Board of Directors with respect to the employment of
a firm of independent public accountants, (ii) confer with the Corporation's
independent public accountants to determine the scope of the audit that such
accountants will perform, (iii) receive reports from the independent public
accountants and transmit such reports to the Board of Directors, and after the
close of the fiscal year, transmit to the Board of Directors the financial
statements certified by such accountants, (iv) inquire into, examine and make
comments on the accounting procedures of the Corporation and the reports of the
independent public accountants, and (v) consider and make recommendations to the
Board of Directors upon matters presented to it by the officers of the
Corporation pertaining to the audit practices and procedures adhered to by the
Corporation. The Board of Directors may designate one (1) member of the Audit
Committee to act as its chairman.

10
<PAGE> 11
4.14 Compensation Committee. The Board of Directors may, by resolution,
designate not less than two (2) of the directors then in office to constitute a
Compensation Committee, at least two (2) of whom shall be independent of
management so as to exercise independent judgment as a committee member. The
Compensation Committee may exercise all of the authority of the Board of
Directors in administering the Corporation's executive compensation plans,
including stock option plans.

4.15 Other Committees. In addition to the Executive Committee, the
Audit Committee and the Compensation Committee, the Board of Directors may, by
resolution, designate one or more other committees of the Board of Directors in
accordance with the provisions of these Bylaws.

ARTICLE V: NOTICE

5.1 Method. Whenever by statute, the Certificate of Incorporation, or
these Bylaws, notice is required to be given to any committee member, director,
or stockholder and no provision is made as to how such notice shall be given,
personal notice shall not be required and any such notice may be given (a) in
writing, by mail, postage prepaid, addressed to such committee member, director,
or stockholder at his or her address as it appears on the books or (in the case
of a stockholder) the stock transfer records of the Corporation, or (b) by any
other method permitted by law (including but not limited to overnight courier
service, telegram, telex, or telefax). Any notice required or permitted to be
given by mail shall be deemed to be delivered and given at the time when the
same is deposited in the United States mail as aforesaid. Any notice required or
permitted to be given by overnight courier service shall be deemed to be
delivered and given at the time delivered to such service with all charges
prepaid and addressed as aforesaid. Any notice required or permitted to be given
by telegram, telex, or telefax shall be deemed to be delivered and given at the
time transmitted with all charges prepaid and addressed as aforesaid.

5.2 Waiver. Whenever any notice is required to be given to any
stockholder, director, or committee member of the Corporation by statute, the
Certificate of Incorporation, or these Bylaws, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be equivalent to the giving of such notice.
Attendance of a stockholder, director, or committee member at a meeting shall
constitute a waiver of notice of such meeting, except where such person attends
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.

ARTICLE VI: OFFICERS

6.1 Number; Titles; Terms of Office. The officers of the Corporation
shall be a Chairman of the Board, a President, a Secretary, and such other
officers as the Board of Directors may from time to time elect or appoint,
including a Vice-Chairman of the Board, Chief Executive Officer, Chief Financial
Officer, one or more Vice Presidents (with each Vice President to have such
descriptive title, if any, as the Board of Directors shall determine),
Controller and a Treasurer. Each officer shall hold office until his or her
successor shall have been duly elected and shall have qualified, until his or
her death, or until he or she shall resign or shall have been

11
<PAGE> 12
removed in the manner hereinafter provided. Any two (2) or more offices may be
held by the same person. None of the officers need be a stockholder or a
director of the Corporation or a resident of the State of Delaware.

6.2 Removal. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interest of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.

6.3 Vacancies. Any vacancy occurring in any office of the Corporation
(by death, resignation, removal, or otherwise) may be filled by the Board of
Directors.

6.4 Authority. Officers shall have such authority and perform such
duties in the management of the Corporation as are provided in these Bylaws or
as may be determined by resolution of the Board of Directors not inconsistent
with these Bylaws.

6.5 Compensation. The compensation, if any, of officers and agents
shall be fixed from time to time by the Board of Directors or any committee
thereof; provided, however, that the Board of Directors may delegate the power
to determine the compensation of any officer and agent (other than the officer
to whom such power is delegated) to any other officer of the Corporation.

6.6 Chairman. The Chairman of the Board shall preside at all meetings
of the Board of Directors and shall exercise such powers and perform such other
duties as shall be determined from time to time by the Board of Directors.

6.7 Vice-Chairman. The Vice-Chairman shall, in the absence or
disability of the Chairman, exercise the powers and perform the duties of the
Chairman and shall exercise such powers and perform such other duties as shall
be determined from time to time by the Board of Directors.

6.8 Chief Executive Officer. The Chief Executive Officer shall be the
chief executive officer of the Corporation and shall have general supervision
and direction over the business of the Corporation, subject, however, to the
control of the Board of Directors and of any duly authorized committee of
directors. The Chief Executive Officer, in the absence of the Chairman or the
Vice Chairman, as the case may be, shall preside at each meeting of the
stockholders and of the Board of Directors. He or she may sign and execute in
the name of the Corporation deeds, mortgages, bonds, contracts and other
instruments, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the Corporation, or shall be required by law otherwise to be
signed or executed, and, in general, shall perform all duties incident to the
office of Chief Executive Officer and such other duties as from time to time may
be assigned to him or her by the Board of Directors or by these Bylaws.

12
<PAGE> 13
6.9 President. The President shall assist the Chief Executive Officer
in the management of and supervision and direction over the business and affairs
of the Corporation, subject, however, to the direction of the Chief Executive
Officer and the control of the Board of Directors. The President may, in the
absence of the Chairman, the Vice-Chairman and the Chief Executive Officer, as
the case may be, preside, if present, at each meeting of the stockholders and of
the Board of Directors. The President may sign and execute in the name of the
Corporation deeds, mortgages, bonds, contracts and other instruments except in
cases in which the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these Bylaws to some other officer or agent of the
Corporation or shall be required by law otherwise to be signed or executed and,
in general, shall perform all duties incident to the office of the President and
such other duties as from time to time may be assigned to him or her by the
Board of Directors, by these Bylaws or by the Chief Executive Officer.

6.10 Chief Financial Officer. The Chief Financial Officer shall be the
chief financial officer of the Corporation, and shall render to the Board of
Directors, whenever the Board of Directors may require, an account of the
financial condition of the Corporation; shall make, sign and file financial, tax
and similar reports to any state, federal or municipal government, agency or
department, or any self-regulatory organization; shall provide for the
continuous review of all accounts and reports; and shall perform such other
duties as from time to time may be assigned to him or her by the Board of
Directors, by these Bylaws or the Chief Executive Officer or President.

6.11 Vice Presidents. Each Vice President shall have such powers and
perform such duties as from time to time may be assigned to such Vice President
or by the Board of Directors or by the Chief Executive Officer or the President
and shall perform such other duties as may be prescribed in these Bylaws.

6.12 Secretary. The Secretary shall attend all meetings of the
stockholders and shall record all the proceedings of the meetings of the Board
of Directors and of the stockholders in a book to be kept for that purpose, and
shall perform like duties for committees of the Board of Directors, when
required. The Secretary shall give, or cause to be given, notice of all special
meetings of the Board of Directors and of the stockholders and shall perform
such other duties as may be prescribed by the Board of Directors or by the Chief
Executive Officer, under whose supervision the Secretary shall be. The Secretary
shall have custody of the corporate seal of the Corporation, and the Secretary,
or an Assistant Secretary, shall have authority to impress the same on any
instrument requiring it, and when so impressed the seal may be attested by the
signature of the Secretary or by the signature of such Assistant Secretary. The
Board of Directors may give general authority to any other officer to impress
the seal of the Corporation and to attest the same by such officer's signature.
The Secretary or an Assistant Secretary may also attest all instruments signed
by the Chairman, the Vice-Chairman, the Chief Executive Officer or the
President. The Secretary shall have charge of all the books, records and papers
of the Corporation relating to its organization and management, shall see that
the reports, statements and other documents required by statute are properly
kept and filed and, in general, shall perform all duties incident to the office
of Secretary of a corporation and such other duties as may from time to time be
assigned to the Secretary by the Board of Directors, by these Bylaws, by the
Chief Executive Officer or by the President.

13
<PAGE> 14
6.13 Treasurer. The Treasurer shall have charge and custody of, and be
responsible for, all funds, securities and notes of the Corporation; receive and
give receipts for moneys due and payable to the Corporation from any sources
whatsoever; deposit all such moneys and valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors; against proper vouchers, cause such funds to be disbursed by
checks or drafts on the authorized depositories of the Corporation signed in
such manner as shall be determined by the Board of Directors and be responsible
for the accuracy of the amounts of all moneys so disbursed; regularly enter or
cause to be entered in books or other records maintained for such purpose full
and adequate accounting of all moneys received or paid for the account of the
Corporation; have the right to require from time to time reports or statements
giving such information as the Treasurer may desire with respect to any and all
financial transactions of the Corporation from the officers or agents
transacting the same; render to the Chairman, the Vice- Chairman, the Chief
Executive Officer, the President or the Board of Directors, whenever the
Chairman, the Vice-Chairman, the Chief Executive Officer, the President or the
Board of Directors shall require the Treasurer so to do, an accounting of the
financial condition of the Corporation and of all financial transactions of the
Corporation; exhibit at all reasonable times the records and books of account to
any of the directors upon application at the office of the Corporation where
such records and books are kept; disburse the funds of the Corporation as
ordered by the Board of Directors; and, in general, perform all duties incident
to the office of Treasurer of a corporation and such other duties as may from
time to time be assigned to the Treasurer by the Board of Directors, by these
Bylaws or by the Chief Executive Officer or by the President.

6.14 Assistant Secretaries and Assistant Treasurers. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the Secretary or by the Treasurer, respectively, or by the
Board of Directors, by these Bylaws, by the Chief Executive Officer or by the
President.

ARTICLE VII: CERTIFICATES AND STOCKHOLDERS

7.1 Certificates for Shares. Certificates for shares of stock of the
Corporation shall be in such form as shall be approved by the Board of
Directors. The certificates shall be signed by the Chairman of the Board, the
Chief Executive Officer or the President or a Vice President and also by the
Secretary or an Assistant Secretary or by the Treasurer or an Assistant
Treasurer. Any and all signatures on the certificate may be a facsimile and may
be sealed with the seal of the Corporation or a facsimile thereof. If any
officer, transfer agent, or registrar who has signed, or whose facsimile
signature has been placed upon, a certificate has ceased to be such officer,
transfer agent, or registrar before such certificate is issued, such certificate
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent, or registrar at the date of issue. The certificates
shall be consecutively numbered and shall be entered in the books of the
Corporation as they are issued and shall exhibit the holder's name and the
number of shares.

7.2 Replacement of Lost or Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
a certificate or certificates therefore issued by the Corporation and alleged to
have been lost or destroyed, upon the making of an

14
<PAGE> 15
affidavit of that fact by the person claiming the certificate or certificates
representing shares to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost 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 with a surety or sureties satisfactory to the
Corporation in such sum as it may direct as indemnity against any claim, or
expense resulting from a claim, that may be made against the Corporation with
respect to the certificate or certificates alleged to have been lost or
destroyed.

7.3 Transfer of Shares. Shares of stock of the Corporation shall be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.

7.4 Registered Stockholders. The Corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, 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 law.

7.5 Regulations. The Board of Directors shall have the power and
authority to make all such rules and regulations as it may deem expedient
concerning the issue, transfer, and registration or the replacement of
certificates for shares of stock of the Corporation.

7.6 Legends. The Board of Directors shall have the power and authority
to provide that certificates representing shares of stock bear such legends as
the Board of Directors deems appropriate to assure that the Corporation does not
become liable for violations of federal or state securities laws or other
applicable law.

ARTICLE VIII: INDEMNIFICATION

8.1 Power to Indemnify in Actions, Suits or Proceedings Other Than
Those By Or In the Right of the Corporation. Subject to Section 8.3, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to 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
or she is or was a director or officer of the Corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director or officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no

15
<PAGE> 16
reasonable cause to believe his or her 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
or she reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.

8.2 Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Corporation. Subject to Section 8.3, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to 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 or
she is or was a director or officer of the Corporation, or is or was a director
or officer of the Corporation serving at the request of the Corporation as a
director or officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he or she 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 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 indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.

8.3 Authorization of Indemnification. Any indemnification under this
Article VIII (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because he or she has met
the applicable standard of conduct set forth in Section 8.1 or 8.2, as the case
may be. Such determination shall be made (i) by a majority vote of the directors
who are not parties to such action, suit or proceeding, even though less than a
quorum, or (ii) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (iii) by the stockholders.
To the extent, however, that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
he or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith, without
the necessity of authorization in the specific case.

8.4 Good Faith Defined. For purposes of any determination under Section
8.3, a person shall be deemed to have acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his or her conduct was unlawful, if his or her
action is based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him or her by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert

16
<PAGE> 17
selected with reasonable care by the Corporation or another enterprise. The term
"another enterprise" as used in this Section 8.4 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, employee or agent. The provisions of this
Section 8.4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Section 8.1 or 8.2, as the case may be.

8.5 Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 8.3, and notwithstanding the
absence of any determination thereunder, any director or officer may apply to
any court of competent jurisdiction in the State of Delaware for indemnification
to the extent otherwise permissible under Sections 8.1 and 8.2. The basis of
such indemnification by a court shall be a determination by such court that
indemnification of the director or officer is proper in the circumstances
because he or she has met the applicable standards of conduct set forth in
Section 8.1 or 8.2, as the case may be. Neither a contrary determination in the
specific case under Section 8.3 nor the absence of any determination thereunder
shall be a defense to such application or create a presumption that the director
or officer seeking indemnification has not met any applicable standard of
conduct. Notice of any application for indemnification pursuant to this Section
8.5 shall be given to the Corporation promptly upon the filing of such
application. If successful, in whole or in part, the director or officer seeking
indemnification shall also be entitled to be paid the expense of prosecuting
such application.

8.6 Expenses Payable in Advance. Expenses incurred by a director or
officer in defending or investigating a threatened or pending action, suit or
proceeding may be paid by the Corporation, upon the determination by the Board
of Directors, in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in this
Article VIII, provided the Corporation approves in advance counsel selected by
the director or officer (which approval shall not be unreasonably withheld).

8.7 Non-exclusivity of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by or granted pursuant to
this Article VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
the Certificate of Incorporation or any Bylaw, agreement, contract, vote of
stockholders or disinterested directors or pursuant to the direction (howsoever
embodied) of any court of competent jurisdiction or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office, it being the policy of the Corporation that indemnification
of the persons specified in Sections 8.1 and 8.2 shall be made to the fullest
extent permitted by law. The provisions of this Article VIII shall not be deemed
to preclude the indemnification of any person who is not specified in Section
8.1 or 8.2 but whom the Corporation has the power or obligation to indemnify
under the provisions of the GCL, or otherwise.

17
<PAGE> 18
8.8 Insurance. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer of the Corporation, or
is or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of his or her status as such, whether or not
the Corporation would have the power or the obligation to indemnify him or her
against such liability under the provisions of this Article VIII.

8.9 Certain Definitions. For purposes of this Article VIII, references
to "the Corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors or
officers, so that any person who is or was a director or officer of such
constituent corporation, or is or was a director or officer of such constituent
corporation serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, shall stand in the
same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued. For purposes of
this Article VIII, references to "fines" shall include any excise taxes assessed
on a person with respect to an 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 or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he or she 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 VIII.

8.10 Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by the Corporation pursuant
to this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.

8.11 Limitation on Indemnification. Notwithstanding anything contained
in this Article VIII to the contrary, except for proceedings to enforce rights
to indemnification (which shall be governed by Section 8.5 hereof), the
Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors of the Corporation.

8.12 Indemnification of Employees and Agents. The Corporation may, to
the extent authorized from time to time by the Board of Directors, provide
rights to indemnification and to the advancement of expenses to employees and
agents of the Corporation similar to those conferred in this Article VIII to
directors and officers of the Corporation.

18
<PAGE> 19
ARTICLE IX: MISCELLANEOUS; PROVISIONS

9.1 Dividends. Subject to provisions of law and the Certificate of
Incorporation, dividends may be declared by the Board of Directors at any
regular or special meeting and may be paid in cash, in property, or in shares of
stock of the Corporation. Such declaration and payment shall be at the
discretion of the Board of Directors.

9.2 Reserves. There may be created by the Board of Directors out of
funds of the Corporation legally available therefor such reserve or reserves as
the directors from time to time, in their discretion, consider proper to provide
for contingencies, to equalize dividends, or to repair or maintain any property
of the Corporation, or for such other purpose as the Board of Directors shall
consider beneficial to the Corporation, and the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.

9.3 Books and Records. The Corporation shall keep correct and complete
books and records of account, shall keep minutes of the proceedings of its
stockholders and Board of Directors and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.

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

9.5 Seal. The seal of the Corporation shall be such as from time to
time may be approved by the Board of Directors.

9.6 Resignations. Any director, committee member, or officer may resign
by so stating at any meeting of the Board of Directors or by giving written
notice to the Board of Directors, the Chairman of the Board, the Vice-Chairman,
the Chief Executive Officer, the President, or the Secretary. Such resignation
shall take effect at the time specified therein or, if no time is specified
therein, immediately upon its receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.

9.7 Securities of Other Corporations. The Chairman of the Board, the
Vice-Chairman, the Chief Executive Officer, the President, or any Vice President
of the Corporation shall have the power and authority to transfer, endorse for
transfer, vote, consent, or take any other action with respect to any securities
of another issuer which may be held or owned by the Corporation and to make,
execute, and deliver any waiver, proxy, or consent with respect to any such
securities.

9.8 Telephone Meetings. Stockholders (acting for themselves or through
a proxy), members of the Board of Directors, and members of any committee of the
Board of Directors may participate in and hold a meeting of such stockholders,
Board of Directors, or committee by means of a conference telephone or similar
communications equipment by means of which persons participating in the meeting
can hear each other, and participation in a meeting pursuant to this section
shall constitute presence in person at such meeting, except where a person
participates in

19
<PAGE> 20
the meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.

9.9 Action Without a Meeting.

(a) Except as otherwise provided in the Certificate of
Incorporation, any action required or permitted at any annual or
special meeting of the stockholders, may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the
holders (acting for themselves or through a proxy) 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 the
holders of all shares entitled to vote thereon were present and voted
and shall be delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of
business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are
recorded. Every written consent of stockholders shall bear the date of
signature of each stockholder who signs the consent and no written
consent shall be effective to take the corporate action referred to
therein unless, within sixty (60) days of the earliest dated consent
delivered in the manner required by this Section 9.9(a) to the
Corporation, written consents signed by a sufficient number of holders
to take action are delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of
business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office,
principal place of business, or such officer or agent shall be by hand
or by certified or registered mail, return receipt requested.

(b) Except as otherwise provided in the Certificate of
Incorporation or in these Bylaws, any action required or permitted to
be taken at a meeting of the Board of Directors, or of any committee
of the Board of Directors, may be taken without a meeting if a consent
or consents in writing, setting forth the action so taken, shall be
signed by all the directors or all the committee members, as the case
may be, entitled to vote with respect to the subject matter thereof,
and such consent shall have the same force and effect as a vote of
such directors or committee members, as the case may be, and may be
stated as such in any certificate or document filed with the Secretary
of State of the State of Delaware or in any certificate delivered to
any person. Such consent or consents shall be filed with the minutes
of proceedings of the Board of Directors or committee, as the case may
be.

9.10 Invalid Provisions. If any part of these Bylaws shall be held
invalid or inoperative for any reason, the remaining parts, so far as it is
possible and reasonable, shall remain valid and operative.

9.11 Mortgages; etc. With respect to any deed, deed of trust, mortgage,
or other instrument executed by the Corporation through its duly authorized
officer or officers, the attestation to such execution by the Secretary of the
Corporation shall not be necessary to constitute such deed, deed of trust,
mortgage, or other instrument a valid and binding obligation

20
<PAGE> 21
against the Corporation unless the resolutions, if any, of the Board of
Directors authorizing such execution expressly state that such attestation is
necessary.

9.12 Headings. The headings used in these Bylaws have been inserted for
administrative convenience only and do not constitute matter to be construed in
interpretation.

9.13 Amendments. The Board of Directors shall have the power, upon the
affirmative vote of a majority of the Common Stock Directors at a meeting
lawfully convened, to make, adopt, alter, amend, and repeal from time to time
these Bylaws and to make from time to time new Bylaws, subject to the right of
the stockholders entitled to vote thereon to adopt, alter, amend, and repeal
Bylaws made by the Board of Directors or to make new Bylaws.

<PAGE> 1
ADVANCED COMMUNICATION SYSTEMS, INC.

1996 STOCK INCENTIVE PLAN

Section 1. Purpose

The purpose of this 1996 Stock Incentive Plan (the "Plan") is
to advance the interests of Advanced Communication Systems, Inc. by enhancing
its ability to attract and retain directors, executive officers and other key
employees, consultants and others who are in a position to contribute to the
Company's future growth and success.

Section 2. Definitions

"Award" means any Option, Stock Appreciation Right,
Performance Share, Restricted Stock or Unrestricted Stock awarded under the
Plan.

"Board" means the Board of Directors of the Company.

"Code" means the Internal Revenue Code of 1986, as amended
from time to time.

"Committee" means a committee of not less than two members of
the Board appointed by the Board to administer the Plan, provided that if and
when the Common Stock is registered under Section 12 of the Securities Exchange
Act of 1934, each member of the Committee shall be a "non-employee director"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934
("Rule 16b-3").

"Common Stock" or "Stock" means the Common Stock, $.01 par
value per share, of the Company.

"Company" means Advanced Communication Systems, Inc. and,
except where the content otherwise requires, all present and future subsidiaries
of the Company as defined in Sections 424(f) of the Code.

"Designated Beneficiary" means the beneficiary designated by a
Participant, in a manner determined by the Board, to receive amounts due to or
exercise rights of the Participant in the event of the Participant's death. In
the absence of an effective designation by a Participant, Designated Beneficiary
shall mean the Participant's estate.

"Fair Market Value" means, with respect to Common Stock or any
other property, the fair market value of such property as determined by the
Board in good faith or in the manner established by the Board from time to time.

"Incentive Stock Option" means an option to purchase shares of
Common Stock awarded to a Participant under Section 6 which is intended to meet
the requirements of Section 422 of the Code or any successor provision.

<PAGE> 2
"Nonstatutory Stock Option" means an option to purchase shares
of Common Stock awarded to a Participant under Section 6 which is not intended
to be an Incentive Stock Option.

"Option" means an Incentive Stock Option or a Nonstatutory
Stock Option.

"Outside Director" means a non-employee director of the
Company.

"Participant" means a person selected by the Board to receive
an Award under the Plan.

"Performance Shares" mean shares of Common Stock which may be
earned by the achievement of performance goals awarded to a Participant under
Section 8.

"Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.

"Restricted Period" means the period of time selected by the
Board during which shares subject to a Restricted Stock Award may be repurchased
by or forfeited to the Company.

"Restricted Stock" means shares of Common Stock awarded to a
Participant under Section 9.

"Stock Appreciation Right" or "SAR" means a right to receive
any excess in Fair Market Value of shares of Common Stock over the exercise
price awarded to a Participant under Section 7.

"Unrestricted Stock" means shares of Common Stock awarded to a
Participant under Section 9(c).

Section 3. Administration

The Plan will be administered by the Board. The Board shall
have authority to make Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable
from time to time, and to interpret the provisions of the Plan. The Board's
decisions shall be final and binding. No member of the Board shall be liable for
any action or determination relating to the Plan made in good faith. To the
extent permitted by applicable law, the Board may delegate to one or more
executive officers of the Company the power to make Awards to Participants who
are not Reporting Persons and to make all determinations under the Plan with
respect thereto, provided that the Board shall fix the maximum amount of such
Awards to be made by such executive officers and a maximum amount for any one
Participant. To the extent permitted by applicable law, the Board may appoint a
Committee to administer the Plan and, in such event, all references to the Board
in the Plan shall mean such Committee or the Board. All decisions by the Board
or the Committee pursuant to the Plan shall be final and binding on all persons
having or claiming any interest in the Plan or in any Award.

2
<PAGE> 3
Section 4. Eligibility

All of the Company's employees, officers, directors,
consultants and advisors who are expected to contribute to the Company's future
growth and success, other than persons who have irrevocably elected not to be
eligible, are eligible to be Participants in the Plan. Incentive Stock Options
may be awarded only to persons eligible to receive Incentive Stock Options under
the Code.

Section 5. Stock Available for Awards

(a) Subject to adjustment under subsection (b) below, Awards
may be made under the Plan for up to 450,000 shares of Common Stock. If any
Award in respect of shares of Common Stock expires or is terminated unexercised
or is forfeited, in whole or in part, for any reason, the shares subject to such
Award, to the extent of such expiration, termination or forfeiture, shall again
be available for award under the Plan, subject, however, in the case of
Incentive Stock Options, to any limitation required under the Code. If shares of
Stock are tendered to the Company in payment of the exercise price of an Option
pursuant to Section 6(a)(iv) or in satisfaction of tax withholding requirements
pursuant to Section 10(g), such tendered shares shall again be available for
subsequent Awards under the Plan; provided, however, that (i) in no event shall
the total number of shares issued pursuant to the exercise of Incentive Stock
Options under the Plan, on a cumulative basis, exceed the maximum number of
shares authorized for issuance under the Plan exclusive of shares made available
for issuance pursuant to this sentence and (ii) shares made available for
issuance pursuant to this sentence shall not be available for Awards to
Reporting Persons. Shares issued under the Plan may consist in whole or in part
of authorized but unissued shares or treasury shares.

(b) If the Board, in its sole discretion, determines that any
stock dividend, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination or other similar
transaction affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Board, subject, in the case of Incentive
Stock Options, to any limitation required under the Code, shall equitably adjust
any or all of (i) the number and kind of shares in respect of which Awards may
be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards, and (iii) the award, exercise or conversion price with
respect to any of the foregoing, and if considered appropriate, the Board may
make provision for a cash payment with respect to an outstanding Award, provided
that the number of shares subject to any Award shall always be a whole number.

(c) The Board may grant Awards under the Plan in substitution
for stock and stock based awards held by employees of another corporation who
concurrently become employees of the Company as a result of a merger or
consolidation of the employing corporation with the Company or a Subsidiary or
the acquisition by the Company or a subsidiary of property or stock of the
employing corporation. The substitute Awards shall be granted on such terms and
conditions as the Board considers appropriate under the circumstances.

3
<PAGE> 4
Section 6. Stock Options

(a) General.

(i) Subject to the provisions of the Plan, the Board may award
Incentive Stock Options and Nonstatutory Stock Options, and determine the number
of shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder.

(ii) The Board shall establish the exercise price at the time
each Option is awarded. In the case of Incentive Stock Options, such price shall
not be less than 100% of the Fair Market Value of the Common Stock on the date
of award.

(iii) Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
Award or thereafter. The Board may impose such conditions with respect to the
exercise of Options, including conditions relating to applicable federal or
state securities laws, as it considers necessary or advisable.

(iv) Options granted under the Plan may provide for the
payment of the exercise price by delivery of cash or check in an amount equal to
the exercise price of such Options or, to the extent permitted by the Board at
or after the award of the Option, by (A) delivery of shares of Common Stock
owned by the optionee for at least six months (or such shorter period as is
approved by the Board), valued at their Fair Market Value, (B) delivery of a
promissory note of the optionee to the Company on terms determined by the Board,
(C) delivery of an irrevocable undertaking by a broker to deliver promptly to
the Company sufficient funds to pay the exercise price or delivery of
irrevocable instructions to a broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price, (D) payment of such other lawful
consideration as the Board may determine, or (E) any combination of the
foregoing.

(v) The Board may provide for the automatic award of an Option
upon the delivery of shares to the Company in payment of the exercise price of
an Option for up to the number of shares so delivered.

(vi) The Board may at any time accelerate the time at which
all or any part of an Option may be exercised.

(vii) For all purposes of the Plan and any Option granted
hereunder, "employment" shall be defined in accordance with the provisions of
Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations).

(b) Incentive Stock Options.

Options granted under the Plan which are intended to be
Incentive Stock Options shall be subject to the following additional terms and
conditions:

4
<PAGE> 5
(i) All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in
the option agreement covering such Incentive Stock Options. The Option
exercise period shall not exceed ten years from the date of grant.

(ii) If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the grant of
such option, the owner of stock possessing more than 10% of the total
combined voting power of all (after taking into account the attribution
of Section 424(b) and of the Code), then the following special
provisions shall be applicable to the Incentive Stock Option granted to
such individual:

(x) The purchase price per share of the
Common Stock subject to such Incentive Stock Option
shall not be less than 110% of the Fair Market value
of one share of Common Stock at the time of grant;
and

(y) The option exercise period shall not
exceed five years from the date of grant.

(iii) For so long as the Code shall so provide,
options granted to any employee under the Plan (and any other incentive
stock option plans of the Company, if any) which are intended to
constitute Incentive Stock Options shall not constitute Incentive Stock
Options to the extent that such options, in the aggregate, become
exercisable for the first time in any one calendar year for shares of
Common Stock with an aggregate Fair Market Value (determined as of the
respective date or dates of grant) of more than $100,000.

(iv) No Incentive Stock Option may be exercised
unless, at the time of such exercise, the Participant is, and has been
continuously since the date of grant of his or her Option, employed by
the Company, except that:

(x) an Incentive Stock Option may be
exercised within the period of three months after the
date the Participant ceases to be an employee of the
Company (or within such lesser period as may be
specified in the applicable option agreement),
provided that the agreement with respect to such
Option may designate a longer exercise period and
that the exercise after such three-month period shall
be treated as the exercise of a Nonstatutory Stock
Option under the Plan;

(y) if the Participant dies while in the
employ of the Company, or within three months after
the Participant ceases to be such an employee, the
Incentive Stock Option may be exercised by the
Participant's Designated Beneficiary within the
period of one year after the date of death (or within
such lesser period as may be specified in the
applicable Option agreement); and

5
<PAGE> 6
(z) if the Participant becomes disabled
(within the meaning of Section 22(e)(3) of the Code
or any successor provision thereto) while in the
employ of the Company, the Incentive Stock Option may
be exercised within the period of one year after the
date of disability (or within such lesser period as
may be specified in the Option agreement).

Notwithstanding the foregoing provisions, no Incentive Stock Option may
be exercised after its expiration date.

(v) Incentive Stock Options shall not be assignable
or transferable by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of
descent and distribution, and, during the life of the optionee, shall
be exercisable only by the optionee.

Section 7. Stock Appreciation Rights

(a) The Board may grant Stock Appreciation Rights entitling
recipients on exercise of the Stock Appreciation Right to receive an amount, in
cash or Stock or a combination thereof (such form to be determined by the
Board), determined in whole or in part by reference to appreciation in the Fair
Market Value of the Stock between the date of the Award and the exercise of the
Award. A Stock Appreciation Right shall entitle the Participant to receive, with
respect to each share of Stock as to which the Stock Appreciation Right is
exercised, the excess of the share's Fair Market Value on the date of exercise
over its Fair Market Value on the date the Stock Appreciation Right was granted.
The Board may also grant Stock Appreciation Rights that provide that, following
a change in control of the Company (as defined by the Board at the time of the
Award), the holder of such Stock Appreciation Right will be entitled to receive,
with respect to each share of Stock subject to the Stock Appreciation Right, an
amount equal to the excess of a specified value (which may include an average of
values) for a share of Stock during a period preceding such change in control
over the Fair Market Value of a share of Stock on the date the Stock
Appreciation Right was granted.

(b) Stock Appreciation Rights may be granted in tandem with,
or independently of, Options granted under the Plan. A Stock Appreciation Right
granted in tandem with an Option which is not an Incentive Stock Option may be
granted either at or after the time the Option is granted. A Stock Appreciation
Right granted in tandem with an Incentive Stock Option may be granted only at
the time the Option is granted.

(i) The Stock Appreciation Right will be exercisable
only at such time or times, and to the extent, that the related Option
is exercisable and will be exercisable in accordance with the procedure
required for exercise of the related Option.

(ii) The Stock Appreciation Right will terminate and
no longer be exercisable upon the termination or exercise of the
related Option, except that a Stock

6
<PAGE> 7
Appreciation Right granted with respect to less than the full number of
shares covered by an Option will not be reduced until the number of
shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.

(iii) The Option will terminate and no longer be
exercisable upon the exercise of the related Stock Appreciation Right.

(iv) The Stock Appreciation Right will be
transferable only with the related Option.

(v) A Stock Appreciation Right granted in tandem with
an Incentive Stock Option may be exercised only when the market price
of the Stock subject to the Option exceeds the exercise price of such
option.

(d) A Stock Appreciation Right not granted in tandem with an
Option will become exercisable at such time or times, and on such conditions, as
the Board may specify.

(e) The Board may at any time accelerate the time at which all
or any part of the Stock Appreciation Right may be exercised.

Section 8. Performance Shares

(a) The Board may make Performance Share Awards entitling
recipients to acquire shares of Stock upon the attainment of specified
performance goals. The Board may make Performance Share Awards independent of or
in connection with the granting of any other Award under the Plan. The Board in
its sole discretion shall determine the performance goals applicable under each
such Award, the periods during which performance is to be measured, and all
other limitations and conditions applicable to the awarded Performance Shares;
provided, however, that the Board may rely on the performance goals and other
standards applicable to other performance plans of the Company in setting the
standards for Performance Share Awards under the Plan.

(b) Performance Share Awards and all rights with respect to
such Awards may not be sold, assigned, transferred, pledged or otherwise
encumbered.

(c) A Participant receiving a Performance Share Award shall
have the rights of a stockholder only as to shares actually received by the
Participant under the Plan and not with respect to shares subject to an Award
but not actually received by the Participant. A Participant shall be entitled to
receive a stock certificate evidencing the acquisition of shares of Stock under
a Performance Share Award only upon satisfaction of all conditions specified in
the agreement evidencing the Performance Share Award.

(d) The Board may at any time accelerate or waive any or all
of the goals, restrictions or conditions imposed under any Performance Share
Award.

<PAGE> 8
Section 9. Restricted and Unrestricted Stock

(a) The Board may grant Restricted Stock Awards entitling
recipients to acquire shares of Stock, subject to the right of the Company to
repurchase all or part of such shares at their purchase price (or to require
forfeiture of such shares if purchased at no cost) from the recipient in the
event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable Restricted Period or Restricted
Periods established by the Board for such Award. Conditions for repurchase (or
forfeiture) may be based on continuing employment or service or achievement of
pre-established performance or other goals and objectives.

(b) Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as permitted by the Board,
during the applicable Restricted Period. Shares of Restricted Stock shall be
evidenced in such manner as the Board may determine. Any certificates issued in
respect of shares of Restricted Stock shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the Restricted Period, the Company (or such
designee) shall deliver such certificates to the Participant or if the
Participant has died, to the Participant's Designated Beneficiary.

(c) The Board may, in its sole discretion, grant (or sell at a
purchase price determined by the Board, which shall not be lower than 85% of
Fair Market Value on the date of sale) to Participants shares of Stock free of
any restrictions under the Plan ("Unrestricted Stock").

(d) The purchase price for each share of Restricted Stock and
Unrestricted Stock shall be determined by the Board of Directors and may not be
less than the par value of the Common Stock. Such purchase price may be paid in
the form of past services or such other lawful consideration as is determined by
the Board.

(e) The Board may at any time accelerate the expiration of the
Restricted Period applicable to all, or any particular, outstanding shares of
Restricted Stock.

Section 10. General Provisions Applicable to Awards

(a) Applicability of Rule 16b-3. Those provisions of the Plan
which make an express reference to Rule 16b-3 shall apply to the Company only at
such time as the Company's Common Stock is registered under the Securities
Exchange Act of 1934, or any successor provision, and then only to Reporting
Persons.

(b) Reporting Person Limitations. Notwithstanding any other
provision of the Plan, to the extent required to qualify for the exemption
provided by Rule 16b-3, (i) any Option, SAR, Performance Share Award or other
similar right related to an equity security issued under the Plan to a Reporting
Person shall not be transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I or the Employee Retirement Income Security Act ("ERISA"), or
the rules thereunder, and

8
<PAGE> 9
shall be exercisable during the Participant's lifetime only by the Participant
or the Participant's guardian or legal representative, and (ii) the selection of
a Reporting Person as a Participant and the terms of his or her Award shall be
determined only in accordance with the applicable provisions of Rule 16b-3.

(c) Documentation. Each Award under the Plan shall be
evidenced by an instrument delivered to the Participant specifying the terms and
conditions thereof and containing such other terms and conditions not
inconsistent with the provisions of the Plan as the Board considers necessary or
advisable. Such instruments may be in the form of agreements to be executed by
both the Company and the Participant, or certificates, letters or similar
documents, acceptance of which will evidence agreement to the terms thereof and
of this Plan.

(d) Board Discretion. Each type of Award may be made alone, in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Board need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Board at the time of
award or at any time thereafter.

(e) Termination of Status. Subject to the provisions of
Section 6(b)(iv), the Committee shall determine the effect on an Award of the
disability, death, retirement, authorized leave of absence or other termination
of employment or other status of a Participant and the extent to which, and the
period during which, the Participant's legal representative, guardian or
Designated Beneficiary may exercise rights under such Award.

(f) Adjustments. If at any time the shares of Common Stock
subject the Plan is changed into or exchanged for a different number or kind of
shares or securities, as the result of any one or more reorganizations,
recapitalizations, stock splits, reverse stock splits, stock dividends or
similar events, other than those events described by Section 10(g), an
appropriate adjustment shall be made in the number, exercise or sale price
and/or type of shares or securities for which Options, Performance Shares or
Stock Appreciation Rights may thereafter be granted and Restricted Stock or
Unrestricted Stock may thereafter be sold or granted under the Plan. The
Committee also shall designate the appropriate changes that shall be made in
Options, Performance Shares or Stock Appreciation Rights, or rights to purchase
Restricted Stock or Unrestricted Stock under the Plan, and the Committee may do
so either at the time of the Option, Performance Share or Stock Appreciation
Right is granted or Restricted Stock or Unrestricted Stock is offered or at that
time of the event causing the adjustment. Any such adjustment in outstanding
Options shall be made without changing the aggregate exercise price applicable
to the unexercised portions of such Options. Any such adjustments in outstanding
rights to purchase Restricted Stock or Unrestricted Stock shall be made without
changing the aggregate purchase price of such Restricted Stock or Unrestricted
Stock.

(g) Mergers, Etc. In the event of a consolidation, merger or
other reorganization in which all of the outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity (an "Acquisition"), or in the event of a liquidation of the
Company, the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its

9
<PAGE> 10
discretion, take any one or more of the following actions as to outstanding
Awards: (i) provide that such Awards shall be assumed, or substantially
equivalent Awards shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof) on such terms as the Board determines to
be appropriate, (ii) upon written notice to Participants, provide that all
unexercised Options or SARs will terminate immediately prior to the consummation
of such transaction unless exercised by the Participant within a specified
period following the date of such notice, (iii) in the event of an Acquisition
under the terms of which holders of the Common Stock of the Company will receive
upon consummation thereof a cash payment for each share surrendered in the
Acquisition (the "Acquisition Price"), make or provide for a cash payment to
Participants equal to the difference between (A) the Acquisition Price times the
number of shares of Common Stock subject to outstanding Options or SARs (to the
extent then exercisable at prices not in excess of the Acquisition Price) and
(B) the aggregate exercise price of all such outstanding Options or SARs in
exchange for the termination of such Options and SARs, and (iv) provide that all
or any outstanding Awards shall become exercisable or realizable in full prior
to the effective date of such Acquisition.

(h) Withholding. The Participant shall pay to the Company, or
make provision satisfactory to the Board for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date of
the event creating the tax liability. In the Board's discretion, and subject to
such conditions as the Board may establish, such tax obligations may be paid in
whole or in part in shares of Common Stock, including shares retained from the
Award creating the tax obligation, valued at their Fair Market Value. The
Company may, to the extent permitted by law, deduct any such tax obligations
from any payment of any kind otherwise due to the Participant.

(i) Foreign Nationals. Awards may be made to Participants who
are foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Board considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.

(j) Amendment of Award. The Board may amend, modify or
terminate any outstanding Award, including substituting therefor another Award
of the same or a different type, changing the date of exercise or realization
and converting an Incentive Stock Option to a Nonstatutory Stock Option,
provided that the Participant's consent to such action shall be required unless
the Board determines that the action, taking into account any related action,
would not materially and adversely affect the Participant.

(k) Cancellation and New Grant of Options. The Board of
Directors shall have the authority to effect, at any time and from time to time,
with the consent of the affected optionees, (i) the cancellation of any or all
outstanding Options under the Plan and the grant in substitution therefor of new
Options under the Plan covering the same or different numbers of shares of
Common Stock and having an option exercise price per share which may be lower or
higher than the exercise price per share of the canceled Options or (ii) the
amendment of the terms of any and all outstanding Options under the Plan to
provide an option exercise price per share which is higher or lower than the
then current exercise price per share of such outstanding Options.

10
<PAGE> 11
(l) Conditions on Delivery of Stock. The Company will not be
obligated to deliver any shares of Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan (i) until all
conditions of the Award have been satisfied or removed, (ii) until, in the
opinion of the Company's counsel, all applicable federal and state laws and
regulations have been complied with, (iii) if the outstanding Stock is at the
time listed on any stock exchange, until the shares to be delivered have been
listed or authorized to be listed on such exchange upon official notice of
notice of issuance, and (iv) until all other legal matters in connection with
the issuance and delivery of such shares have been approved by the Company's
counsel. If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to exercise of the
Award, such representations or agreements as the Company may consider
appropriate to avoid violation of such Act and may require that the certificates
evidencing such Stock bear an appropriate legend restricting transfer.

Section 11. Terms, Conditions and Form of Outside Directors Options

(a) The Board may provide for options to be granted to Outside
Directors in consideration for their service to the Company. The Board shall
determine to which Outside Directors options shall be granted hereunder (any
such person, a "Participant"). The Board shall specify the number of shares
subject to each option grant provided for under this Section 11, or the formula
pursuant to which such number shall be determined, the Participants to receive
any such grant, the date of grant and the vesting and expiration terms
applicable to such options. The grant of options hereunder may, but need not, be
conditioned on the Outside Director electing to forego his right to all or any
part of his or her cash retainer or other fees. The maximum number of shares of
Common Stock subject to options granted under this Plan during any calendar year
to any person on account of his or her service as an Outside Director, other
than options that an Outside Director has elected to receive in lieu of cash
retainer or other fees, shall not exceed 20,000 shares. Each option granted
under this Section to Outside Directors shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the terms and
conditions set forth in this Section 11.

(b) Option Exercise Price. The option exercise price per share
for each option granted under this Section 11 shall equal (i) the closing price
per share of the Company's Common Stock on the principal exchange on which the
Common Stock is listed, on the date of grant (or if no such price is reported on
such date, such price as reported on the nearest preceding date on which such
price is reported), (ii) if the Common Stock is not listed on an exchange, the
bid price per share of Common Stock at the close of trading on the date of the
grant, or (iii) if the Common Stock is not listed on an exchange or otherwise
publicly traded on the date of such grant, the fair market value of the
Company's Common Stock as last determined by the Board of Directors of the
Company.

(c) Options Non-Transferable. Each option granted under the
Plan by its terms shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution, or pursuant to a qualified
domestic relations order (as defined in Section 414(p) of the Code) and shall be
exercised during the lifetime of the optionee only by such optionee.

11
<PAGE> 12
(e) Exercise Period. Each option may be exercised at any time
and from time to time, in whole or in part, prior to the fifth anniversary of
the date of grant, except that no option may be exercised more than three months
after the optionee ceases to serve as a director of the Company for any reason.

(f) Exercise Procedure. Options may be exercised only by
written notice to the Company at its principal office accompanied by payment of
the full consideration for the shares as to which they are exercised.

(g) Payment of Purchase Price. Payment of the exercise price
may be made, at the election of the optionee, (i) by delivery of cash or a check
to the order of the Company in an amount equal to the exercise price, (ii) by
delivery to the Company of shares of Common Stock of the Company already owned
and held by the optionee for at least twelve months and having a fair market
value equal in amount to the exercise price of the options being exercised, or
(iii) by any combination of such methods of payment. The fair market value of
any shares of Common Stock which may be delivered upon exercise of an option
shall be determined by the Company as of the date that such shares are
delivered.

Section 12. Miscellaneous

(a) No Right to Employment or Other Status. No person shall
have any claim or right to be granted an Award, and the grant of an Award shall
not be construed as giving a Participant the right to continued employment with
or service for the Company. The Company expressly reserves the right at any time
to dismiss a Participant free from any liability or claim under the Plan, except
as expressly provided in the applicable Award.

(b) No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
under the Plan until he or she becomes the record holder thereof.

(c) Exclusion from Benefit Computations. No amounts payable
upon exercise of Awards granted under the Plan shall be considered salary, wages
or compensation to Participants for purposes of determining the amount or nature
of benefits that Participants are entitled to under any insurance, retirement or
other benefit plans or programs of the Company.

(d) Effective Date and Term.

(i) Effective Date. The Plan shall become effective
when adopted by the Board of Directors, but no Incentive Stock Option granted
under the Plan shall become exercisable unless and until the Plan shall have
been approved by the Company's stockholders. If such stockholder approval is not
obtained within twelve months after the date of the Board's adoption of the
Plan, no Options previously granted under the Plan shall be deemed to be
Incentive Stock Options and no Incentive Stock Options shall be granted
thereafter. Amendments to the Plan not requiring stockholder approval pursuant
to Section 11(e) below shall become effective when adopted by the Board of
Directors; amendments requiring stockholder approval

12
<PAGE> 13
shall become effective when adopted by the Board of Directors, but no Incentive
Stock Option granted after the date of such amendment shall become exercisable
(to the extent that such amendment to the Plan was required to enable the
Company to grant such Incentive Stock Option to a particular optionee) unless
and until such amendment shall have been approved by the Company's stockholders.
If such stockholder approval is not obtained within twelve months of the Board's
adoption of such amendment, any Incentive Stock Options granted on or after the
date of such amendment shall terminate to the extent that such amendment to the
Plan was required to enable the Company to grant such Option to a particular
optionee. Subject to the limitations set forth in this Section 11(d), Awards may
be made under the Plan at any time after the effective date and before the date
fixed for termination of the Plan.

(ii) Termination. The Plan shall terminate upon the
earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board of Directors or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued pursuant to Awards under the Plan. Awards outstanding on such date shall
continue to have force and effect in accordance with the provisions of the
instruments evidencing such Awards.

(e) Amendment of Plan. The Board may amend, suspend or
terminate the Plan or any portion thereof at any time, provided that no
amendment shall be made without stockholder approval if such approval is
necessary to comply with any applicable tax or regulatory requirement, including
any requirements for compliance with Rule 16b-3. Prior to any such approval,
Awards may be made under the Plan expressly subject to such approval.

(f) Governing Law. The provisions of the Plan shall be
governed by and interpreted in accordance with the laws of the Commonwealth of
Virginia.

Adopted by the Board of Directors on
July 15, 1996

Approved by the Stockholders, effective
July 15, 1996

<PAGE> 1
STOCKHOLDERS AGREEMENT

THIS STOCKHOLDERS AGREEMENT (this "Agreement") is entered into
as of the 2nd day of May, 1997, among the stockholders listed on Exhibit A
hereto (each such stockholder individually a "Stockholder" and collectively the
"Stockholders").

WITNESSETH:

WHEREAS, each Stockholder owns the number of shares of the
common stock of Advanced Communication Systems, Inc. (the "Company") (the common
stock of the Company referred to herein as the "Stock" or "Shares"), in such
number as is listed on Exhibit A;

WHEREAS, the Stockholders desire to promote their mutual
interests and the interests of the Company by imposing certain restrictions and
obligations on themselves with respect to the Stock; and

WHEREAS, the Stockholders hereto believe that it is in their
mutual best interests to provide for continuity and harmony in the management
and policies of the Company;

NOW THEREFORE, in consideration of the mutual agreements and
covenants contained herein, the Stockholders hereby agree as follows:

1. Voting of Shares.

(a) Board of Directors.

(i) In any and all elections of directors of
the Company (whether at a meeting or by written action in lieu of a meeting),
each Stockholder shall vote or cause to be voted all Shares owned by him, her or
it, or over which he, she or it has voting control, and otherwise use his, her
or its best efforts to cause the Board of Directors to fix the number of
directors of the Company at five and to elect (y) George A. Robinson
("Robinson"), Charles G. Martinache ("Martinache") and Thomas A. Costello
(together with Robinson and Martinache, the "Principals") as members of the
Board of Directors and (z) two Outside Directors as required for listing the
Stock on the Nasdaq National Market, which Outside Directors shall be designated
by a majority of the Principals. "Outside Directors" shall mean persons other
than officers or employees of the Company or its subsidiaries or any other
individuals having a relationship which, in the opinion of the Company's Board
of Directors, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director.

Notwithstanding the foregoing, until such time as the
Principals give notice of their desire to appoint additional directors, the
number of directors shall be three (the number of directors authorized as of the
date hereof by the Company's bylaws).

(ii) No Stockholder shall vote to remove any
of the Principals, except for bad faith or willful misconduct. The seat of any
director who resigns, is removed or dies while serving in such capacity, shall
be filled by a designee of the remaining Stockholders.

<PAGE> 2
(b) Other Matters.

(i) In any and all other matters of the
Company which are submitted to a vote by the Company's stockholders (whether at
a meeting or by written action in lieu of a meeting), each Stockholder shall
vote or cause to be voted all Shares owned by him, her or it, or over which he,
she or it has voting control, and otherwise use his, her or its best efforts to
approve that action upon which a majority of the Stockholders shall have agreed
in accordance with clause (ii) below.

(ii) Prior to the date of any meeting at
which a stockholder vote is permitted or required, the Stockholders shall
separately vote upon each and every action which will be submitted to the vote
of the Company's stockholders. The number of votes to which each Stockholder is
entitled shall be equal to the number of votes to which he, she or it is
entitled under the Company's Certificate of Incorporation or Bylaws, as amended
from time to time.

2. Applicability to Stock Splits, Stock Dividends, etc. If
from time to time there is a stock split-up, stock dividend, stock distribution
or other reclassification of the Stock, any and all new, substituted or
additional securities to which each Stockholder is entitled by reason of his,
her or its ownership of Shares shall be immediately subject to the provisions of
this Agreement in the same manner and to the same extent as the Shares.

3. Representations and Warranties. Each Stockholder represents
and warrants that (a) such Stockholder is the record owner of the number of
Shares set forth opposite his, her or its name on Exhibit A hereto, (b) this
Agreement has been duly authorized, executed and delivered by such Stockholder
and constitutes the valid and binding obligation of such Stockholder,
enforceable in accordance with its terms, and (c) such Stockholder has not
granted and is not a party to any proxy, voting trust or other arrangement which
is inconsistent with, conflicts with or violates any provision of this
Agreement. In addition, no Stockholder shall grant any proxy or become party to
any voting trust or other arrangement which is inconsistent with, conflicts with
or violates any provision of this Agreement.

4. Termination

(a) Termination. This Agreement may be terminated at
any time by the mutual consent of the parties hereto, and shall be terminated
upon the earliest date upon which (i) only one of the three Principals shall
own, either individually or beneficially, any Stock or (ii) the Stockholders as
a group own less than forty percent (40%) of the outstanding Stock of the
Company.

(b) Effect of Termination and Abandonment. In the
event of termination of this Agreement pursuant to Section 4(a), no party hereto
(or any of its directors or officers) shall have any liability or further
obligation to another party to this Agreement, except that nothing herein will
relieve any party from liability for any breach of this Agreement.

5. Legend. The Stockholders shall encourage the Company to
place on the face of each certificate representing Shares owned by them the
following legend:

"The Shares represented by this certificate are subject to a
Stockholders Agreement dated as of April __, 1997, among
certain of the Company's stockholders, as amended and modified
from time to time. A copy of

2
<PAGE> 3

such Stockholders Agreement shall be furnished without charge
by the Company to the holder hereof upon written request."

Such legend shall be removed upon a sale or transfer of Shares to a person not a
party to this Agreement.

6. Miscellaneous.

(a) Notices. Any notice or other communication
required or permitted in connection with this Agreement shall be deemed to be
delivered if in writing (or in the form of a telecopy) to the parties at the
addresses listed on Exhibit A (i) when actually delivered, or telecopied to said
address, (ii) when, in the case of a letter, five (5) business days shall have
elapsed after the same shall have been deposited in the United States mails,
postage prepaid, registered or certified, return receipt requested, and, (iii)
in the case of a notice sent via an established commercial overnight delivery
service, at the close of business on the next business day following the date on
which the same shall have been delivered to such service.

(b) Amendments. This Agreement may not be amended
except by an instrument in writing signed by all the Stockholders.

(c) Entire Agreement. This instrument embodies the
entire agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersedes and preempts any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.

(d) Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect the validity, legality or enforceability of any other provision of
this Agreement in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, and this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.

(e) Assignment. Except as provided herein, this
Agreement shall not be assigned by any party without the written consent of the
other parties. Any attempted assignment without such written consent shall be
null and void and without legal effect.

(f) Binding. This Agreement shall be binding upon and
inure to the benefit of the respective parties hereto and their successors,
permitted assigns, heirs, executors, administrators and personal
representatives.

(g) Counterparts. This Agreement may be executed in
two or more partially or fully executed counterparts each of which shall be
deemed an original and shall bind the signatory, but all of which together shall
constitute but one and the same instrument.

(h) Headings. The headings in the Sections of this
Agreement are inserted for convenience only and shall not constitute a part
hereof.

(i) Law Governing. ALL ISSUES AND QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, INTERPRETATION AND ENFORCEABILITY OF THIS
AGREEMENT AND THE EXHIBITS HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE

3
<PAGE> 4
STATE OF DELAWARE, WITHOUT REGARD TO THE CHOICE OF LAW OR CONFLICT OF LAW
PROVISIONS THEREOF.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed all as of the day and year first above written.

The Stockholders:
/s/ GEORGE A. ROBINSON
----------------------------------------
George A. Robinson

/s/ BARBARA ROBINSON
----------------------------------------
Barbara Robinson

/s/ GEORGE A. ROBINSON
/s/ THOMAS A. COSTELLO ----------------------------------------
- ------------------------------------ George A. Robinson as Trustee for
Thomas A. Costello Robinson 1997 Trust No. 1

/s/ GEORGE A. ROBINSON
/s/ MARGARET M. COSTELLO ----------------------------------------
- --------------------------------- George A. Robinson as Trustee for
Margaret M. Costello Robinson 1997 Trust No. 2

/s/ THOMAS A. COSTELLO /s/ CHARLES G. MARTINACHE
- ------------------------------------ ----------------------------------------
Thomas A. Costello as Trustee for Charles G. Martinache
Costello 1997 Trust No. 1

/s/ MARGARET M. COSTELLO /s/ HELEN MARTINACHE
- ------------------------------------ ----------------------------------------
Margaret M. Costello as Trustee for Helen Martinache
Costello 1997 Trust No. 1

/s/ MARGARET M. COSTELLO /s/ CHARLES G. MARTINACHE
- ------------------------------------ ----------------------------------------
Margaret M. Costello as Trustee for Charles G. Martinache as Trustee for
Costello 1997 Trust No. 2 Martinache 1997 Trust No. 2

4
<PAGE> 5
EXHIBIT A
STOCKHOLDERS

<TABLE>
<CAPTION>
Name No. Shares
- ---- ----------
<S> <C>
George A. and Barbara Robinson 200,000
c/o Advanced Communication Systems, Inc.
10089 Lee Highway
Second Floor
Fairfax, Virginia 22030
Facsimile: (703) 934-8807

Robinson 1997 Trust No. 1 473,750
c/o Advanced Communication Systems, Inc.
10089 Lee Highway
Second Floor
Fairfax, Virginia 22030
Facsimile: (703) 934-8807

Robinson 1997 Trust No. 2 473,750
c/o Advanced Communication Systems, Inc.
10089 Lee Highway
Second Floor
Fairfax, Virginia 22030
Facsimile: (703) 934-8807

Charles G. and Helen Martinache 715,500
c/o Advanced Communication Systems, Inc.
10089 Lee Highway
Second Floor
Fairfax, Virginia 22030
Facsimile: (703) 934-8807

Martinache 1997 Trust No. 1 216,000
c/o Advanced Communication Systems, Inc.
10089 Lee Highway
Second Floor
Fairfax, Virginia 22030
Facsimile: (703) 934-8807

Martinache 1997 Trust No. 2 216,000
c/o Advanced Communication Systems, Inc.
10089 Lee Highway
Second Floor
Fairfax, Virginia 22030
Facsimile: (703) 934-8807
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Name No. Shares
- ---- ----------
<S> <C>
Thomas A. and Margaret M. Costello 547,500
c/o Advanced Communication Systems, Inc.
10089 Lee Highway
Second Floor
Fairfax, Virginia 22030
Facsimile: (703) 934-8807

Costello 1997 Trust No. 1 300,000
c/o Advanced Communication Systems, Inc.
10089 Lee Highway
Second Floor
Fairfax, Virginia 22030
Facsimile: (703) 934-8807

Costello 1997 Trust No. 2 300,000
c/o Advanced Communication Systems, Inc.
10089 Lee Highway
Second Floor
Fairfax, Virginia 22030
Facsimile: (703) 934-8807
</TABLE>

<PAGE> 1

EXHIBIT 11.1 - COMPUTATION OF PER SHARE EARNINGS

Advanced Communication Systems, Inc.
Pro forma Net Income Per share

(in thousands, except share and per share data)

<TABLE>
<CAPTION>
Year Ended Six Months Ended
September 30, March 31,
1996 1997
--------------- -------------
<S> <C> <C>
Weighted average common stock outstanding 3,732,750 3,764,250

Common stock equivalent 75,330 25,110

Stock options* issued during twelve months
immediately preceding the offering date (using the
treasury stock method and the estimated mid-point
of the proposed initial public offering price per share) 122,750 122,750

Stock issued to satisfy S corporation distribution in
excess of fiscal 1996 earnings based on the
estimated initial public offering price per share 359,500 359,500
--------------- -------------

Pro forma weighted average shares 4,290,330 4,271,610
=============== =============

Pro forma net income $ 1,162 $ 774
=============== =============

Pro forma net income per share $ 0.27 $ 0.18
=============== =============
</TABLE>

* includes options to purchase 115,000 shares of common stock issued on
January 2, 1997.

<PAGE> 1
EXHIBIT 23.2

Report of Independent Public Accountants

As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement.

/s/ Arthur Anderson LLP
Washington, DC
May 2, 1997