DUNN COMPUTER CORP /VA/, S-4, 1998-03-18

DUNN COMPUTER CORP /VA/
S-4, 1998-03-18

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 18, 1998

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

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

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------

DUNN COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
VIRGINIA 506 99-9999999
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

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

1306 SQUIRE COURT
STERLING, VIRGINIA 20166
(703) 450-0400
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------

JOHN D. VAZZANA
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
DUNN COMPUTER CORPORATION
1306 SQUIRE COURT
STERLING, VIRGINIA 20166
(703) 450-0400
(Name, address, including zip code, and telephone number, including area code of
agent for service)
------------------------------
COPY TO:

KENNETH J. AYRES, ESQ.

JONES, DAY, REAVIS & POGUE

METROPOLITAN SQUARE

1450 G STREET, N.W.

WASHINGTON, D.C. 20005-2088

(212) 879-3791

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective and the
effective time of the merger of a wholly-owned subsidiary of the Registrant with
and into Dunn Computer Corporation, a Delaware corporation, as described in the
Agreement of Merger dated as of March 18, 1998.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, check the following box and
list the Securities Act 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(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________________________

CALCULATION OF REGISTRATION FEE

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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.001................... 5,150,000 $9.1875 $47,315,625 $13,958
</TABLE>

(1) Estimated in accordance with Rule 457 (f) under the Securities Act solely
for purposes of calculating the registration fee and based upon the average
of the high and low price of Dunn Computer Corporation, a Delaware
Corporation, as reported on the Nasdaq National Market on March 16, 1998.

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

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

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<PAGE>
DUNN COMPUTER CORPORATION
1306 SQUIRE COURT
STERLING, VIRGINIA 20166
, 1998

Dear Stockholder:

You are cordially invited to attend the annual meeting of the stockholders
of Dunn Computer Corporation, a Delaware corporation ("Dunn") to be held at
10:00 a.m. on April 30, 1998, at its offices at 1306 Squire Court, Sterling,
Virginia. A Notice of Annual Meeting of Stockholders, Proxy Statement/
Prospectus and proxy card are enclosed for your review. All holders of shares of
Dunn common stock as of the close of business on April 6, 1998 are entitled to
notice of, and to vote at, the meeting.

The meeting will include a discussion and vote on the matters set forth in
the accompanying Notice of Annual Meeting of Stockholders and the Proxy
Statement/Prospectus.

At the meeting, holders of shares of Dunn common stock will be asked to
approve and adopt an Agreement of Merger (the "Merger Agreement") dated as of
March 18, 1998 among Dunn, Dunn Computer Corporation, a Virginia corporation
(the "Company"), and a wholly-owned subsidiary of the Company. Under the Merger
Agreement, the Company will acquire all of the shares of Dunn in a merger (the
"Merger"), and Dunn shareholders will receive one share of the Company's common
stock in exchange for each of their shares of Dunn common stock. The Company is
a new corporate entity organized by Dunn to be the vehicle for the acquisition
of all of the shares of common stock of International Data Products, Corp. ("IDP
Co.") and substantially all of the net assets of its affiliate, Puerto Rico
Industrial Manufacturing Operations, Corp. ("PRIMO") pursuant to an Acquisition
Agreement (the "Acquisition Agreement") entered into on March 9, 1998 by Dunn,
the Company and the stockholders of IDP Co. and PRIMO (the "IDP Acquisition").
The Merger is contingent upon, and will take place concurrently with, the IDP
Acquisition as well as a public offering of 2,500,000 shares of the Company's
common stock, the proceeds of which will be used to finance a portion of the
purchase price of the IDP Acquisition.

At the meeting Dunn stockholders will also elect the persons to serve as
directors of Dunn for the upcoming year. In addition, at the meeting Dunn
stockholders will be asked to approve an amendment of Dunn's 1997 Stock Option
Plan to increase from 600,000 to 2,200,000 the number of shares of Dunn common
stock subject to issuance thereunder and to approve the adoption by the Company
of a stock option plan that will, in the Merger, be the successor to Dunn's 1997
Stock Option Plan.

You are encouraged to read this Proxy Statement/Prospectus carefully. It
contains a description and copy of the Merger Agreement and the Acquisition
Agreement and other important information regarding the Merger and the IDP
Acquisition. It also contains information about the persons nominated to serve
as directors, as well as a description and copy of the 1997 Stock Option Plan.

Whether or not you plan to attend the annual meeting, please complete, sign
and date the pre-paid envelope promptly. You may attend the meeting and vote in
person even if you have previously returned your proxy. PLEASE DO NOT SEND IN
YOUR STOCK CERTIFICATES UNTIL YOU HAVE RECEIVED SEPARATE INSTRUCTIONS AND A
LETTER OF TRANSMITTAL. IF THE MERGER AGREEMENT IS APPROVED, THESE WILL BE SENT
TO YOU PROMPTLY AFTER THE MERGER IS COMPLETED.

Sincerely,

Thomas P. Dunne

Chairman, Chief Executive Officer and
President
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 30, 1998

NOTICE IS HEREBY GIVEN that the annual meeting of the stockholders of Dunn
Computer Corporation, a Delaware corporation ("Dunn"), will be held at 10:00
a.m. on April 30, 1998 at its offices at 1306 Squire Court, Sterling, Virginia.

The annual meeting is called for the purpose of considering and voting upon:

1. A proposal for the holders of Dunn common stock to approve an Agreement
of Merger dated as of March 18, 1998, among Dunn, Dunn Computer
Corporation, a Virginia corporation (the "Company"), and a wholly-owned
subsidiary of the Company, under which all of the shares of Dunn will be
acquired by the Company in a merger (the "Merger"). Upon the consummation
of the Merger, each share of Dunn common stock (other than shares held in
Dunn's treasury) will be converted into the right to receive one share of
the Company's common stock. (The Merger is being effected in connection
with the Company's acquisition of all of the shares of common stock of
International Data Products, Corp. and substantially all of the net
assets of its affiliate, Puerto Rico Industrial Manufacturing Operations,
Corp. (the "IDP Acquisition"). The Merger is contingent upon, and will
take place concurrently with, the IDP Acquisition as well as a public
offering of 2,500,000 shares of the Company's common stock, the proceeds
of which will be used to finance a portion of the purchase price of the
IDP Acquisition.)

2. The election of directors.

3. A proposal for the holders of Dunn common stock to approve an amendment
of Dunn's 1997 Stock Option Plan to increase from 600,000 to 2,200,000
the number of shares of Dunn common stock subject to issuance thereunder
and to approve the adoption by the Company of a stock option plan that
will, in the Merger, be the successor to Dunn's 1997 Stock Option Plan.

4. Any other matters that may properly come before the meeting or any
adjournments or postponements thereof.

The Board of Directors has fixed the close of business on April 6, 1998, as
the record date for the determination of the stockholders entitled to notice of
and to vote at the annual meeting and any adjournments or postponements thereof.
Only holders of record of Dunn common stock on the record date are entitled to
vote at the meeting. A list of such stockholders will be available at the time
and place of the meeting and, during the ten days prior to the meeting, at the
office of the Secretary of Dunn at the above address.

If you would like to attend the meeting and your shares are held by a
broker, bank or other nominee, you must bring to the meeting a recent brokerage
statement or a letter from the nominee confirming your beneficial ownership of
the shares. You must also bring a form of personal identification. In order to
vote your shares at the meeting, you must obtain from the nominee a proxy in
your name.

You can ensure that your shares are voted at the meeting by signing and
dating the enclosed proxy and returning it in the envelope provided. Sending in
a signed proxy will not affect your right to attend the meeting and to vote in
person. You may revoke your proxy at any time before it is voted by notifying
Continental Stock Transfer & Trust Company in writing before the meeting, or by
executing a subsequent proxy, which revokes your previously executed proxy.

WHETHER OR NOT YOU EXPECT TO ATTEND, WE URGE YOU TO SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.

By Order of the Board of Directors

Thomas P. Dunne

Chairman, Chief Executive Officer and
President

Sterling, Virginia
, 1998
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 18, 1998

DUNN COMPUTER CORPORATION
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 30, 1998

[DUNN LOGO]

PROSPECTUS
5,150,000 SHARES OF COMMON STOCK

This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished to the holders of common stock of Dunn Computer Corporation, a
Delaware corporation ("Dunn"), by the Board of Directors of Dunn to solicit
proxies for the annual meeting of stockholders to be held at Dunn's offices at
1306 Squire Court, Sterling, Virginia, 20166, on April 30, 1998, at 10:00 a.m.,
and at any and all adjournments or postponements thereof. At the meeting, the
holders of Dunn common stock will be asked to approve an Agreement of Merger
(the "Merger Agreement") dated as of March 18, 1998, among Dunn, Dunn Computer
Corporation, a Virginia Corporation (the "Company"), and a wholly-owned
subsidiary of the Company ("Merger Sub"), under which all of the shares of Dunn
will be acquired by the Company in a merger (the "Merger"). The Company is a new
corporate entity organized for the purposes of the acquisition of all of the
shares of International Data Products, Corp. ("IDP Co.") and substantially all
of the net assets of its affiliate, Puerto Rico Industrial Manufacturing
Operations, Corp. ("PRIMO") (collectively, the "IDP Acquisition"). Upon
consummation of the Merger and the IDP Acquisition, the Company will become a
holding company owning, either directly or through subsidiaries, 100% of the
shares of Dunn and IDP and substantially all of the net assets of PRIMO.

In the Merger, each outstanding share of Dunn common stock will be converted
into the right to receive one share of the Company's common stock. The Company
has filed a registration statement under the Securities Act of 1933 (the
"Securities Act") on Form S-4 for up to 5,150,000 shares of common stock of the
Company issuable pursuant to the terms of the Merger Agreement. This Proxy
Statement/Prospectus also constitutes the Prospectus of the Company filed as
part of that registration statement. The Company's common stock will trade on
the Nasdaq National Market under the symbol "DNCC," under which Dunn's common
stock is traded prior to the Merger. On March 16, 1998 the closing price of
Dunn's common stock was $9 1/4.

Consummation of the Merger is subject to various conditions, including
completion of the IDP Acquisition and a public offering of 2,500,000 shares of
the Company's common stock (the "Offering"), the proceeds of which will be used
to finance a portion of the purchase price of the IDP Acquisition. See "The
Merger and the IDP Acquisition." The IDP Acquisition, the Offering and the
Merger are each contingent upon the consummation of the others.

At the meeting Dunn stockholders will also elect the persons to serve as
directors of Dunn for the upcoming year. In addition, Dunn stockholders will be
asked to approve an amendment of Dunn's 1997 Stock Option Plan to increase from
600,000 to 2,200,000 the number of shares of Dunn common stock subject to
issuance thereunder and to approve the adoption by the Company of a stock option
plan that will, in the Merger, be the successor to Dunn's 1997 Stock Option
Plan.

This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to Dunn stockholders on , 1998. A stockholder who has
given a proxy in respect to this proxy solicitation may revoke it at any time
prior to its exercise. See "Matters Related to the Annual Meeting--Voting of
Proxies and Revocability."

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY DUNN STOCKHOLDERS.
---------------------
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 PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------

The date of this Proxy Statement/Prospectus is , 1998.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
NOT CONTAINED HEREIN OR INCORPORATED HEREIN BY REFERENCE MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE
SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER, OR PROXY SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR THE
DISTRIBUTION OF ANY SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH
HEREIN OR INCORPORATED HEREIN BY REFERENCE SINCE THE DATE HEREOF.

TABLE OF CONTENTS

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<CAPTION>
PAGE
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<S> <C>
MATTERS RELATED TO THE ANNUAL MEETING..................................................................... 4

SUMMARY................................................................................................... 6

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS................................................. 10

RISK FACTORS.............................................................................................. 10

DUNN SELECTED CONSOLIDATED FINANCIAL DATA................................................................. 15

IDP SELECTED COMBINED FINANCIAL DATA...................................................................... 16

SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA....................................................... 17

SUMMARY UNAUDITED COMPARATIVE PER SHARE DATA.............................................................. 21

PRICE RANGE OF DUNN'S COMMON STOCK........................................................................ 22

DIVIDEND POLICY........................................................................................... 22

THE MERGER AND THE IDP ACQUISITION........................................................................ 23

DESCRIPTION OF THE COMPANY'S COMMON STOCK................................................................. 31

COMPARATIVE RIGHTS OF STOCKHOLDERS........................................................................ 34

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................................................... 39

BUSINESS.................................................................................................. 46

PRINCIPAL STOCKHOLDERS.................................................................................... 55

ELECTION OF DIRECTORS..................................................................................... 57

DUNN'S BOARD OF DIRECTORS, ITS COMMITTEES AND COMPENSATION................................................ 58

THE COMPANY'S BOARD OF DIRECTORS.......................................................................... 58

MANAGEMENT................................................................................................ 59

CERTAIN TRANSACTIONS...................................................................................... 62

PROPOSAL TO AMEND THE 1997 STOCK OPTION PLAN OF DUNN AND AUTHORIZE THE STOCK OPTION PLAN OF THE COMPANY... 63

STOCK OPTION PLAN SUMMARY................................................................................. 64

LEGAL MATTERS............................................................................................. 66

INDEPENDENT AUDITORS...................................................................................... 66

EXPERTS................................................................................................... 67
</TABLE>

2
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<TABLE>
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PAGE
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<S> <C>
OTHER MATTERS............................................................................................. 67

FUTURE STOCKHOLDER PROPOSALS.............................................................................. 67

ADDITIONAL INFORMATION.................................................................................... 67

INDEX TO FINANCIAL STATEMENTS............................................................................. F-1

APPENDIX A--MERGER AGREEMENT.............................................................................. A-1

APPENDIX B--ACQUISITION AGREEMENT......................................................................... B-1

APPENDIX C--1997 STOCK OPTION PLAN........................................................................ C-1
</TABLE>

3
<PAGE>
MATTERS RELATED TO THE ANNUAL MEETING

PURPOSE OF THE ANNUAL MEETING

At the annual meeting, stockholders will act upon the matters outlined in
the accompanying Notice of Annual Meeting of Stockholders.

RECORD DATE

The Board of Directors has fixed the close of business on April 6, 1998 as
the record date for the annual meeting. Only holders of record of common stock
at the close of business on such record date are entitled to notice of and to
vote at the meeting or any adjournments or postponements thereof. On March 16,
1998 there were 5,150,000 shares of Dunn common stock outstanding. A list of
such stockholders will be available at the time and place of the meeting and,
during the ten days prior to the meeting, at the office of the Secretary of Dunn
at the address set forth on the cover page.

VOTING OF PROXIES AND REVOCABILITY

All shares presented by properly executed proxies will be voted in
accordance with the specifications on the proxy. IF NO SUCH SPECIFICATIONS ARE
MADE ON AN EXECUTED PROXY, THE PROXY WILL BE VOTED FOR APPROVAL OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREUNDER, FOR THE ELECTION OF THE
NOMINEES FOR DIRECTORS LISTED UNDER THE CAPTION "ELECTION OF DIRECTORS" AND FOR
THE APPROVAL OF THE 1997 STOCK OPTION PLAN AND THE COMPANY'S SUCCESSOR STOCK
OPTION PLAN. A stockholder who has given a proxy pursuant to this proxy
solicitation may revoke it at any time before it is exercised by giving written
notice thereof prior to the meeting to Dunn's transfer agent, Continental Stock
Transfer & Trust Company, or by signing and returning a later dated proxy, or by
voting in person at the meeting. Sending in a signed proxy will not affect a
stockholder's right to attend the meeting and vote in person. However, mere
attendance at the meeting will not, in and of itself, have the effect of
revoking the proxy.

Dunn does not know of any matters other than as described in the Notice of
Annual Meeting of Stockholders that are to come before the meeting. If any other
matter or matters are properly presented for action at the meeting, the persons
named in the enclosed proxy card and acting thereunder will have the discretion
to vote on such matters in accordance with their best judgment, unless such
authorization is withheld.

REQUIRED VOTE

The presence in person or by properly executed proxy of holders of a
majority of the outstanding shares of Dunn common stock is necessary to
constitute a quorum at the meeting. Each holder of Dunn common stock is entitled
to one (1) vote for each share held on the record date. The candidates for
election as Directors will be elected by the affirmative vote of a plurality of
the shares of common stock present in person or by proxy and actually voting at
the meeting. The affirmative vote of a majority of shares of Dunn common stock
outstanding on the record date is required for the approval of the Merger
Agreement. Approval of the 1997 Stock Option Plan and the Company's successor
stock option plan and all other matters that may properly come before the
meeting require for their approval the favorable vote of a majority of the
shares of common stock voted in person or by proxy at the meeting.

4
<PAGE>
Votes cast by proxy or in person at the meeting will be tabulated by the
election inspectors appointed for the meeting, who will determine whether or not
a quorum is present. The election inspectors will treat abstentions and
non-votes as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Any action other than a vote for the
nominee or proposal (including abstentions and broker non-votes) will have the
practical effect of voting against the nominee or proposal, as the case may be.

AS OF THE RECORD DATE THERE WERE SHARES OF DUNN COMMON STOCK
OUTSTANDING, AND OF THOSE SHARES ARE OWNED BY THOMAS P. DUNN, JOHN D.
VAZZANA AND CLAUDIA N. DUNNE, OFFICERS AND DIRECTORS OF DUNN WHO HAVE ADVISED
DUNN THAT THEY WILL VOTE (1) FOR THE MERGER AGREEMENT, (2) FOR THE NOMINEES FOR
DIRECTOR SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS AND (3) FOR THE AMENDMENT
OF DUNN'S STOCK OPTION PLAN AND THE ADOPTION BY THE COMPANY OF A SUCCESSOR STOCK
OPTION PLAN. ACCORDINGLY, APPROVAL OF EACH OF THESE ITEMS FOR WHICH PROXIES ARE
BEING SOLICITED IS ASSURED EVEN IF NO ADDITIONAL SHARES OF DUNN COMMON STOCK ARE
VOTED IN FAVOR THEREOF.

NEVERTHELESS, THE MERGER AND THE OTHER MATTERS TO BE CONSIDERED AT THE
MEETING ARE OF GREAT IMPORTANCE TO THE STOCKHOLDERS OF DUNN AND STOCKHOLDERS ARE
URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.

5
<PAGE>
SUMMARY

The following is a summary of certain information contained in this Proxy
Statement/Prospectus and the Appendices. This summary does not contain a
complete statement of all material information relating to the Merger and the
IDP Acquisition and is qualified by the more detailed information and financial
statements contained in this Proxy Statement/Prospectus. You should read all of
this Proxy Statement/ Prospectus carefully.

THE PARTIES

DUNN

Dunn Computer Corporation, a Delaware corporation ("Dunn"), manufactures
build-to-order computer systems and provides related services to departments,
agencies and offices of the federal government (the "Government") and selected
businesses. Dunn provides its customers with single-source solutions by
manufacturing its own brand of desktop and portable computers and high
performance network client servers and by offering services, which include
network consulting, project implementation and technical support. Dunn currently
derives most of its revenue from computer hardware sales to the Government, but
also sells computer hardware and services to medium and large businesses.

In April 1997, Dunn completed an initial public offering of its common
stock, which since has traded on the Nasdaq National Market under the symbol
"DNCC." Since its initial public offering, Dunn has continued to pursue its
growth strategy.

In September 1997, Dunn acquired STMS, Inc. ("STMS"), a Virginia-based
network services company (the "STMS Acquisition"). This acquisition expanded
Dunn's capabilities to provide a wide variety of computer services, including
network consulting, project implementation and technical support. Additionally,
the STMS Acquisition provided Dunn with new opportunities to sell computer
hardware into the commercial marketplace as part of a total network solution.
Dunn believes that the rapid technological change and increased complexity of
the computer industry will result in an increasing number of entities
outsourcing total network solutions to third party providers.

On March 9, 1998, Dunn entered into an agreement (the "Acquisition
Agreement") to acquire International Data Products, Corp. ("IDP Co.") and its
affiliate, Puerto Rico Industrial Manufacturing Operations, Corp. ("PRIMO"; IDP
Co. and PRIMO are referred to collectively as "IDP"). IDP, which had total
combined revenue of approximately $71.9 million for its fiscal year ended
September 30, 1997, is primarily a manufacturer of notebooks, desktops and high
performance network servers. IDP manufactures its products in its ISO 9000
certified facility in Gaithersburg, Maryland and in its facility in Guayama,
Puerto Rico. IDP is expected to retain its product brand names and continue to
service its existing contracts. See "Business."

Dunn's management believes that the acquisition of IDP (the "IDP
Acquisition") will result in several benefits, including: (i) doubling its
Government customer base; (ii) expanding Dunn's portable computer product line;
and (iii) providing cost savings and economies of scale. See "The Merger and the
IDP Acquisition--Recommendation of the Board of Directors; Dunn's Reasons for
the IDP Acquisition."

THE COMPANY

Dunn has organized a new corporate entity, Dunn Computer Corporation, a
Virginia corporation (the "Company"), to be the vehicle for the IDP Acquisition.
At the time the IDP Acquisition closes and the Merger is effective, the Company
will become a holding company owning 100% of both Dunn and IDP. After giving
effect to the IDP Acquisition and the STMS Acquisition, the Company's pro forma
combined revenue for fiscal 1997 was $109.1 million and for the first quarter of
fiscal 1998 was $35.6 million.

With the combination of Dunn and IDP, the Company will sell its products and
services to more than 950 customers, including customers from agencies within
the Department of Defense, Department of Justice, Administrative Office of the
U.S. Courts, Social Security Administration, Lockheed Martin

6
<PAGE>
Corporation, Blue Cross and Blue Shield Association and Inova Health Care
Systems, Inc. The Company's target markets are large and growing. The Office of
Management and Budget ("OMB") proposed in January 1998 a Government information
technology ("IT") budget of $29.5 billion, which is expected to grow between 3%
and 6% over the next five years. Additionally, industry sources indicate that
the total U.S. computer hardware and systems IT market was $66.6 billion in 1996
and estimates growth of approximately 10% over the next three years.

The Company intends to continue Dunn's strategy of increasing revenues and
profits by providing the Government market and selected businesses with
single-source computer network solutions. The Company plans to achieve this
objective by: (i) leveraging its Government customer base to increase sales of
products and network services; (ii) targeting the commercial market to expand
the sales of its own brand name computer hardware as part of a total network
solution; (iii) focusing on product quality; and (iv) pursuing targeted
acquisitions that complement its core skills and increase the overall value of
the Company.

MERGER SUB

Merger Sub is a wholly-owned subsidiary of the Company formed for the
purpose of consummating the Merger. In accordance with the Merger Agreement
among Dunn, the Company and Merger Sub, Merger Sub will merge with and into
Dunn, the separate existence of Merger Sub will cease, and Dunn will be the
surviving corporation and will be a wholly-owned subsidiary of the Company.

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

The principal executive offices of Dunn, the Company and Merger Sub are
located at 1306 Squire Court, Sterling, Virginia 20166, and their telephone
number is (703) 450-0400.

THE MERGER AND THE IDP ACQUISITION

GENERAL DESCRIPTION OF THE MERGER AND THE IDP ACQUISITION

Under the Merger Agreement, the Company will acquire all of the shares of
Dunn in a merger of Merger Sub with and into Dunn. Each outstanding share of
Dunn common stock (other than shares held in Dunn's treasury) will be converted
into the right to receive one share of the Company's common stock (the "Common
Stock"). The reorganization effected by the Merger is a necessary step towards
completion of the IDP Acquisition. A copy of the Merger Agreement is attached as
Appendix A to this Proxy Statement/ Prospectus.

Under the Acquisition Agreement, Dunn and the Company have agreed to pay the
stockholders of IDP Co. and PRIMO (the "IDP Sellers") $14.9 million in cash and
750,000 shares of the Company's Common Stock to acquire all of the shares of IDP
Co. and substantially all of the net assets of PRIMO. This purchase price is
subject to certain post-closing adjustments. See "The Merger and the IDP
Acquisition--Purchase Price for the IDP Acquisition." A copy of the Acquisition
Agreement is attached as Appendix B to this Proxy Statement/Prospectus. A
portion of the purchase price of the IDP Acquisition will be funded by the
Offering of 2,500,000 shares of the Company's Common Stock.

The Merger will become effective upon the filing of the certificate of
merger with the Delaware Secretary of State. The certificate of merger will be
filed concurrently with the closing of the IDP Acquisition and the successful
completion of the Offering (collectively, the "Closing"). The Merger, the IDP
Acquisition and the Offering are each contingent upon the consummation of the
others.

RECOMMENDATION OF THE BOARD OF DIRECTORS OF DUNN

THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND HAS DETERMINED THAT THE MERGER AND THE IDP
ACQUISITION ARE FAIR TO, AND IN THE BEST INTEREST OF DUNN AND ITS STOCKHOLDERS.
ACCORDINGLY, THE DUNN BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF
DUNN COMMON STOCK VOTE "FOR" THE APPROVAL OF THE MERGER AGREEMENT. SEE "THE
MERGER AND THE IDP

7
<PAGE>
ACQUISITION--RECOMMENDATION OF THE BOARD OF DIRECTORS; DUNN'S REASONS FOR THE
MERGER."

TREATMENT OF DUNN STOCK OPTIONS AND WARRANTS

When the Merger is effective, all outstanding options and warrants to
purchase shares of Dunn common stock, whether or not exercisable, will be
converted into options or warrants, as the case may be, to purchase the same
number of shares of the Company's Common Stock at the same exercise price and on
terms and conditions substantially the same as those applicable to the options
or warrants to purchase Dunn common stock prior to the Merger. See "The Merger
and the IDP Acquisition--Treatment of Dunn Stock Options and Warrants."

REPRESENTATIONS AND WARRANTIES; CONDUCT OF BUSINESS PENDING THE IDP
ACQUISITION

Dunn, the Company and the IDP Sellers have made certain customary
representations to each other in the Acquisition Agreement on a variety of
corporate and other matters. Each of Dunn and IDP have also agreed to operate
their business in the usual and ordinary course and generally to preserve their
business organization, properties and assets until the IDP Acquisition is
completed. See "The Merger and the IDP Acquisition--IDP Acquisition
Representations and Warranties" and "--Conduct of Business Pending the IDP
Acquisition."

CONDITIONS TO CONSUMMATION OF THE MERGER AND THE IDP ACQUISITION

In addition to certain standard closing conditions, the IDP Acquisition is
contingent upon, among other things: (i) the execution of employment agreements
with two executives of IDP Co. pursuant to which they will each receive stock
options to purchase up to 300,000 shares of the Company's Common Stock (subject
to adjustment to 400,000 shares under certain conditions), (ii) the appointment
of two IDP Co. directors to the Company's board of directors; (iii) the
successful completion of the Offering; and (iv) the prior transfer of assets and
liabilities of IDP Co.'s F Squared Engineering division to a separate
subsidiary, and the transfer of such subsidiary to certain IDP Sellers. See "The
Merger and the IDP Acquisition-- Conditions Precedent to the IDP Acquisition."

TERMINATION AND TERMINATION FEE

The Acquisition Agreement may be terminated, among other reasons, by the
mutual consent of the Board of Directors of Dunn and the IDP Sellers or if the
IDP Acquisition is not completed on or before June 30, 1998. The Acquisition
Agreement also provides that if the Acquisition Agreement is terminated because
the closing has not occurred before June 30, 1998, Dunn shall pay to the IDP
Sellers a termination fee in the amount of $500,000, provided that if the
closing does not occur on or before June 30, 1998 because (i) the conditions
precedent to the obligations of Dunn to consummate the IDP Acquisition were not
met, or (ii) the Offering is postponed or terminated because of general market
conditions, then no termination fee shall be paid. See "The Merger and the IDP
Acquisition--Acquisition Agreement Termination and Amendment" and "--IDP
Acquisition Fees and Expenses."

DISSENTERS' RIGHTS

Under Delaware law, Dunn stockholders have no right to an appraisal of the
value of their shares in connection with the Merger. See "The Merger and the IDP
Acquisition--Dissenters' Rights."

APPROVALS

IDP has certain contracts awarded under a program administered by the Small
Business Association ("SBA") which require the SBA's consent to a change in
ownership. Notice has been provided to the SBA regarding the transfer of IDP Co.
shares. See "Risk Factors--Risks Related to the IDP Acquisition and Future
Acquisitions." In addition, the Company's continued eligibility for certain
Puerto Rican tax benefits

8
<PAGE>
formerly granted to PRIMO depends on an approval to be granted by the Puerto
Rican taxing authorities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

It is intended that the Merger will constitute a reorganization under
section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code")
and/or a transfer of property by the Dunn stockholders to the Company under
section 351 of the Code. Accordingly, no gain or loss will be recognized for
United States federal income tax purposes by holders of Dunn common stock upon
the conversion of their Dunn common stock into shares of Company Common Stock in
the Merger. Further, no gain or loss will be recognized by the Dunn stockholders
as a result of the IDP Acquisition. Dunn's stockholders are urged to consult
their own tax advisors as to the specific consequences to them of the Merger
under federal, state, local and other applicable laws. See "The Merger and the
IDP Acquisition --Certain Federal Income Tax Considerations."

POSITION OF PRINCIPAL STOCKHOLDERS

Thomas P. Dunne, John D. Vazzana and Claudia N. Dunne, directors and
officers of Dunn who collectively own shares of Dunn common stock as of
the record date, have advised Dunn that they will vote (1) for the Merger
Agreement, (2) for the nominees for director set forth in this Proxy Statement/
Prospectus, and (3) for the amendment of Dunn's 1997 Stock Option Plan and
adoption by the Company of a successor stock option plan as set forth in this
Proxy Statement/Prospectus. Because the shares owned by these three principal
stockholders constitute approximately % of the total number of shares of Dunn
common stock that were issued and outstanding as of the record date, approval of
each of these items for which proxies are being solicited is assured even if no
additional shares of Dunn common stock are voted in favor thereof.

COMPARISON OF THE RIGHTS OF HOLDERS OF DUNN COMMON STOCK AND THE COMPANY'S
COMMON STOCK

The rights of stockholders of Dunn currently are governed by Delaware law,
Dunn's Certificate of Incorporation and Dunn's Bylaws. Upon consummation of the
Merger, stockholders of Dunn will become shareholders of the Company, which is a
Virginia corporation, and their rights as shareholders of the Company will be
governed by Virginia law, the Company's Articles of Incorporation and the
Company's Bylaws. For a discussion of various differences between the rights of
stockholders of Dunn and the rights of shareholders, see "Comparative Rights of
Stockholders."

CERTAIN DEFINITIONS

REFERENCES HEREIN TO THE "GOVERNMENT" ARE TO THE FEDERAL GOVERNMENT OF THE
UNITED STATES AND ITS DEPARTMENTS, AGENCIES AND OFFICES.

REFERENCES TO THE "COMPANY" ARE TO DUNN COMPUTER CORPORATION, A VIRGINIA
CORPORATION INCORPORATED ON FEBRUARY 26, 1998, AS IT EXISTS PRIOR TO THE CLOSING
OR, TOGETHER WITH THE COMPANIES THAT WILL BE ITS WHOLLY-OWNED SUBSIDIARIES UPON
THE CLOSING, AS THEY EXIST AND WILL EXIST AFTER THE MERGER AND THE CLOSING, AS
THE CONTEXT MAY REQUIRE.

UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO "DUNN" ARE TO DUNN
COMPUTER CORPORATION, A DELAWARE CORPORATION INCORPORATED ON JANUARY 3, 1997,
AND ITS WHOLLY-OWNED SUBSIDIARIES, AS THEY EXIST AND HAVE EXISTED PRIOR TO THE
CLOSING.

UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO "IDP" ARE TO
INTERNATIONAL DATA PRODUCTS, CORP. AND ITS AFFILIATE, PUERTO RICO INDUSTRIAL
MANUFACTURING OPERATIONS, CORP., AS THEY EXIST AND HAVE EXISTED PRIOR TO THE
CLOSING.

9
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in "Management Discussion and Analysis of
Financial Condition and Results of Operations," and "Business" and certain other
statements contained herein regarding matters that are not historical facts are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995). Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those discussed
under "Risk Factors."

RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, IN ADDITION TO THE
OTHER INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS, IN CONNECTION
WITH YOUR VOTE ON THE MERGER.

COMPETITION. The markets for the Company's products and services are highly
competitive. Many of the Company's competitors offer broader product lines, have
substantially greater financial, technical, marketing and other resources than
the Company and may benefit from component volume purchasing and product and
process technology license arrangements that are more favorable in terms of
pricing and availability than the Company's arrangements. Competitive pressures
have intensified as large build-to-order multinational computer manufacturers
have entered the Government market. The Company also competes with a large
number of computer systems integrators and resellers. The Company believes that
it is likely that these competitive conditions will continue in the future.
There can be no assurance that the Company will continue to compete successfully
against existing or new competitors that may enter markets in which the Company
operates. See "Business--Competition."

RAPID CHANGES IN PRODUCT STANDARDS AND RISK OF INVENTORY OBSOLESCENCE. The
computer products market is characterized by rapid technological change and the
frequent introduction of new products and product enhancements. As a result,
computer components decline in value rapidly. Dunn has sought to minimize its
inventory exposure through a variety of inventory control procedures and
policies. Historically, Dunn has purchased inventory to fulfill existing orders.
With the IDP Acquisition, the Company will be required to carry increased
inventory levels in order to satisfy a larger number of customers, to obtain
greater purchasing discounts, and to fill commercial orders. The Company
attempts to react to new product introductions and to mitigate its exposure to
losses from inventory obsolescence. There can be no assurance that such efforts
will be successful or that unexpected new product introductions will not have a
material adverse effect on the Company.

NEED FOR TECHNICAL PERSONNEL. The Company believes that its future success
will depend in large part upon its continued ability to attract and retain
highly qualified management, technical and sales personnel. The computer
industry is currently undergoing a shortage of trained and experienced
technicians. The Company endeavors to be attractive to current and prospective
employees and has an in-house training program to produce its own supply of
highly qualified technicians and service providers. However, there can be no
assurance that the Company will be able to attract and retain the qualified
personnel necessary for its business.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. Both Dunn and IDP's results of
operations vary from quarter to quarter as a result of uneven purchasing
patterns and budgetary cycles. For example, in its fiscal year ended October 31,
1997 ("fiscal 1997"), Dunn's quarterly revenues were $5.5 million, $4.0 million,
$2.5 million and $9.8 million in the first, second, third and fourth quarters,
respectively. For IDP, the quarterly revenues for its fiscal year ended
September 30, 1997 ("IDP's fiscal 1997") were $36.0 million, $16.5 million, $7.7
million and $11.7 million in the first, second, third and fourth quarters,
respectively. In the first quarter of their respective fiscal years 1998, Dunn's
and IDP's revenues were $10.4 million and

10
<PAGE>
$25.2 million, respectively. These quarterly variations are likely to continue
in the future and may cause the market price of the Common Stock to fluctuate.

DEPENDENCE ON THE GOVERNMENT MARKET. The Company's business is highly
dependent on the Government market. Approximately 68% and 70% of Dunn's revenues
in its fiscal year ended October 31, 1996 ("fiscal 1996") and fiscal 1997,
respectively, and approximately 97% and 99% of IDP's revenues in its fiscal year
ended September 30, 1996 ("IDP's fiscal 1996") and IDP's fiscal 1997,
respectively, were derived from contracts or subcontracts with the Government.
The Company believes that the success and development of its business will
continue to be largely dependent upon its ability to participate in Government
contract programs. Accordingly, the Company's financial performance may be
directly affected by changes in Government contracting policies. Among the
factors that could materially adversely affect the Company's Government
contracting business are budgetary constraints and the adoption of new laws or
regulations. Most Government contracts are also subject to modification or
termination in the event of changes in funding, and the Company's contractual
costs and revenues are subject to adjustments as a result of audits by
Government auditors. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

The Company derives significant revenues from sales made pursuant to certain
major procurement programs awarded by the Government in the ordinary course of
business. These include its General Services Administration ("GSA") Schedules,
contracts with agencies within the Department of Defense, and contracts with the
Administrative Office of the U.S. Courts, among others. The GSA Schedules are
indefinite delivery, indefinite quantity ("IDIQ") contracts, which the GSA
negotiates with selected vendors and can be used by any Government agency. Both
Dunn and IDP currently have GSA Schedules that are three-year contracts which
expire in 1999. Both GSA Schedules may be renewed for an additional three years
with the mutual consent of Dunn or IDP, as the case may be, and the GSA. The
inability of either Dunn or IDP to renew or replace its GSA Schedule or other
contracts could have a material adverse effect on the Company.

GOVERNMENT CONTRACTING RISKS. Government contracts, by their terms,
generally can be terminated at any time, without cause, for the convenience of
the Government. If a Government contract is so terminated, the contractor
generally is entitled to receive compensation for the services provided or
certain costs incurred at the time of termination and a reasonable profit on the
contract work performed prior to the date of termination. In addition, all
Government contracts require compliance with various contract provisions and
procurement regulations and in certain cases, accounting requirements. If not
cured, certain violations of these regulations could result in the termination
of the contract, imposition of fines, and suspension or debarment from competing
for or receiving awards of additional Government contracts. Exclusion of the
Company from federal procurements, the termination of any of the Company's
significant Government contracts or the imposition of such penalties could have
a material adverse effect on the Company. See "Business-- Contracts."

RISKS RELATED TO THE IDP ACQUISITION AND FUTURE ACQUISITIONS. Following the
consummation of the IDP Acquisition, the Company plans to integrate certain
administrative operations of Dunn and IDP. There can be no assurance that the
Company will: (i) achieve its operating and growth strategies with respect to
these businesses; (ii) obtain increased revenue opportunities as a result of the
anticipated synergies created by expanded product offerings; and (iii) acquire
additional distribution channels or reduce the overall selling, general and
administrative expenses associated with the acquired operation. Additionally,
the integration of any other business the Company may acquire in the future
could involve unforeseen difficulties, which could have a material adverse
effect on the Company's business, financial condition and results of operations
and ultimately the market price of the Common Stock. See "The Merger and the IDP
Acquisition."

Until December 1997, IDP participated in the "8(a) Program" administered by
the SBA. The
8(a) Program affords eligible firms with advantages in competing for Government
contracts based on

11
<PAGE>
certain disadvantaged status. Under SBA regulations, all contracts awarded to a
firm under the 8(a) Program must be terminated for the convenience of the
Government if the program-eligible owner(s) relinquish ownership of the firm,
unless the procuring agency requests a waiver from the SBA. IDP has been awarded
a "Desktop V" contract with the U.S. Air Force pursuant to the 8(a) Program,
which has an estimated delivery quantity valued at $100 million. The Air Force
has been advised of the pending change in ownership of IDP, and has requested a
waiver from the SBA. The Company expects that the SBA will not oppose the
waiver. In the event that the SBA denies the waiver and the Company, after the
IDP Acquisition, will not be able to make sales pursuant to the Desktop V
contract, there would be a material adverse effect on the Company's anticipated
revenue from this contract. In addition to the Desktop V contract, IDP has other
contracts under the 8(a) Program for which a waiver from the SBA will be
required in connection with the Company's acquisition of IDP. See
"Business--Contracts."

DEPENDENCE ON MANAGEMENT PERSONNEL. The Company's future success will
depend to a significant extent on the continued efforts of key management
personnel, including Thomas P. Dunne and John D. Vazzana, Chief Executive
Officer and Executive Vice President of both Dunn and the Company, respectively.
Dunn has entered into employment contracts with Mr. Dunne and Mr. Vazzana. The
Company's future success also will depend to a significant extent on the
continued efforts of George D. Fuster and D. Oscar Fuster, from whom the Company
is purchasing IDP and who have heretofore served as President and Executive Vice
President of IDP, respectively. At the Closing, the Company will enter into
employment agreements with George D. Fuster and D. Oscar Fuster who will
thereafter continue in their present positions. The loss of one or more of these
key employees could have a material adverse effect on the Company's business.

CONTROL BY MANAGEMENT STOCKHOLDERS. Upon the completion of the Offering and
the IDP Acquisition, the Company's management will collectively beneficially own
54% (51% if the over-allotment option issued in connection with the Offering is
exercised in full) of the Company's outstanding Common Stock. Because of their
beneficial stock ownership, these stockholders will be in a position to elect
the members of the Board of Directors and decide most, if not all, matters
requiring stockholder approval. See "Principal Stockholders."

IDP'S STATUS UNDER THE 8(A) PROGRAM. IDP was approved to participate in the
SBA's 8(a) Program on June 3, 1994. IDP voluntarily withdrew from the 8(a)
Program on December 4, 1997, by entering into a Voluntary Withdrawal Agreement
with SBA that, among other things, requires IDP to complete all previously
awarded 8(a) Program contracts and subcontracts, including modifications.

On January 21, 1998, SBA's Office of Inspector General ("OIG") issued a
final audit report closing out an audit concerning IDP's 8(a) Program
eligibility, and concluding that one of IDP's owners exceeded SBA's individual
net worth thresholds both at the time IDP was admitted to the 8(a) Program and
during 1996. The final audit report states, however, that IDP's voluntary
withdrawal from the 8(a) Program meets the intent of OIG's recommendation that
SBA initiate action to terminate IDP from the 8(a) Program. IDP is not aware of
any further SBA action or decision regarding the final audit report or its
recommendation.

While it is possible that the Government could initiate action against IDP
beyond the OIG's recommendation, including seeking to suspend or debar IDP from
contracting or to void or terminate IDP's 8(a) contracts, IDP believes the
following factors would weigh against initiation of such actions: (i) IDP has
already withdrawn from the 8(a) Program; (ii) IDP's Voluntary Withdrawal
Agreement with the SBA requires IDP to complete all of its 8(a) contracts; and
(iii) the OIG final audit report concludes that IDP's voluntary withdrawal from
the 8(a) Program satisfies the report's recommendation. Any action that results
in the voiding or termination of IDP's 8(a) contracts or excluding IDP from
federal procurements could have a material adverse effect on the Company. The
Company would expect to contest any such action vigorously.

12
<PAGE>
BID PROTESTS AND SETTLEMENTS. From time to time, competitors of the Company
may commence protest proceedings with respect to Government contracts awarded to
the Company. In the past, Dunn and IDP, depending on the most advantageous
course of action, have either defended or settled such protests. Terms of
settlement have included cash settlement, payment of percentage of revenues
received from the contract, or an agreement to share the contract. In the past,
certain of such proceedings or settlement agreements have had a material adverse
impact on IDP's results of operation. There can be no assurance that such
protests and or settlement agreements will not have a material adverse effect on
the Company in the future. See "Business--Contracts."

SHARES ELIGIBLE FOR FUTURE SALE. At Closing, 8,400,000 shares of Common
Stock will be outstanding and the Company will also have outstanding options and
warrants to purchase up to a total of 2,657,000 shares of Common Stock. The
shares sold in the Offering and the 5,150,000 shares exchanged for Dunn's common
stock pursuant to the Merger (other than the approximately 4,000,000 shares
issued to affiliates of the Company) will be freely tradable by the public. The
remaining 750,000 outstanding shares of Common Stock (collectively, the
"Restricted Shares") have not been registered under the Securities Act and may
be resold publicly only pursuant to an effective registration under that act or
pursuant to an available exemption from the registration requirements of that
act (such as Rule 144 thereunder).

In general under Rule 144, if a minimum of one year has elapsed since the
later of the date of acquisition of the restricted securities from the issuer or
from an affiliate of the issuer, a person (or persons whose shares of Common
Stock are aggregated), including persons who may be deemed "affiliates" of the
Company, would be entitled to sell within any three-month period a number of
shares of Common Stock that does not exceed the greater of: (i) 1% of the then
outstanding shares of Common Stock (i.e., 84,000 shares as of the Closing); and
(ii) the average weekly trading volume during a preceding period of four
calendar weeks. Sales under Rule 144 are also subject to certain provisions as
to the manner of sale, notice requirements and the availability of current
public information about the Company. In addition, under Rule 144(k), if a
period of at least two years has elapsed since the later of the date restricted
securities were acquired from the Company or the date they were acquired from an
affiliate of the Company, a stockholder who is not an affiliate of the Company
at the time of sale and has not been an affiliate for at least three months
prior to the sale would be entitled to sell shares of Common Stock in the public
market immediately without compliance with the foregoing requirements under Rule
144. In certain circumstances, Rule 144 permits a holder of restricted shares to
"tack" his holding period with that of his predecessor(s) who were not
affiliates at the time of transfer in order to meet Rule 144's holding period
requirements. The foregoing summary of Rule 144 is not intended to be a complete
description thereof.

The Company and its directors and executive officers, persons who acquire
shares of Common Stock in the IDP Acquisition and all warrant holders have
agreed not to offer or sell any shares for a period of 180 days following
, 1998, the date of the prospectus for the Offering.

The effect, if any, of the availability for sale, or sale, of the shares of
Common Stock eligible for future sale will have on the market price of the
Common Stock prevailing from time to time is unpredictable, and no assurance can
be given that the effect will not be adverse.

VOLATILITY OF STOCK PRICE. The market prices of the stock of companies
providing IT products and services, including Dunn, have been highly volatile.
The market price of the Company's Common Stock is likely to be highly volatile
and may increase or may decrease significantly as a result of factors such as
actual or anticipated fluctuations in the Company's operating results, general
conditions in the computer hardware and software industries, announcements of
new products, technological innovations or new contracts by the Company or by
its competitors, general market conditions and other factors. In addition,
shortfalls in sales or earnings as compared with securities analysts'
expectations, changes in such analysts' recommendations or projections and
general economic conditions, may materially and adversely affect the market
price of the Common Stock. Because it is anticipated that there will be a
limited public float in the Common Stock and it will be thinly traded, sales of
significant amounts of Common Stock in the public

13
<PAGE>
market could have a material adverse effect on the market price for the Common
Stock. Although the Offering will result in there being a greater number of
shares of the Company's Common Stock publicly traded than the number of Dunn
shares publicly traded prior to the Offering, there can be no assurance that
there will be a more active trading market in the Company's Common Stock than
there has been in Dunn's shares.

REQUIREMENT TO MAINTAIN A SECURITY CLEARANCE. One of the Company's
Government contracts requires the Company to maintain a Government security
clearance. If the Company were to lose this clearance, the Company would not be
able to retain its current contract, and would not be able to obtain new
contracts requiring security clearances.

PROPRIETARY INFORMATION AND TECHNOLOGICAL CHANGE. The Company believes that
its business is dependent on its technical and organizational knowledge,
practices and procedures, and that the future success of the Company is based,
in part, on its ability to keep up to date with new technological breakthroughs
and incorporate such changes in its products, services and processes. Although
Dunn and IDP each seeks to protect its proprietary information by
confidentiality agreements with many of its employees, there can be no assurance
that these measures will prevent the unauthorized disclosure of such
information.

PREFERRED STOCK. The Company's Articles of Incorporation authorize the
issuance of 2,000,000 shares of "blank check" preferred stock with such
designations, rights and preferences as may be fixed from time to time by
amendment of the Articles of Incorporation adopted by the Company's Board of
Directors. Accordingly, the Company's Board of Directors is empowered, without
further stockholder approval, to cause the issuance of preferred stock with
dividend, liquidation, conversion, voting or other rights that could materially
and adversely affect the voting power or other rights of the holders of the
Common Stock. The Company has no current plans to issue any shares of preferred
stock; however, in the event of issuance, the preferred stock could be used,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of the Company. See "Description of Company's Common Stock."

NO DIVIDENDS. To date, no dividends have been declared or paid by Dunn, or
by the Company on the Common Stock, and the Company does not anticipate
declaring or paying any dividends in the foreseeable future, but rather intends
to reinvest profits, if any, in its business. Investors should, therefore, be
aware that it is unlikely that any dividends will be paid on the Common Stock in
the foreseeable future. See "Dividend Policy."

YEAR 2000 UNCERTAINTIES. Recently, national attention has focused on the
potential problems and costs resulting from computer programs being written
using two digits rather than four to define the applicable year. Any computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. While the Company believes that its
internal software applications and the software in the systems it sells are year
2000 compliant, there can be no assurance until the year 2000 that all systems
will function adequately then. If they do not, the result could be a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities. Further, if the software
applications of others on whose services the Company depends (such as suppliers
and subcontractors) are not year 2000 compliant, such noncompliance could have a
material adverse effect on the Company.

The year 2000 problem can be corrected either through software programming,
or the application can be ported to a client/server network. The Company
believes that with its technical services and its client/ server hardware
product line, it will provide year 2000 solutions.

14
<PAGE>
DUNN SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected consolidated financial data of Dunn should be read in
conjunction with the consolidated financial statements and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein. The consolidated statement of income data
set forth below with respect to the fiscal years ended October 31, 1995, 1996
and 1997 and the consolidated balance sheet data as of October 31, 1996 and 1997
is derived from and is referenced to the audited consolidated financial
statements of Dunn (a predecessor to the Company) included elsewhere in this
Proxy Statement/Prospectus. The consolidated statement of income data set forth
below with respect to the fiscal years ended October 31, 1993 and 1994 and the
consolidated balance sheet data as of October 31, 1993, 1994 and 1995 is derived
from audited consolidated financial statements of Dunn not included in this
Proxy Statement/Prospectus.

In the opinion of Dunn's management, the unaudited interim financial data
reflect all adjustments necessary to present fairly the results of operations
for the three months ended January 31, 1997 and 1998 and Dunn's financial
position at January 31, 1998. These adjustments are of a normal, recurring
nature. The results of operations of the interim periods are not necessarily
indicative of results that may be expected for a year.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED OCTOBER 31, ENDED JANUARY 31,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
CONSOLIDATED STATEMENT OF INCOME DATA:
Net revenues.................................. $ 5,812 $ 4,429 $ 7,491 $ 18,099 $ 21,766 $ 5,505 $ 10,429
Costs of revenues............................. 4,858 3,444 6,046 14,103 17,549 4,199 7,990
--------- --------- --------- --------- --------- --------- ---------
Gross profit.................................. 954 985 1,445 3,996 4,217 1,306 2,439
Selling, general and administrative........... 761 1,005 966 1,972 2,198 434 1,290
--------- --------- --------- --------- --------- --------- ---------
Income from operations........................ 193 (20) 479 2,024 2,019 872 1,149
Other income (expense)........................ (1) (32) 8 (9) 98 8 (43)
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) before income taxes......... 192 (52) 487 2,015 2,117 880 1,106
Provision for (benefit from) income taxes..... 65 (11) 244 776 795 334 417
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............................. $ 127 $ (41) $ 243 $ 1,239 $ 1,322 $ 546 $ 689
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) per share (1)................. $ 0.05 $ (0.01) $ 0.06 $ 0.31 $ 0.29 $ 0.14 $ 0.13
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earning (loss) per share(1)--assuming
dilution.................................... $ 0.05 $ (0.01) $ 0.06 $ 0.31 $ 0.28 $ 0.13 $ 0.12
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average shares outstanding(1)........ 2,800 3,158 4,000 4,000 4,552 4,000 5,150
Weighted average shares outstanding(1)
assuming dilution(1)........................ 2,800 3,158 4,000 4,000 4,679 4,050 5,715
</TABLE>

<TABLE>
<CAPTION>
AT JANUARY
AT OCTOBER 31, 31,
----------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- -------------
CONSOLIDATED BALANCE SHEET DATA:
Working capital................................... $ 351 $ 340 $ 512 $ 1,722 $ 4,339 $ 5,116
Total assets...................................... 1,149 2,503 3,647 5,275 18,703 15,519
Long-term debt.................................... 75 23 -- -- 75 70
Total liabilities................................. 804 2,046 3,047 3,335 10,465 6,592
Stockholders' equity.............................. 345 457 600 1,939 8,238 8,927
</TABLE>

- ------------------------
(1) The earnings per share amounts prior to fiscal 1998 have been restated as
required to comply with Statement of Financial Accounting Standards No. 128,
EARNINGS PER SHARE. For further discussion of earnings per share and the
impact of Statement No. 128, see Note 2 of the notes to Dunn's consolidated
financial statements included herein.

15
<PAGE>
IDP SELECTED COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected combined financial data of IDP should be read in
conjunction with the combined financial statements and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere herein. The combined statement of income data set
forth below with respect to the fiscal years ended September 30, 1995, 1996 and
1997 and the combined balance sheet data as of September 30, 1996 and 1997 are
derived from and are referenced to the audited combined financial statements of
IDP included elsewhere in this Proxy Statement/ Prospectus.

The combined income statement data set forth below with respect to the
fiscal year ended February 28, 1993, the seven month period ended September 30,
1993 and the fiscal year ended September 30, 1994 and the combined balance sheet
data set forth below as of February 28, 1993, and September 30, 1993, 1994 and
1995 are derived from unaudited combined financial statements of IDP not
included in this Proxy Statement/Prospectus.

In the opinion of IDP's management, the unaudited interim combined financial
data reflects all adjustments necessary to present fairly the combined results
of operations for the three months ended December 31, 1996 and 1997 and IDP's
combined financial position as of December 31, 1997. These adjustments are of a
normal, recurring nature. The results of operations of the interim periods are
not necessarily indicative of results that may be expected for a year.
<TABLE>
<CAPTION>
SEVEN MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
FEBRUARY 28, SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------- ------------- -------------------------------------------- -------------
1993 1993 1994 1995 1996 1997 1996
------------- ------------- ----------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF INCOME
DATA:
Sales........................... $ 7,860 $ 6,216 $ 33,354 $ 80,432 $ 84,292 $ 71,921 $ 35,999
Cost of sales................... 6,056 4,746 28,841 69,025 71,890 58,996 30,838
------------- ------------- ----------- --------- --------- --------- -------------
Gross profit.................... 1,805 1,470 4,513 11,407 12,402 12,925 5,161
Selling, general and
administrative................ 1,827 1,156 3,865 8,709 11,233 11,599 3,651
------------- ------------- ----------- --------- --------- --------- -------------
Income (loss) from operations... (22) 314 648 2,698 1,169 1,326 1,510
Other income (expense).......... (83) (87) 92 (483) (9) (563) (184)
------------- ------------- ----------- --------- --------- --------- -------------
Income (loss) before income
taxes......................... (105) 227 740 2,215 1,160 763 1,326
Income tax expense (benefit).... (25) 106 306 278 (18) (418) 290
------------- ------------- ----------- --------- --------- --------- -------------
Net income (loss)............... $ (80) $ 121 $ 434 $ 1,937 $ 1,178 $ 1,181 $ 1,036
------------- ------------- ----------- --------- --------- --------- -------------
------------- ------------- ----------- --------- --------- --------- -------------

1997
-------------
<S> <C>
COMBINED STATEMENT OF INCOME
DATA:
Sales........................... $ 25,201
Cost of sales................... 21,100
-------------
Gross profit.................... 4,100
Selling, general and
administrative................ 3,694
-------------
Income (loss) from operations... 406
Other income (expense).......... (218)
-------------
Income (loss) before income
taxes......................... 188
Income tax expense (benefit).... 54
-------------
Net income (loss)............... $ 134
-------------
-------------
</TABLE>

<TABLE>
<CAPTION>
AT FEBRUARY 28, AT SEPTEMBER 30, AT DECEMBER 31,
--------------- ----------------------------------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1993 1994 1995 1996 1997 1997
--------------- ----------- ----------- ----------- --------- --------- ---------------
COMBINED BALANCE SHEET DATA:
Working capital................. $ 7 $ 24 $ 136 $ 1,773 $ 2,640 $ 2,935 $ 2,980
Total assets.................... 2,366 2,684 9,444 22,154 25,738 27,312 39,405
Long-term debt.................. 451 575 1,039 6,015 2,255 2,031 2,161
Total liabilities............... 2,241 2,327 8,632 19,405 21,810 22,203 34,163
Stockholders' equity............ 125 247 812 2,749 3,928 5,109 5,242
</TABLE>

16
<PAGE>
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

The unaudited pro forma combined balance sheet gives effect to the Merger,
the IDP Acquisition and the sale of 2,500,000 shares of Common Stock offered by
the Company in the Offering (at an assumed price to the public of $ per
share) and the application of net proceeds therefrom, as if each had occurred on
January 31, 1998.

The unaudited pro forma combined statement of operations for the Company's
fiscal year ended October 31, 1997 gives effect to the Merger and the IDP
Acquisition as if each had occurred on November 1, 1996. The unaudited pro forma
combined statement of operations for the Company's three month period ended
January 31, 1998 gives effect to the Merger and the IDP Acquisition as if each
had occurred on November 1, 1996.

The unaudited pro forma combined balance sheet and statements of operations
are based on available information and on certain assumptions and adjustments
described in the accompanying notes, which the Company believes are reasonable.
The unaudited pro forma combined statements of operations are provided for
informational purposes only and do not purport to present the results of
operations of the Company had the transactions assumed therein occurred on or as
of the dates indicated, nor are they necessarily indicative of the results of
operations which may be achieved in the future. The unaudited pro forma combined
statements of operations should be read in conjunction with the consolidated
financial statements of Dunn, including the notes thereto, the combined
financial statements of IDP, including the notes thereto, and the financial
statements of STMS, including the notes thereto, included elsewhere in this
Proxy Statement/Prospectus.

17
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
HISTORICAL HISTORICAL ACQUISITION OFFERING PRO FORMA
DUNN (A) IDP (B) ADJUSTMENTS (C) ADJUSTMENTS (G) COMBINED
-------------- ------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents..... $ 162,359 $ 891,493 $ (14,900,000)(c) -- $(13,846,148)
Accounts receivable, net...... 8,373,278 14,595,651 -- -- 22,968,929
Employee and stockholder
advances.................... -- 118,587 -- -- 118,587
Prepaid expenses and other
assets...................... 120,052 1,735,269 -- -- 1,855,321
Inventory, net................ 2,882,118 18,652,198 -- -- 21,534,316
Income taxes receivable....... -- 401,775 -- -- 401,775
Deferred income taxes......... -- 443,415 -- -- 443,415
-------------- ------------- --------------- --------------- -----------
Total current assets............ 11,537,807 36,838,388 (14,900,000) -- 33,476,195
Property and equipment, net... 598,257 2,325,143 -- -- 2,923,400
Deferred income taxes......... -- 17,631 -- -- 17,631
Investments................... 275,000 31,200 -- -- 306,200
Goodwill and other intangible
assets, net................. 2,920,514 -- 17,492,366(d) -- 20,412,880
Other assets.................. 186,958 193,027 -- -- 379,985
-------------- ------------- --------------- --------------- -----------
Total assets.................... $ 15,518,536 $ 39,405,389 $ 2,592,366 -- $57,516,291
-------------- ------------- --------------- --------------- -----------
-------------- ------------- --------------- --------------- -----------
Liabilities and stockholders'
equity Current liabilities
Accounts payable.............. $ 2,153,011 $ 17,495,811 $ 800,000(e) -- $20,448,822
Accrued expenses.............. 483,151 2,839,493 -- -- 3,322,644
Income taxes payable.......... 417,662 112,174 -- -- 529,836
Notes payable--current
portion..................... 12,840 420,467 -- -- 433,307
Obligations under capital
leases-- current portion.... 54,319 -- -- -- 54,319
Notes payable--related
parties..................... -- 1,579,973 -- -- 1,579,973
Line of credit................ 2,826,789 11,340,942 -- -- 14,167,731
Unearned revenue.............. 474,345 -- -- -- 474,345
Other liabilities............. -- 69,429 -- -- 69,429
-------------- ------------- --------------- --------------- -----------
Total current liabilities....... 6,422,117 33,858,289 800,000 41,080,406
Notes payable--long term
portion....................... 47,105 160,860 -- -- 207,965
Obligation under capital leases-
long-term portion............. 22,453 -- -- -- 22,453
Deferred rent................... -- 143,606 -- -- 143,606
Deferred tax credit............. 100,000 -- -- 100,000
-------------- ------------- --------------- --------------- -----------
Total liabilities............... 6,591,675 34,162,755 800,000 -- 41,554,430
Commitments
Stockholders' equity:
Preferred Stock, $.001 par
value; 2,000,000 shares
authorized, no shares issued
and outstanding............. -- -- -- -- --
Common Stock, $.001 par value;
20,000,000 shares
authorized, 5,150,000 shares
issued and outstanding,
historical Dunn and
8,400,000 shares issued and
outstanding, pro forma
combined basis.............. 5,150 -- 750(f) 5,900
IDP common stock, no par
value; 5,000 shares
authorized, 100 shares
issued and outstanding...... -- 40,000 (40,000) (f) -- --
PRIMO common stock, no par
value; 10,000 shares
authorized, 7,000 shares
issued and outstanding...... -- 132,000 (132,000) (f) -- --
Additional paid-in capital.... 5,087,371 -- 7,034,250(f) -- 12,121,621
Retained earnings............. 3,834,340 5,070,634 (5,070,634)(f) -- 3,834,340
-------------- ------------- --------------- --------------- -----------
Total stockholders' equity........ 8,926,861 5,242,634 1,792,366 -- 15,961,861
-------------- ------------- --------------- --------------- -----------
Total liabilities and
stockholders' equity.............. $ 15,518,536 $ 39,405,389 $ 2,592,366 -- $57,516,291
-------------- ------------- --------------- --------------- -----------
-------------- ------------- --------------- --------------- -----------
</TABLE>

18
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------------------------------
IDP STMS
HISTORICAL HISTORICAL ACQUISITION HISTORICAL ACQUISITION
DUNN (H) IDP (I) ADJUSTMENTS SUBTOTAL (J) STMS (K) ADJUSTMENTS (K)
-------------- ------------- ------------ ------------ ----------- ----------------

<S> <C> <C> <C> <C> <C> <C>
Net revenues................... $ 21,766,465 $ 71,920,739 $ -- $93,687,204 $15,419,104 $ --

Costs of revenues.............. 17,549,655 58,995,644 -- 76,545,299 13,532,509 --
-------------- ------------- ------------ ------------ ----------- ----------------

Gross profit................... 4,216,810 12,925,095 -- 17,141,905 1,886,595 --

Selling, general and
administrative expenses...... 2,197,704 11,598,705 -- 13,796,409 3,329,452 --

Amortization of intangible
assets....................... -- -- 1,006,761(l) 1,006,761 -- 240,000(l)
-------------- ------------- ------------ ------------ ----------- ----------------

Income (loss) from operations.. 2,019,106 1,326,390 (1,006,761) 2,338,735 (1,442,857) (240,000)

Other income (expense):

Interest income.............. 109,877 31,359 -- 141,236 88,687 --

Interest expense............. (11,813) (593,012) -- (604,825) (215,053) --

Miscellaneous, net........... -- (1,109) -- (1,109) (31,150) --

Loss on property and
equipment.................. -- -- -- -- (182,338) --
-------------- ------------- ------------ ------------ ----------- ----------------

Net income (loss) before income
taxes........................ 2,117,170 763,628 (1,006,761) 1,874,037 (1,782,711) (240,000)

Provision for (benefit from)
income taxes................. 794,870 (417,447) -- 377,423 -- --
-------------- ------------- ------------ ------------ ----------- ----------------

Income (loss) before
extraordinary item........... 1,322,300 1,181,075 (1,006,761) 1,496,614 (1,782,711) (240,000)

Extraordinary gain on debt
settlement................... -- -- -- -- 359,716 --
-------------- ------------- ------------ ------------ ----------- ----------------

Net income (loss).............. $ 1,322,300 $ 1,181,075 $(1,006,761) $1,496,614 $(1,422,995) $ (240,000)
-------------- ------------- ------------ ------------ ----------- ----------------
-------------- ------------- ------------ ------------ ----------- ----------------

EARNINGS PER COMMON SHARE:(P)

Income (loss) before
extraordinary item........... $ 0.29

Extraordinary gain on debt
settlement................... --
--------------

Net income per common share.... $ 0.29
--------------
--------------

EARNINGS PER COMMON SHARE--
ASSUMING DILUTION(P):

Income (loss) before
extraordinary item........... $ 0.28

Extraordinary gain on debt
settlement................... --
--------------

Net income per common
share--assuming dilution..... $ 0.28
--------------
--------------

PRO FORMA
COMBINED
-------------
<S> <C>
Net revenues................... $ 109,106,308
Costs of revenues.............. 90,077,808
-------------
Gross profit................... 19,028,500
Selling, general and
administrative expenses...... 17,125,861
Amortization of intangible
assets....................... 1,246,761
-------------
Income (loss) from operations.. 655,878
Other income (expense):
Interest income.............. 229,923
Interest expense............. (819,878)
Miscellaneous, net........... (32,259)
Loss on property and
equipment.................. (182,338)
-------------
Net income (loss) before income
taxes........................ (148,674)
Provision for (benefit from)
income taxes................. (377,423)
-------------
Income (loss) before
extraordinary item........... (526,097)
Extraordinary gain on debt
settlement................... 359,716
-------------
Net income (loss).............. $ (166,381)
-------------
-------------
EARNINGS PER COMMON SHARE:(P)
Income (loss) before
extraordinary item........... $ (0.07)
Extraordinary gain on debt
settlement................... 0.05
-------------
Net income per common share.... $ (0.02)
-------------
-------------
EARNINGS PER COMMON SHARE--
ASSUMING DILUTION(P):
Income (loss) before
extraordinary item........... (0.07)
Extraordinary gain on debt
settlement................... 0.05
-------------
Net income per common
share--assuming dilution..... $ 0.02
-------------
-------------
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------
<S> <C> <C> <C> <C>
IDP
HISTORICAL HISTORICAL ACQUISITION PRO FORMA
DUNN(M) IDP(N) ADJUSTMENTS COMBINED
--------------- ----------- -------------- ------------

Net revenues....................................................... $ 10,429,168 $25,200,523 $ -- $ 35,629,691

Costs of revenues.................................................. 7,989,879 21,100,060 -- 29,089,939
--------------- ----------- -------------- ------------

Gross profit....................................................... 2,439,289 4,100,463 -- 6,539,752

Selling, general and administrative expenses....................... 1,235,845 3,694,449 -- 4,930,294

Amortization of intangible assets.................................. 54,326 -- 251,690(o) 306,016
--------------- ----------- -------------- ------------

Income from operations............................................. 1,149,118 406,014 (251,690) 1,303,442

Other income (expense):

Interest income.................................................. -- 1,504 -- 1,504

Interest expense................................................. (37,618) (224,536) -- (262,154)

Miscellaneous, net............................................... (5,132) 4,544 -- (588)
--------------- ----------- -------------- ------------

Net income (loss) before income taxes.............................. 1,106,368 187,526 (251,690) 1,042,204

Provision for (benefit from) income taxes.......................... 417,662 53,718 -- 471,380
--------------- ----------- -------------- ------------

Net income (loss).................................................. $ 688,706 $ 133,808 $ (251,690) $ 570,824
--------------- ----------- -------------- ------------
--------------- ----------- -------------- ------------

Earnings per share................................................. $ 0.13 $ 0.07
--------------- ------------
--------------- ------------

Earnings per share--assuming dilution.............................. $ 0.12 $ 0.06
--------------- ------------
--------------- ------------
</TABLE>

19
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL DATA

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

(a) Consolidated Balance Sheet of Dunn as of January 31, 1998.

(b) Combined Balance Sheet of IDP as of December 31, 1997.

(c) Represents adjustments for the IDP Acquisition based on a purchase price of
approximately $14.9 million in cash and an aggregate of 750,000 shares of
Common Stock. The 750,000 shares of the Company's Common Stock were valued
at a price per share of $9.38, which represents the closing market price of
Dunn's Common Stock on January 31, 1998, the assumed date of acquisition for
pro forma presentation. The purchase price has been allocated on a
preliminary basis to the assets and liabilities acquired based on fair
values of such assets and liabilities which are estimated to approximate
their book value.

(d) Represents certain intangible assets identified by the Company. The amounts
allocated to intangible assets were as follows: $1,000,000 to work force and
$16,492,366 to goodwill and trademarks. All of the intangible assets will be
amortized on a straight-line basis over lives ranging from five to twenty
years.

(e) Represents $800,000 in estimated investment banking, legal, accounting and
printing expenses related to the IDP Acquisition.

(f) Represents elimination of IDP's stockholders' equity accounts, and issuance
of 750,000 shares of the Company's Common Stock valued at a price of $9.38
per share.

(g) Gives effect to the sale of 2,500,000 shares of Common Stock offered by the
Company in the Offering (at an assumed price to the public of $[ ] per
share) and the application of the net proceeds therefrom (amounts to be
completed upon determination of pricing upon the effective date).

(h) Consolidated Statement of Operations for Dunn for the fiscal year ended
October 31, 1997.

(i) Combined Statement of Operations for IDP for the fiscal year ended
September 30, 1997.

(j) The Company has presented the combined statement of operations for Dunn and
IDP as the Company believes that this presentation is necessary for a
reader's understanding of the pro forma results of the combined entity. The
Company believes that STMS' statement of operations for the period from
November 1, 1996 to August 31, 1997 (effective date of the STMS Acquisition)
includes certain non-recurring charges that distort the overall pro forma
presentation. Futhermore, the Company believes that STMS will not operate in
the future at similar net loss levels.

(k) Statement of Operations for STMS from November 1, 1996 to August 31, 1997
(effective date of STMS Acquisition).

(l) Represents amortization expense of $1,006,761 and $240,000 related to the
intangible assets acquired in the IDP and STMS Acquisitions, respectively.

(m) Consolidated Statement of Operations for Dunn for the three months ended
January 31, 1998.

(n) Combined Statement of Operations for IDP for the three months ended December
31, 1997.

(o) Represents amortization expense of $251,690 related to the intangible assets
acquired in the IDP Acquisition.

(p) In 1997, the Financial Accounting Standards Board issued Statement No 128,
EARNINGS PER SHARE. Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options and warrants. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
appropriate, restated to conform to the Statement 128 requirement.

20
<PAGE>
SUMMARY UNAUDITED COMPARATIVE PER SHARE DATA

The following comparative per share data sets forth for the periods
presented Dunn, on an historical basis, and the Company, on a pro forma basis,
giving effect to Merger and the IDP Acquisition. Neither Dunn nor the Company
has ever paid cash dividends on its common stock. The data set forth below
should be read in conjunction with the audited and unaudited consolidated
financial statements of Dunn, including notes thereto, which are included in
this Proxy Statement/Prospectus. The data should also be read in conjunction
with the unaudited consolidated financial statements of Dunn as of and for the
three months ended January 31, 1998 and the summary unaudited pro forma combined
financial data, including notes thereto, included elsewhere in this Proxy
Statement/Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
OCTOBER 31, 1997 JANUARY 31, 1998
----------------- -----------------
<S> <C> <C>
Dunn Historical:
Income from continuing operations............................................ $ 0.44 $ 0.22
Income from continuing operations--assuming dilution......................... $ 0.43 $ 0.20
Book value per share(1)...................................................... $ 1.60 $ 1.73
Company Pro Forma:
Earnings per share........................................................... $ 0.08 $ 0.16
Earnings per share--assuming dilution........................................ $ 0.08 $ 0.15
Book value per share(2)...................................................... $ -- $ 1.90
Pro Forma Equivalent(3):
Earnings per share........................................................... $ 0.08 $ 0.16
Earnings per share--assuming dilution........................................ $ 0.08 $ 0.15
Book value equivalent........................................................ $ -- $ 1.90
</TABLE>

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

(1) The historical book value per share is computed by dividing stockholders'
equity by the number of shares of common stock outstanding at the end of
each period.

(2) The pro forma combined book value per share is computed by dividing pro
forma stockholders' equity by the pro forma number of shares outstanding at
the end of each period.

(3) The pro forma equivalent combined share amounts are calculated by
multiplying the combined pro forma per share amounts by the exchange ratio
of one share of Dunn common stock for each share of Company Common Stock.

21
<PAGE>
PRICE RANGE OF DUNN'S COMMON STOCK

Since April 1997, Dunn's common stock has been traded in the
over-the-counter market and prices are quoted on the Nasdaq National Market
under the symbol DNCC. The following table sets forth the high and low selling
prices for Dunn's common stock as reported by the Nasdaq National Market. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.

<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-------------------
HIGH LOW
------- --------
<S> <C> <C>
FISCAL 1997
First Quarter............... not public
Second Quarter.............. $ 7 1/8 $ 5
Third Quarter............... $ 7 1/4 $ 5 5/8
Fourth Quarter.............. $ 7 5/16 $ 5 1/2

FISCAL 1998
First Quarter............... $10 5/16 $ 6 21/32
Second Quarter (through
March 13, 1998)........... $ 9 1/2 $ 8 1/4
February 6, 1998(1)......... $ 9 1/8 $ 8 15/16
March 6, 1998(2)............ $ 8 3/4 $ 8 11/16
</TABLE>

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

(1) Last trading date preceding the public announcement of the IDP Acquisition.

(2) Last trading date prior to the execution of the Acquisition Agreement, which
includes the form of Merger Agreement.

On March 16, 1998, the closing price of Dunn's common stock as reported by
the Nasdaq National Market was $9 1/4 per share. There were approximately 1,000
beneficial holders of Dunn's common stock as of such date.

The Company's Common Stock has no trading history.

DIVIDEND POLICY

Neither Dunn nor the Company has ever paid or declared a dividend. The
payment of cash dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, its capital
requirements, financial condition and other relevant factors. The Company
intends, for the foreseeable future, to retain future earnings for use in the
Company's business. See "Risk Factors--No Dividends."

22
<PAGE>
THE MERGER AND THE IDP ACQUISITION
(ITEM 1 OF PROXY CARD)

THE FOLLOWING INFORMATION RELATING TO THE MERGER AGREEMENT AND THE
ACQUISITION AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THESE
AGREEMENTS WHICH ARE ATTACHED AS APPENDICES HERETO AND INCORPORATED HEREIN BY
REFERENCE. PLEASE READ THESE AGREEMENTS IN FULL.

GENERAL DESCRIPTION OF THE MERGER AND IDP ACQUISITION

Under the Merger Agreement, Dunn will be acquired by and become a
wholly-owned subsidiary of the Company. The Company is a new corporate entity
organized by Dunn for the purpose of effecting the IDP Acquisition. In
connection with the Merger, each outstanding share of Dunn common stock (other
than shares held in Dunn's treasury) will be converted into the right to receive
one share of Company Common Stock. The Merger Agreement provides that, upon the
terms and subject to the conditions set forth in the Merger Agreement and in
accordance with Delaware law, Merger Sub (a wholly owned subsidiary of the
Company) will merge with and into Dunn, the separate existence of Merger Sub
will cease, and Dunn will be the surviving corporation and will continue as a
wholly-owned subsidiary of the Company.

Under the Acquisition Agreement, Dunn and the Company have agreed to pay the
IDP Sellers approximately $14.9 million in cash (the "Cash Portion") and 750,000
shares of Company Common Stock, subject to adjustment (the "Share Portion") to
acquire all of the shares of IDP Co. and through a newly-formed subsidiary to
acquire substantially all of the net assets of PRIMO. In connection with the
Share Portion, the Company will grant certain of the IDP Sellers piggy-back
registration rights and under certain conditions demand registration rights. The
Company intends to finance the Cash Portion of the IDP Acquisition with part of
the proceeds from the Offering of 2,500,000 shares of the Company's common
stock. Upon completion of the IDP Acquisition, the Merger and the Offering,
certain of the IDP Sellers will own approximately 8.9% of the Company's
outstanding Common Stock (or 8.7% if an over allotment option issued to the
underwriters of the Offering is exercised in full).

Consummation of the Merger will occur upon the filing of a certificate of
merger, together with any required certificates, with the Delaware Secretary of
State. The certificate of merger will be filed concurrently with the closing of
the IDP Acquisition, which will occur if and when the conditions to the IDP
Acquisition have been satisfied or waived, and upon the completion of the
Offering. The reorganization effected by the Merger is a necessary step towards
completion of the IDP Acquisition. THE MERGER WILL OCCUR ONLY CONTEMPORANEOUSLY
WITH THE SUCCESSFUL CONSUMMATION OF THE IDP ACQUISITION AND THE OFFERING.

RECOMMENDATION OF THE BOARD OF DIRECTORS; DUNN'S REASONS FOR THE IDP ACQUISITION

DUNN'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND ADOPTED THE MERGER
AGREEMENT AND THE ACQUISITION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY AND HAS DETERMINED THAT THE MERGER AND THE IDP ACQUISITION ARE FAIR AND
IN THE BEST INTERESTS OF DUNN AND ITS STOCKHOLDERS. ACCORDINGLY, DUNN'S BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE MERGER AGREEMENT.

Through the IDP Acquisition, Dunn will acquire a leading manufacturer in the
Government market of portable and desktop computer systems and network servers
and a provider of repair and warranty services. IDP manufactures its products in
its ISO 9000 certified facility in Gaithersburg, Maryland and in its facility in
Guayama, Puerto Rico. Additionally, IDP has spent the last four years developing
a proprietary management system that enables it to provide build-to-order
systems to the federal Government.

23
<PAGE>
According to an IT industry research group, International Data Corporation
("IDC"), IDP was the second leading supplier of notebook computers ahead of
International Business Machine Corporation ("IBM"), Compaq Computer Corporation
("Compaq") and Dell Computer Corporation ("Dell") and was the ninth largest
supplier of desktop systems to the federal Government in 1996. IDP's customers
include the agencies within the Department of Defense, Department of Justice and
Social Security Administration. IDP had total revenues of approximately $71.9
million for fiscal 1997 and after giving effect to the IDP Acquisition and the
STMS Acquisition, the Company's pro forma combined revenue for fiscal 1997 was
$109.1 million.

Dunn's management considers the IDP Acquisition to be consistent with Dunn's
growth strategy and believes that the IDP Acquisition will result in the
benefits set forth below, among others.

DOUBLE EXISTING GOVERNMENT CUSTOMER BASE. Dunn believes the increase in the
Company's Government customer base is the most important element of the IDP
Acquisition. Dunn's customer base as of January 31, 1998 was over 450. As of the
Closing, the Company's Government customer base will be more than 950. IDP has
sold more than 60,000 portable computers and 40,000 desktop computers to the
federal Government and actively maintains over 35,000 systems. The changes in
the procurement regulations of the Government have enabled Government purchasers
to buy from an expanding array of vendors. Dunn believes that the vast majority
of these customers will continue to purchase their computer hardware and
technical services needs from those vendors with whom they have a satisfactory
working relationship. By doubling its customer base early in the new procurement
landscape, management believes it will obtain a competitive advantage by
developing a large network of loyal and satisfied customers.

EXPAND THE COMPANY'S PORTABLE COMPUTER PRODUCT LINE. IDP has a full line of
portable notebook computers and provides the customer support organization
required to further penetrate both the Government and commercial markets.
Portable computers, which represent the fastest growing segment of the computer
hardware market, accounted for approximately 40% of revenues in IDP's fiscal
1997. Prior to the IDP Acquisition, Dunn has not had a full line of portables,
and has not had the required support organization. With the IDP Acquisition,
Dunn is positioned to meet the portable computer needs of its Government and
commercial customers.

PROVIDE COST SAVINGS AND ECONOMIES OF SCALE. Dunn expects significant
consolidated cost savings to result from the IDP Acquisition. For example, Dunn
expects the IDP Acquisition to: (i) result in greater volume discounts on
purchased part inventory; (ii) reduce overhead expense through the elimination
of duplicative operations and centralization of certain general and
administrative functions; (iii) create economies of scale from combined
utilization of facilities and production lines; (iv) reduce outside professional
fees; and (v) reduce costs from the integration of benefit plans.

PURCHASE PRICE FOR THE IDP ACQUISITION

Dunn and the Company have agreed to pay the IDP Sellers $14.9 million in
cash and 750,000 shares of Company stock to acquire all of the shares of IDP Co.
and substantially all of the net assets of PRIMO. The Acquisition Agreement
provides that this purchase price is subject to adjustment as described below.

ADJUSTMENT TO SHARE PORTION. If the Average Closing Price (as defined
below) for a share of Dunn common stock is less than $7.50, the Share Portion
shall be adjusted upward to that number of shares which multiplied by the
Average Closing Price equals $5,625,000. "Average Closing Price" shall be the
average of the mean between the closing high bid and asked prices for a share of
Dunn common stock as reported on the Nasdaq National Market for the twenty
consecutive trading days immediately preceding the date two business days before
the closing of the IDP Acquisition. If Dunn declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange of
shares or similar transaction between the date of the Acquisition Agreement and
the closing of the IDP Acquisition, the Share Portion shall be appropriately
adjusted to account therefor.

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ADJUSTMENT TO CASH PORTION. The purchase price shall be adjusted downward
if and to the extent that the combined balance sheet of IDP Co. and PRIMO as of
the Closing reflects a net asset value (net worth) of IDP Co. and PRIMO on a
combined basis of less than $5,108,826 at Closing (any such difference, the
"Shortfall Amount"). The IDP Sellers shall pay to the Company the Shortfall
Amount in cash or shares of Company Common Stock (valued for this purpose at
$8.50 per share), or a combination thereof, as the IDP Sellers shall elect,
within ten days of written acceptance by the Company of the closing balance
sheet.

The purchase price shall be adjusted upward if the combined balance sheet of
IDP Co. and PRIMO as of the Closing reflects a net worth of IDP Co. and PRIMO on
a combined basis of more than $5,242,634 at Closing (any such difference, the
"Excess Amount"); such adjustment shall be the amount of the Excess Amount up to
a maximum adjustment of $500,000. For purposes of this calculation, certain
expenses relating to the entering into of the Acquisition Agreement and the
Offering are to be deducted from the liabilities of IDP Co. and PRIMO on the
closing balance sheet.

MERGER CONSIDERATION

Upon consummation of the Merger each share of Dunn common stock shall be
converted into the right to receive one share of the Company's Common Stock

When the Merger is effective, all shares of Dunn common stock outstanding
immediately prior to the Merger will automatically be canceled and retired and
will cease to exist, and each certificate previously representing any such
shares will thereafter represent only the right to receive the same number of
shares of the Company's Common Stock. Upon the effectiveness of the Merger, the
Company will be the sole stockholder of Dunn.

TREATMENT OF DUNN STOCK OPTIONS AND WARRANTS

As of March 16, 1998, there were options and warrants outstanding to acquire
2,057,000 shares of Dunn common stock, including 1,832,000 options outstanding
under Dunn's 1997 Stock Option Plan (the "1997 Stock Option Plan"). Each option
and warrant that is outstanding as of the effective time of the Merger will be
converted into an option or warrant, as the case may be, to purchase the same
number of shares of the Company's Common Stock at the same exercise price;
provided, however, that in the case of any incentive stock option issued
pursuant to section 422 of the Code, the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be further adjusted to the extent necessary to maintain
incentive stock option status of the option. Any unvested options and warrants
so converted will retain the same vesting schedule. Each Dunn option and warrant
that is converted into an option or warrant to acquire the Company's Common
Stock will be on terms and conditions substantially the same as those applicable
to such Dunn option or warrant prior to the Merger. As soon as practicable after
the Merger, the Company will deliver to each holder of an outstanding option and
warrant an appropriate notice setting forth such holder's rights pursuant
thereto. The shares of the Company's Common Stock underlying the Dunn options
issued under the 1997 Stock Option Plan and converted into the Company's options
will be issued under a registration statement on Form S-8.

EXCHANGE OF CERTIFICATES

EXCHANGE AGENT. At the closing of the Merger, the Company will deposit with
an exchange agent designated by the Company and reasonably acceptable to Dunn
certificates evidencing the shares of the Company's Common Stock issuable in
exchange for shares of Dunn common stock and new option and warrant agreements
representing the right to purchase shares of the Company's Common Stock. The
Company will also make available to the exchange agent from time to time as
needed, any additional cash required to pay any dividends or distributions
subsequent to the Merger with respect to certificates for shares of the
Company's Common Stock held by the exchange agent.

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EXCHANGE PROCEDURES, NO FURTHER RIGHTS IN DUNN COMMON STOCK. Following
Closing, the Company will instruct the exchange agent to mail to each holder of
record of Dunn common stock, stock options and warrants a letter of transmittal
and instructions to effect the surrender of the certificates representing Dunn
common stock or the option or warrant agreement in exchange for certificates
evidencing the Company's Common Stock or a new option or warrant agreement, as
the case may be. Upon surrender thereof with such letter of transmittal, duly
executed, and such other customary documents as may be required pursuant to such
instructions, the holder of such certificate or stock option or warrant will
receive in exchange therefor the certificate or certificates of shares of the
Company's Common Stock, or a new option or warrant agreement, that such holder
is entitled to receive as a result of the Merger. The certificate representing
Dunn common stock so surrendered will forthwith be canceled. Until so
surrendered, each outstanding certificate that previously represented shares of
Dunn common stock will be deemed to evidence only the right to receive upon such
surrender the same number of shares of the Company's Common Stock.

DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, WILL BE MAILED TO
DUNN STOCKHOLDERS PROMPTLY FOLLOWING THE EFFECTIVE TIME OF THE MERGER AS TO THE
METHOD OF EXCHANGING CERTIFICATES FORMERLY REPRESENTING SHARES OF DUNN COMMON
STOCK. DUNN STOCKHOLDERS SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR SHARES
TO THE EXCHANGE AGENT OR DUNN PRIOR TO RECEIPT OF THE TRANSMITTAL LETTER.

DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED DUNN SHARES. No dividends or
other distributions declared or made with respect to the Company's Common Stock
with a record date after the effective time of the Merger will be paid to the
holder of any unsurrendered Dunn stock certificate with respect to the shares of
the Company's Common Stock such holder is entitled to receive pursuant to the
Merger Agreement until such holder shall surrender such certificate. Subject to
applicable law and the provisions of the Merger Agreement, following the
surrender of any such certificate there will be paid to the record holder of the
shares of the Company's Common Stock issued in exchange for such certificate,
without interest, at the time of such surrender, the amount of dividends or
other distributions with a record date after the Merger theretofore paid with
respect to such shares of the Company's Common Stock.

TRANSFERS OF OWNERSHIP. If any certificate for shares or the Company's
Common Stock is requested to be issued in a name other than that in which the
certificate representing shares of Dunn common stock surrendered in exchange
therefore is registered, it will be a condition of the issuance that the
certificate surrendered will be properly endorsed and otherwise in proper form
for transfer. Also, the person requesting such exchange will have to pay the
Company or any designated agent any transfer or other taxes required by reason
of the issuance of a certificate for shares of the Company's Common Stock in any
name other than that of the registered holder of the certificate surrendered.

TERMINATION OF EXCHANGE FUND, NO LIABILITY, AND WITHHOLDING RIGHTS. At any
time following six months after the effective date of the Merger, the Company
will be entitled to require the exchange agent to deliver to the Company all
stock certificates, and any cash for the payment of dividends or distributions
subsequent to the Merger, that have been made available to the exchange agent by
the Company and that have not been delivered to holders of certificates
representing shares of Dunn common stock. Thereafter, such holders will be
entitled to look only to the Company as general creditors thereof with respect
to the stock certificates and any such cash to which they are entitled. However,
neither the Company, Merger Sub nor Dunn will be liable to any holder of Dunn
common stock for any stock certificates or cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. The
Company or the exchange agent will be entitled to deduct and withhold from any
dividends or distributions otherwise payable to any Dunn stockholder such
amounts as the Company or the exchange agent is required to deduct and withhold
with respect to the making of such payment under any provisions of federal,
state, local or foreign tax law.

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LOST, STOLEN OR DESTROYED CERTIFICATES. No one will receive a certificate
for shares of the Company's Common Stock in exchange for a certificate for
shares of Dunn common stock that has been lost, stolen or destroyed without
first delivering an affidavit and an indemnity bond.

ANTICIPATED ACCOUNTING TREATMENT

The IDP Acquisition will be accounted for as a "purchase" as such term is
used under generally accepted accounting principles. Accordingly, from and after
the Merger, IDP's combined results of operations will be included with Dunn's in
the Company's consolidated results of operations. For purposes of preparing
consolidated financial statements, the Company will establish a new accounting
basis for IDP's assets and liabilities based upon the fair market values thereof
and the Company's purchase price, including the fees and other costs associated
with the IDP Acquisition at the date of consummation. Accordingly, the purchase
accounting adjustments made in connection with the development of the pro forma
combined financial information appearing elsewhere in this Proxy
Statement/Prospectus are preliminary and have been made solely for purposes of
developing such pro forma combined financial information to comply with the
disclosure requirements of the Securities and Exchange Commission. Although the
final allocation of the purchase price to the fair values of IDP's assets and
liabilities may differ, the pro forma combined financial information reflects
management's best estimate based upon currently available information. See
"Summary Unaudited Pro Forma Combined Financial Data."

In connection with the Merger, Dunn's historical financial statements will
be included in the Company's consolidated financial statements based on
historical carrying amounts.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain federal income tax consequences
applicable as a result of the Merger and the IDP Acquisition to holders of Dunn
common stock, Dunn and the Company. This summary is based upon the provisions of
the Code, applicable Treasury Regulations thereunder, judicial decisions, and
current administrative rulings.

Jones, Day, Reavis & Pogue, counsel for Dunn, is delivering an opinion to
Dunn to the effect that the description of the federal income tax consequences
to holders of Dunn common stock, Dunn and the Company contained under the
heading "--Treatment of Holders of Dunn Common Stock, Dunn and the Company"
below correctly sets forth the material federal income tax consequences of the
Merger and the IDP Acquisition for such persons. This opinion is based upon,
among other things, a representation letter provided by Dunn to counsel
containing customary statements relating to planned dispositions of Company
stock by certain holders of Dunn stock, plans on the part of the Company to
undertake or cause Dunn to undertake transactions outside of the ordinary course
of business, and certain other technical requirements under the Code.

No rulings have been or will be requested from the Internal Revenue Service
(the "IRS") with respect to any of the matters discussed herein, and the opinion
of counsel described above is not binding on the IRS. There can be no assurance
that future legislation, regulations, administrative rulings, or court decisions
will not adversely affect the accuracy of the statements contained herein.

TREATMENT OF HOLDERS OF DUNN COMMON STOCK, DUNN AND THE COMPANY

The following discussion does not address all aspects of federal income
taxation that may be important to particular taxpayers in light of their
personal investment circumstances or to taxpayers subject to special treatment
under the federal income tax laws (including life insurance companies, foreign
persons, tax-exempt entities, and holders who acquired their Dunn common stock
pursuant to the exercise of employee stock options or otherwise as compensation)
and does not address any aspect of state, local, or foreign taxation. This
summary also assumes that the Dunn common stock will be held as capital assets
at the effective time of the Merger.

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The Merger will be treated for federal income tax purposes as a
reorganization described in section 368(a) of the Code and/or a transfer of
property by the Dunn stockholders to the Company described in section 351 of the
Code. Accordingly, a holder of Dunn common stock who, pursuant to the Merger,
exchanges such stock for the Company's Common Stock will not recognize gain or
loss upon such exchange. The tax basis of the Company's Common Stock received in
the Merger by such holder will be equal to the tax basis of the Dunn common
stock surrendered and the holding period of the Company's Common Stock will
include the holding period of such Dunn common stock surrendered. Neither Dunn
nor the Company will recognize gain or loss as a result of the Merger.

Neither the Dunn Stockholders, Dunn nor the Company will recognize gain or
loss as a result of the IDP Acquisition.

STOCK EXCHANGE LISTING

It is a condition to the consummation of the Merger that the shares of the
Company's Common Stock to be issued in connection with the Merger be approved
for listing on the Nasdaq National Market, subject to official notice of
issuance. It is expected that the Company's Common Stock will trade after the
Closing on the Nasdaq National Market under the symbol "DNCC," the symbol used
by Dunn prior to the Closing.

RESTRICTIONS ON RESALE FOR AFFILIATES

The Company's Common Stock issuable in the Merger has been registered under
the Securities Act, but this registration does not cover resales by those
stockholders of Dunn or the Company who are deemed to control, be controlled by,
or be under common control with Dunn or the Company, respectively, within the
meaning of the Securities Act ("affiliates"). Affiliates may not sell their
shares of the Company's Common Stock acquired in the Merger except pursuant to
an effective registration statement under the Securities Act covering the resale
of such shares, or in compliance with the resale provisions of Rule 145 under
the Securities Act or another applicable exemption from the registration
requirements of the Securities Act.

In addition, all of the Company's directors, executive officers and certain
existing stockholders (who will hold securities relating to an aggregate
4,675,000 shares of the Company's Common Stock), have agreed not to sell or
offer to sell any shares of the Company's Common Stock until 180 days from
, 1998, the date of the prospectus for the Offering, except pursuant to
gifts or pledges in which the donee or pledgee agrees to be bound by such
restrictions, without the prior written consent of the underwriter of the
Offering. These agreements are enforceable only by the parties thereto, and are
subject to rescission or amendment at any time without approval of other
stockholders.

DISSENTERS' RIGHTS

Section 262 of the General Corporation Law of the State of Delaware (the
"DGCL") provides appraisal rights (also referred to as "dissenters' rights") to
stockholders of a Delaware corporation in certain situations. However, section
262 appraisal rights are not available for shares of a corporation in a merger
if the corporation's shares are listed on a national securities exchange or
included on the Nasdaq National Market and if, in consideration for those
shares, the stockholder receives shares of the corporation surviving or
resulting from the merger and such surviving corporation's shares are also
listed on a national securities exchange or included on the Nasdaq National
Market. Since the Merger is being effected pursuant to the above provisions of
the DGCL, appraisal rights will not be available to Dunn stockholders in
connection with the Merger.

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IDP ACQUISITION REPRESENTATIONS AND WARRANTIES

The Acquisition Agreement contains, subject to certain exceptions, similar
representations concerning IDP Co. and PRIMO (made by the IDP Sellers) and
concerning Dunn and the Company as to, among other things: due organization and
good standing; corporate authorization to enter into the contemplated
transactions; approvals required in connection with the contemplated
transactions; absence of any breach of organizational documents and contracts
and other agreements as a result of the contemplated transactions;
capitalization; ownership of shares; financial statements; status of agreements;
government contracts; absence of material changes (including changes which would
have a material adverse effect); absence of undisclosed material liabilities;
compliance with laws and court orders; litigation; tax matters; employee
matters; environmental matters; and patents and other proprietary rights.

The IDP Sellers have agreed to indemnify the Company and the Company has
agreed to indemnify the IDP Sellers until the second anniversary of the Closing
of the IDP Acquisition for losses resulting from breaches of certain
representations and warranties. Neither the Company nor the IDP Sellers are
required to indemnify the other unless and until the aggregate amount of such
losses exceeds $500,000, whereupon the Company or the IDP Sellers, as the case
may be, are entitled to receive indemnity payments to the full extent of the
aggregate amount of losses not to exceed $10.0 million.

CONDITIONS PRECEDENT TO THE IDP ACQUISITION

The obligations of Dunn to consummate the IDP Acquisition are subject to the
following conditions, any one or more of which may be waived by Dunn:

(1) the representations and warranties with respect to IDP Co. and PRIMO
must be true and correct in all material respects on and as of the Closing of
the IDP Acquisition with the same effect as though such representations and
warranties were made on and as of such date; the covenants required to be
performed by the IDP Sellers must have been performed in all material respects;
and no material adverse change shall have occurred with respect to the financial
condition, assets or business of IDP Co. and PRIMO;

(2) certain third-party consents shall have been obtained and there shall
not have been entered a preliminary or permanent injunction, restraining order
or other judicial or administrative order the effect of which would prohibit the
IDP Acquisition;

(3) IDP Co. and PRIMO shall have entered into employment agreements with two
executives of IDP Co. in the forms attached to the Acquisition Agreement
pursuant to which each executive will be entitled to stock options to purchase
up to 300,000 shares of the Company's Common Stock (subject to adjustment to
400,000 shares under certain conditions);

(4) certain indebtedness of IDP Co. running to the IDP Sellers and certain
of their relatives in the principal amount of $1,557,057 shall have been
refinanced;

(5) the prior spin-off of certain assets and liabilities of IDP Co.
(described in Exhibit G to the Acquisition Agreement attached hereto) to F
Squared Engineering, Corp., the outstanding stock of which will be owned by the
IDP Sellers;

(6) there shall have been furnished to Dunn a favorable opinion of Thacher
Proffitt & Wood in the form attached to the Acquisition Agreement; and

(7) the Offering shall have occurred, the net proceeds of which are at least
equal to $14.9 million, the Cash Portion of the purchase price; and at the
effective date of the Merger, the Company's Common Stock to be issued in
connection with the Merger and the Offering shall be approved for listing on the
Nasdaq National Market.

The obligations of the IDP Sellers to consummate the IDP Acquisition are
subject to the following conditions, any one or more of which may be waived by
the IDP Sellers:

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(1) the Company shall have delivered to the IDP Sellers both the Cash
Portion and the Share Portion of the purchase price for the IDP Acquisition;

(2) the representations and warranties with respect to Dunn and the Company
must be true and correct in all material respects on and as of the closing of
the IDP Acquisition with the same effect as though such representations and
warranties were made on and as of such date; the covenants required to be
performed by Dunn and the Company must have been performed in all material
respects; and no material adverse change shall have occurred with respect to the
financial condition, assets or business of Dunn;

(3) there shall not have been entered a preliminary or permanent injunction,
restraining order or other judicial or administrative order the effect of which
would prohibit the IDP Acquisition;

(4) IDP Co. and PRIMO shall have entered into employment agreements with two
executives of IDP Co. referred to above; the Company shall have entered into a
registration rights agreement with the IDP Sellers in the form attached to the
Acquisition Agreement; and certain IDP Sellers shall have been duly appointed to
the Board of Directors of the Company;

(5) there shall have been furnished to the IDP Sellers a favorable opinion
of Jones, Day, Reavis & Pogue in the form attached to the Acquisition Agreement;
and

(6) the Offering shall have occurred, the net proceeds of which are at least
equal to $14.9 million, the Cash Portion of the purchase price.

CONDUCT OF BUSINESS PENDING THE IDP ACQUISITION

COVENANTS OF IDP. The Acquisition Agreement provides that unless otherwise
consented to by Dunn, prior to the Closing of the IDP Acquisition the IDP
Sellers will cause IDP to: (i) use reasonable efforts to keep the business of
IDP intact and not take or knowingly permit to be taken actions other than in
the ordinary course of business as the same is presently being conducted, and to
maintain the goodwill and reputation associated with their business; (ii)
continue their existing practices relating to the maintenance of assets used in
their business; (iii) not purchase, sell, lease or dispose of, or make any
contract for the purchase, sale, lease or disposition of, or subject to any
lien, any assets other than in the ordinary course of their business; (iv)
except as specifically provided for in the Acquisition Agreement, not increase
the rates of compensation of any employee except for normal salary increases in
the ordinary course of business consistent with past practice; and (v) not amend
their governing documents or make any change in their capital stock or grant any
option, warrant or other right to purchase or to convert any obligation into
shares of capital stock.

COVENANTS OF DUNN. The Acquisition Agreement further provides that unless
otherwise consented to by the IDP Sellers, prior to the closing of the IDP
Acquisition Dunn and the Company will: (i) use reasonable efforts to keep the
business of Dunn intact and not take or not permit to be taken actions other
than in the ordinary course of business as the same is presently being
conducted, and to maintain the goodwill and reputation associated with the
business of Dunn; (ii) continue its existing practices relating to the
maintenance of assets used in its business; and (iii) not amend its governing
documents, or make any change in its capital stock or, except pursuant to the
Plan, grant any option, warrant or other right to purchase or to convert any
obligation into shares of capital stock.

JOINT COVENANTS OF DUNN AND IDP. Dunn and the IDP Sellers shall, together,
use reasonable efforts to seek to have the governmental counterparties to
certain IDP Co. contracts awarded under the SBA's 8(a) Program obtain waivers
from the SBA for the change in ownership of IDP Co., as required for the
continuation of such contracts. See "Risk Factors--Risks Related to the IDP
Acquisition and Future Acquisitions."

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ACQUISITION AGREEMENT TERMINATION AND AMENDMENT

TERMINATION. The Acquisition Agreement may be terminated under certain
circumstances, including (i) by the mutual consent of the Board of Directors of
Dunn and the IDP Sellers; (ii) if the Offering and the IDP Acquisition are not
consummated by June 30, 1998; or (iii) there shall have been entered a final
non-appealable order or injunction of any court or government authority
restraining or prohibiting the consummation of the transactions contemplated by
the Acquisition Agreement. There can be no assurance that the conditions to the
closing of the IDP Acquisition will be satisfied or waived or that the
Acquisition Agreement will not be terminated prior to closing.

AMENDMENT. The Acquisition Agreement may be amended at any time prior to
the consummation of the IDP Acquisition by the written consent of the parties.

IDP ACQUISITION FEES AND EXPENSES

Each of IDP and the IDP Sellers will pay one-half of the fees and expenses
of IDP and the IDP Sellers in connection the Acquisition Agreement and the
consummation of the transactions contemplated thereby (except that to the extent
that payments to Gruntal & Co. for their advice and services to the IDP Sellers
exceed $600,000, the excess will be solely the responsibility of the IDP
Sellers). Dunn will pay its own expenses in connection with the Acquisition
Agreement and the consummation of the transactions contemplated thereby.

The Acquisition Agreement also provides that if the Acquisition Agreement is
terminated because the Closing has not occurred before June 30, 1998, Dunn shall
pay to the IDP Sellers a termination fee in the amount of $500,000, provided
that if the Closing does not occur on or before June 30, 1998 because (i) the
conditions precedent to the obligations of Dunn to consummate the IDP
Acquisition were not met, or (ii) the Offering is postponed or terminated
because of general market conditions on the basis of a joint decision of Ferris
Baker Watts and Gruntal & Co., investment advisors to Dunn and IDP, respectively
(or if such firms do not agree, upon the decision of a third investment banking
firm chosen by Ferris Baker Watts and Gruntal & Co.), then no termination fee
shall be paid.

DESCRIPTION OF THE COMPANY'S COMMON STOCK

The following is a description of all material terms and features of the
securities of the Company, but does not purport to be complete and is subject in
all respects to applicable Virginia law and to the provisions of the Company's
Certificate of Incorporation and Bylaws, copies of which have been filed with
the Commission as Exhibits to the Registration Statement of which this Proxy
Statement/Prospectus is a part. See also "Comparative Rights of Stockholders"
for a description of various differences between the rights of stockholders of
Dunn and the rights of shareholders of the Company.

GENERAL

The Company is authorized by its Articles of Incorporation to issue an
aggregate of 20,000,000 shares of Common Stock, $.001 par value per share, and
2,000,000 shares, $.001 par value per share, of preferred stock (the "Preferred
Stock"). At the Closing, 5,150,000 shares of Common Stock will be issued in
exchange for the common stock of Dunn in the Merger. See "The Merger and the IDP
Acquisition." No shares of the authorized Preferred Stock are issued and
outstanding. All shares of Common Stock are of the same class and have equal
rights and attributes.

PREFERRED STOCK

The Company is authorized by its Articles of Incorporation to issue a
maximum of 2,000,000 shares of Preferred Stock, in one or more series and
containing such rights, privileges and limitations, including voting rights,
dividend rates, conversion privileges, redemption rights and terms, redemption
prices and

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liquidation preferences, as the Board of Directors of the Company may, from time
to time, fix by amendment of the Articles of Incorporation. No shares of the
Preferred Stock have been issued, and the Company has no present plans to issue
any Preferred Stock.

The issuance of shares of Preferred Stock pursuant to the Board's authority
described above could decrease the amount of earnings and assets available for
distribution to holders of Common Stock, and, coupled with special voting rights
could otherwise materially and adversely affect the rights and powers, including
voting rights, of such holders and may have the effect of delaying, deferring or
preventing a change in control of the Company. The Board of Directors does not
currently intend to seek stockholder approval prior to any issuance of
authorized but unissued Preferred Stock.

COMMON STOCK

The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders of the Company. In addition, such
holders are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the payment of preferential dividends with
respect to any shares of Preferred Stock that may be outstanding from time to
time. In the event of the dissolution, liquidation or winding up of the Company,
the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of all liabilities of the Company, subject to the prior
distribution rights of the holders of any Preferred Stock that may be
outstanding at that time. All outstanding shares of Common Stock are, and the
shares of Common Stock offered in the Offering when issued will be, fully paid
and nonassessable.

The holders of Common Stock do not have any subscription, redemption or
conversion rights, nor do they have any preemptive or other rights to acquire or
subscribe for additional, unissued or treasury shares. Accordingly, if the
Company were to issue additional shares of Common Stock, current Company
shareholders would have no right to purchase additional shares and, as a result,
their percentage equity interest in the Company would be reduced.

The holders of Common Stock do not have cumulative voting rights.
Accordingly, all directors will be elected by the affirmative vote of the
holders of a majority of the Company's outstanding Common Stock. The Board is
empowered to fill any vacancies on the Board created by the resignation, death
or removal of directors.

Upon completion of the Offering (but without giving effect to the exercise
of the over-allotment option issued in connection with the Offering, or any
outstanding stock options or warrants), the Company's executive officers and
directors will beneficially own approximately 54% of the outstanding shares of
Common Stock, and will be in a position to control the voting results of certain
actions required or permitted to be taken by stockholders of the Company,
including the election of directors. However, as no voting agreement exists
among these executive officers and directors, each is able to vote as he or she
may desire on any issue affecting the Company.

VIRGINIA ANTI-TAKEOVER LAW

Under the Virginia Control Share Acquisition statute (Section 13.1-728 et
seq. of the Virginia Stock Corporation Act ("VSCA")), a person ( the "acquiror")
who makes a bona fide offer to acquire, or acquires, shares of stock of a
Virginia corporation that when combined with shares already owned, would
increase the acquiror's ownership to at least 20%, 33 1/3%, or a majority of the
voting stock of the corporation, must obtain the approval of a majority in
interest of the shares held by all shareholders (except the acquiror and
officers and inside directors of the corporation) in order to vote the shares
acquired. The statute does not apply to mergers pursuant to a merger or plan of
share exchange effected in compliance with the relevant provision of the VSCA.
The Control Share Acquisition statute permits a Virginia corporation to elect
not to be governed by these provisions by including such an election in its
articles of incorporation or bylaws, and does not apply to companies with less
than 300 shareholders. The

32
<PAGE>
Company has elected not to be governed by the Control Share Acquisition statute
in its Articles of Incorporation.

Virginia's Affiliated Transactions statute (Section 13.1-725 et seq. of the
VSCA) provides that if a person acquires 10% or more of the stock of a Virginia
corporation without the approval of its board of directors (an "interested
shareholder"), such person may not engage in certain transactions with the
corporation (including a merger and purchase or sale of greater than 5% of the
corporation's assets or voting stock) for a period of three years, and then only
with the specified supermajority shareholder vote, disinterested director
approval or fair price and procedural protections. Virginia's statute includes
certain exceptions to this prohibition; for example, if a majority of
disinterested directors approves the acquisition of stock or the transaction
prior to the time that the person became an interested shareholder, or if the
transaction is approved by the board of directors and by the affirmative vote of
two-thirds of the outstanding voting stock which is not owned by the interested
shareholder, the prohibition does not apply.

The VSCA contains provisions which permit a corporation to take the steps
necessary to implement a shareholder rights plan, sometimes referred to as a
"poison pill," whereby all shareholders, except for the acquiror, have certain
economically powerful rights that are activated upon an acquiror obtaining a 20%
(or other percentage) stock ownership position. The Company has not implemented
a "poison pill." The Company's Articles of Incorporation do provide for
preferred stock as to which the board of directors has authority to determine
the terms of such stock, which is generally a prerequisite to implementing a
"poison pill."

PERSONAL LIABILITY OF DIRECTORS

Under the VSCA, the liability of an officer or director for a single
transaction in a proceeding brought by or in the right of a corporation or on
behalf of shareholders is limited to damages not exceeding the lesser of (i) the
monetary amount, including the elimination of liability, specified in the
articles of incorporation or, if approved by the shareholders, in the bylaws, as
a limitation on or elimination of the liability of the officer or director; or
(ii) the greater of $100,000 or the amount of cash compensation received by the
officer or director from the corporation during the 12 months immediately
preceding the act or omission for which liability was imposed. The liability of
an officer or director may not be so limited if the officer or director engaged
in willful misconduct or a knowing violation of the criminal law or of any
federal or state securities law, including, without limitation, any claim of
federal or state securities law, including, without limitation, any claim of
unlawful insider trading or manipulation of the market for any security.

The Company's Articles of Incorporation include a provision eliminating, to
the fullest extent permitted by law, the personal liability of directors.

The Articles of Incorporation provide for the indemnification of, and
advancement of litigation expenses to, the directors and officers of the Company
to the fullest extent permitted by Virginia law. Furthermore, the Company may
enter into indemnification agreements with its directors and officers for the
indemnification of and advancing of expenses to such person to the fullest
extent permitted by law.

Dunn has directors' and officers' liability insurance in the amount of $1.0
million.

TRANSFER AGENT

The Transfer Agent for the Common Stock of the Company is Continental Stock
Transfer & Trust Company.

33
<PAGE>
COMPARATIVE RIGHTS OF STOCKHOLDERS

At the effective time of the Merger, each share of Dunn common stock will be
converted into one share of the Company's Common Stock, and holders of Dunn
common stock will become shareholders of the Company, a Virginia corporation. As
a result, their rights as shareholders of the Company will be governed by the
VSCA and the Articles of Incorporation and Bylaws of the Company, and will no
longer be governed by the DGCL or the Certificate of Incorporation or Bylaws of
Dunn. The following summary of certain differences which may affect the rights
and interests of Dunn stockholders does not purport to be a complete discussion
of such differences, but should give some basis for Dunn stockholders to
evaluate their rights as shareholders of the Company upon receipt of the
Company's Common Stock. References to the VSCA and DGCL below describe Virginia
and Delaware law, respectively, as it is currently in effect.

BOARD OF DIRECTORS

NUMBER. Dunn's Bylaws currently provide that the number of directors
constituting the entire Board of Directors shall consist of not less than three
(3) nor more than seven (7) members, as may be determined by the stockholders
from time to time. The Company's Articles of Incorporation provide that the
number of directors shall consist of not less than five (5) not more than
fifteen (15) directors, as may be determined or changed by the Board of
Directors or by the affirmative vote of not less than 66 2/3% of the voting
shareholders. Currently, the Company has 7 directors.

REMOVAL. The DGCL provides that directors may be removed with or without
cause by the vote of holders of a majority of shares entitled to vote for the
election of directors. Although the VSCA also provides that directors may be
removed by shareholders with or without cause unless the articles of
incorporation provide otherwise, the Articles of Incorporation of the Company
provide that directors may be removed only for cause and only by an affirmative
vote of the holders of at least 66 2/3% of the outstanding shares of the Company
then entitled to vote on the election of the directors.

VACANCIES. In accordance with the DGCL, Dunn's Bylaws provide that
vacancies may be filled by the directors then in office (other than vacancies
occurring from the removal of a director by the stockholders). Pursuant to the
VSCA, unless the articles of incorporation provide otherwise, if a vacancy
occurs on the board of directors, including a vacancy resulting from an increase
in the number of directors, such vacancy may be filled by the shareholders, the
board of directors, or if the directors remaining in office constitute fewer
than a quorum, the vacancy may be filled by the affirmative majority vote of
such remaining directors. The Company's Articles of Incorporation provide that
any vacancy in the Board of Directors (including by removal or an increase in
the number of directors) may be filled by a majority vote of the remaining
directors, even if less than a quorum.

CUMULATIVE VOTING. Under the DGCL, cumulative voting in the election of
directors is not mandatory. The Dunn Certificate of Incorporation does not
provide for cumulative voting. Similarly, under the VSCA, shareholders do not
have a right to cumulative voting unless the articles of incorporation so
provide. The Articles of Incorporation of the Company do not provide for
cumulative voting.

CLASSIFIED BOARD. The DGCL allows a corporation to adopt a classified board
of directors consisting of as many as three classes, without specifying any
minimum number required in each class. The Dunn Certificate of Incorporation or
Bylaws do not provide for a classified Board of Directors. The VSCA similarly
allows a corporation's articles of incorporation to provide for staggering the
terms of directors by dividing the total number of directors into two or three
groups, with each group containing one-half or one-third of the total. The terms
of directors in the first group expire at the first annual shareholders' meeting
after their election, the terms of the second group expire at the second annual
shareholders' meeting after their election, and the terms of the third, if any,
expire at the third annual shareholders' meeting after their election. At each
annual meeting of shareholders held thereafter, the successors to the class of
directors whose term expires shall be elected to hold office for a three-year
term. The Company's

34
<PAGE>
Board of Directors is divided into three classes of directors and, in accordance
with the VSCA, Class I, II and III directors shall hold office for a term
expiring at the 1999, 2000, 2001 annual shareholders meeting, respectively.
Thereafter, the successors to the class of directors whose term expires shall
serve for three-year terms.

SPECIAL MEETING OF STOCKHOLDERS

The DGCL provides that a special meeting of stockholders may be called by a
corporation's board of directors or by such person or persons as may be
authorized by its certificate of incorporation or bylaws. The DGCL does not
provide stockholders with the right to call special meetings unless otherwise
set forth in the certificate of incorporation or bylaws. In that regard, Dunn's
Bylaws provide that a special meeting of stockholders may be called by the
President, at the written request of 25% of the stockholders or at the written
request of a majority of the Board of Directors.

The VSCA provides that a special meeting of the shareholders may be called
by the chairman of the board of directors, the board of directors or the person
or persons authorized by the articles of incorporation or bylaws. The Company's
bylaws provide that special meetings of shareholders may be called as provided
in the Company's Articles of Incorporation. The Company's Articles of
Incorporation incorporate the above VSCA provisions as well as the right of the
President and a majority of the Board of Directors, even if less than a quorum,
to call such a meeting. Furthermore, the Company's Articles of Incorporation
provide that the holders of more than 50% of the Company's voting shares may
call a special meeting; if an annual shareholder's meeting is not held within 15
months after the last annual shareholders' meeting, a special meeting may be
called by the holders of 20% or more of the Company's voting shares.

STOCKHOLDER ACTION IN LIEU OF MEETING

The DGCL provides that, unless otherwise provided in a corporation's
certificate of incorporation, any action required or permitted to be taken at an
annual or special meeting of 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 that would be taken, is signed by holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize such action at a meeting.

The VSCA permits shareholders to act without meeting only be unanimous
written consent by all shareholders entitled to vote on the action.

BYLAW AMENDMENTS BY DIRECTORS

Under the DGCL, the power to adopt, amend, or repeal bylaws is vested
exclusively in the stockholders entitled to vote, unless the certificate of
incorporation confers such power upon the board of directors as well. The Dunn
Certificate of Incorporation provides that the Board of Directors is expressly
authorized to make, alter or repeal Dunn's Bylaws.

The VSCA provides generally that a corporation's board of directors may
amend or repeal the corporation's bylaws except (i) to the extent such power is
reserved to the shareholders by the articles of incorporation or the VSCA, (ii)
to the extent the shareholders in adopting or amending particular bylaws provide
expressly that the board of directors may not amend or repeal that bylaw, and
(iii) the corporation's shareholders may amend or repeal bylaws even though the
bylaws may be amended or repealed by the board of directors. The Company's
Articles of Incorporation provides that the Company's bylaws may be amended only
by the Board of Directors or the affirmative vote of not less than 66 2/3% of
the total number of votes of the then outstanding shares entitled to vote,
voting together as a single class.

35
<PAGE>
AMENDMENT OF THE CERTIFICATE OR ARTICLES OF INCORPORATION

Under the DGCL, the affirmative vote of a majority of the outstanding stock
entitled to vote is required to amend the certificate of incorporation.

Under the VSCA, amendments to a corporation's articles of incorporation
generally require the vote of at least two-thirds of each class outstanding and
entitled to vote thereon or, if the articles of incorporation so provide, a
greater or lesser proportion, but not less than a majority of the outstanding
shares of each class. The Company's Articles of Incorporation does not alter the
two-thirds rule.

PAYMENT OF DIVIDENDS; SHARE REPURCHASES

Under the DGCL, a corporation may declare and pay dividends either out of
its surplus or, if there is no surplus, out of its net profits for the fiscal
year in which the dividend is declared and/or the preceding fiscal year.

The DGCL permits a corporation to purchase or redeem shares of its own stock
when its capital is not impaired and such purchase or redemption would not cause
any impairment of the capital of the corporation, except that a corporation may
purchase or redeem out of capital any of its preferred shares if such shares
will be retired upon their acquisition and the capital of the corporation will
be reduced in accordance to the DGCL.

Under the DGCL, a corporation may not purchase any of its redeemable shares
for more than the price at which they may then be redeemed.

Under the VSCA, a board of directors may authorize and the corporation may
make distributions to its shareholders (including dividends and share
repurchases) except that no distribution may be made if, after giving it effect,
the corporation would not be able to pay its debts as they become due in the
usual course of its business or the corporation's total assets would be less
than the sum of its total liabilities plus the amount that would be needed, if
the corporation were dissolved, to satisfy the preferential rights of holders of
securities with rights superior to the corporation's common stock. The directors
of a Virginia corporation may be personally liable to the corporation and its
creditors to the extent that a dividend authorized by the directors exceeds such
permissible amounts and is not repaid to the corporation, but may seek
contribution from other directors voting in favor of the distribution and from
the shareholders receiving the distribution.

VOTE ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS

The DGCL generally requires approval of any merger, consolidation or sale of
substantially all the assets of a corporation at a meeting of stockholders by
vote of the holders of a majority of all outstanding shares of the corporation
entitled to vote thereon. The certificate of incorporation of a Delaware
corporation may provide for a greater vote; the Dunn Certificate of
Incorporation does not so provide.

Under the VSCA, a sale, lease, exchange or other disposal of all or
substantially all of the property of a corporation other than in the usual or
regular course of business, requires the approval by the holders of more than
two-thirds of all the votes entitled to be cast on the transaction (unless the
board of directors requires a higher vote or the articles of incorporation
provide for a greater or lesser vote so long as the vote provided for is not
less than a majority of all the votes cast on the transaction by each voting
group entitled to vote on the transaction at a meeting at which a quorum
exists). Also under the VSCA, a plan of merger or share exchange generally must
be approved by each voting group entitled to vote on the plan by more than
two-thirds of all the votes entitled to be cast by that voting group (unless the
board of directors requires a higher vote or the articles of incorporation
provide for a greater or lesser vote so long as the vote provided for is not
less than a majority of all the votes cast on the plan by each voting group
entitled to vote on the transaction at a meeting at which a quorum exists). The
Company's Articles of Incorporation do not alter the shareholder vote
requirement relating to such transactions.

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<PAGE>
POSSIBLE ANTI-TAKEOVER EFFECTS

Subject to certain exceptions set forth below, the DGCL provides that a
corporation may not engage in any business combination with any "interested
stockholder" for a three-year period following the time that such stockholder
becomes an interested stockholder unless: (i) prior to such time, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding certain shares); or (iii) at or subsequent to
such time, the business combination is approved by the board of directors of the
corporation and by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the interested stockholder. An interested
stockholder is defined to include any person that is the owner of 15% or more of
the outstanding voting stock of the corporation, or is an affiliate or associate
of the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation, at any time within three years immediately prior to
the relevant date, and the affiliates and associates of such person. Under
certain circumstances, Section 203 of the DGCL makes it more difficult for an
"interested stockholder" to effect various business combinations with a
corporation for a three-year period.

As a Virginia corporation, the Company is subject to Virginia's Affiliated
Transactions statute which provides that if a person acquires 10% or more of the
stock of a Virginia corporation without the approval of its board of directors
(an "interested shareholder"), such person may not engage in certain
transactions with the corporation (including a merger and purchase or sale of
greater than 5% of the corporation's assets or voting stock) for a period of
three years, and then only with the specified supermajority shareholder vote,
disinterested director approval or fair price and procedural protections.
Virginia's statute includes certain exceptions to this prohibition; for example,
if a majority of disinterested directors approves the acquisition of stock or
the transaction prior to the time that the person became an interested
shareholder, or if the transaction is approved by the board of directors and by
the affirmative vote of two-thirds of the outstanding voting stock which is not
owned by the interested shareholder, the prohibition does not apply.

In addition, under the Virginia Control Share Acquisition statute, a person
(the "acquiror") who makes a bona fide offer to acquire, or acquires, shares of
stock of a Virginia corporation that when combined with shares already owned,
would increase the acquiror's ownership to at least 20%, 33 1/3%, or a majority
of the voting stock of the corporation, must obtain the approval of a majority
in interest of the shares held by all shareholders (except the acquiror and
officers and inside directors of the corporation) in order to vote the shares
acquired. The statute does not apply to mergers pursuant to a merger or plan of
share exchange effected in compliance with the relevant provision of the VSCA.
The Control Share Acquisition statute permits a Virginia corporation to elect
not to be governed by these provisions by including such an election in its
articles of incorporation or bylaws, and does not apply to companies with less
than 300 shareholders. The Company has elected out of the Control Share
Acquisition statute in its Articles of Incorporation.

37
<PAGE>
DIRECTOR LIABILITY; RELIANCE; INDEMNIFICATION

The DGCL and the VSCA are substantially identical with regard to limitations
on director liability. The DGCL and the VSCA permit a corporation to include in
its certificate or articles of incorporation, as the case may be, a provision
eliminating or limiting a director's liability to the corporation or its
shareholders for monetary damages for breaches of fiduciary duty, including
conduct which could be characterized as negligence or gross negligence. The DGCL
and the VSCA expressly provide, however, that liability for breaches of the duty
of loyalty, acts or omissions not in good faith or involving intentional
misconduct or knowing violations of the law, the unlawful purchase or redemption
of stock or payment of unlawful dividends or the receipt of improper personal
benefits cannot be eliminated or limited in this manner. Both statutes further
provide that no such provision shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective. The Dunn Certificate of Incorporation contains provisions
which eliminate the personal liability of the directors of Dunn in certain
circumstances. The Company's Articles of Incorporation contain similar
provisions.

Under the DGCL, a member of the board of directors of a corporation or a
member of any committee designated by the board of directors will, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the corporation and upon such information, opinions, reports, or
statements presented to the corporation by any of the corporation's officers or
employees, or committees of the board of directors, or by any other person as to
matters the member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the corporation. The VSCA does not contain a similar
provision.

Both the DGCL and the VSCA provide that a corporation may purchase and
maintain insurance on behalf of any individual who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in such capacity, whether or
not the corporation would have the power to indemnify him against such
liability.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Dunn or the
Company pursuant to the foregoing provisions, Dunn and the Company have been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.

PREEMPTIVE RIGHTS

None of the stockholders of Dunn or the Company have any preemptive rights.

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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

THE FOLLOWING DISCUSSION IS OF THE COMPANY AS IT WILL EXIST UPON
CONSUMMATION OF THE MERGER AND THE IDP ACQUISITION.

Dunn was founded in 1987 and initially resold third party computers to the
Government. In 1991, Dunn began to manufacture and market its own line of
computers to better serve the rapidly changing Government market. Dunn completed
its initial public offering in April 1997. In September 1997, Dunn completed the
STMS Acquisition. The STMS Acquisition expanded Dunn's capabilities to provide a
wide variety of services including network consulting, project implementation
and technical support and provided new opportunities to sell computer hardware
into the commercial marketplace as part of a total network solution. By
manufacturing its own computer systems, the cost of which represents a
significant portion of the cost of a total solution, the Company believes it has
a sustainable competitive advantage over other network service providers and
computer resellers.

On February 27, 1998, Dunn entered into an agreement to acquire IDP, the
second largest supplier of portable computers and the ninth largest supplier of
desktop computers to the federal Government in 1996, according to industry
sources. IDP has two state-of-the-art manufacturing facilities located in
Gaithersburg, Maryland, and Guayama, Puerto Rico. The Gaithersburg facility is
ISO 9000 certified and the Guayama facility is currently in the process of being
ISO 9000 certified. Additionally, IDP has spent the last four years developing a
proprietary management information system that enables it to provide
build-to-order systems and world-wide customer support to the federal
Government. With the IDP Acquisition, the Company believes it has enhanced its
market position as a major supplier of computer systems and services to the
federal Government and to selected businesses.

Over 90% of the Company's revenues, on a pro forma basis, are generated from
the sale of hardware. Sales to customers within the U.S. Government accounted
for 70% of Dunn's revenues and 99% of IDP's revenues in their respective 1997
fiscal years. The Company's operating results are characterized by a number of
factors resulting from its emphasis on the Government market. For example, both
Dunn and IDP have historically experienced fluctuating quarterly results due to
uneven purchasing patterns of Government customers relating to the Government's
budgetary cycle. Consequently, sales for the first and fourth quarters typically
account for the greatest proportions of revenues each year. In addition, the
Company's Government contracts, which frequently provide for fixed prices, often
have initially low gross margins which will increase over the term of a contract
due to cost savings from technological improvements and shorter component life
cycles. Since most Government contracts have 30-day delivery terms, the Company
is able to limit its inventory risks by purchasing components to fill firm
fixed-price contracts. Further, the Government is a reliable payor, enabling the
Company to predict cash flows and avoid losses from the bad debt.

The Company's most significant costs are components used in the manufacture
of desktop, portable and server systems. By manufacturing its own computer
systems instead of reselling third party products, the Company believes it can
increase its gross margin by at least 15% which gives the Company a significant
advantage over computer resellers. The Company believes the combination of Dunn
and IDP will result in lower component costs because of increased volume
discounts.

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<PAGE>
The historical results of operation of IDP reflect a number of benefits
resulting from PRIMO being incorporated and located in Puerto Rico. For example,
under an agreement with the Puerto Rican government, PRIMO is exempt for 20
years from property taxes and 90% of Puerto Rican income taxes. In addition, the
Puerto Rican government subsidizes the employment and training of certain
employees. The government leases space to PRIMO for $2.70 per square foot. The
Company plans to apply to the government to receive similar benefits after the
IDP Acquisition and has already received positive indications that they will be
granted, but there can be no assurance in this regard.

RESULTS OF OPERATIONS OF DUNN

The following table sets forth below for the fiscal years ended October 31,
1995, 1996 and 1997, and the three months ended January 31, 1997 and 1998,
certain income and expense items of Dunn as a percentage of net revenues.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, JANUARY 31,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues............................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................ 80.7% 77.9% 80.6% 76.3% 76.6%
--------- --------- --------- --------- ---------
Gross profit............................ 19.3% 22.1% 19.4% 23.7% 23.4%
Selling and marketing................... 2.1% 2.6% 3.9% 3.3% 5.3%
General and administrative.............. 10.8% 8.3% 6.2% 4.6% 7.1%
--------- --------- --------- --------- ---------
Income from operations.................. 6.4% 11.2% 9.3% 15.8% 11.0%
Other income (expense).................. 0.1% (0.1%) 0.4% 0.2% (0.4%)
--------- --------- --------- --------- ---------
Net income before income taxes.......... 6.5% 11.1% 9.7% 16.0% 10.6%
Provision for income taxes.............. 3.3% 4.3% 3.6% 6.1% 4.0%
--------- --------- --------- --------- ---------
Net income.............................. 3.2% 6.8% 6.1% 9.9% 6.6%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

THREE MONTHS ENDED JANUARY 31, 1998 COMPARED TO THREE MONTHS ENDED JANUARY 31,
1997

Net revenues of Dunn for the first quarter ended January 31, 1998 ("first
quarter 1998") increased 89.4% to $10.4 million from $5.5 million for the first
quarter ended January 31, 1997 ("first quarter 1997"). This increase was
primarily due to additional revenue from STMS, which was acquired in the fourth
quarter of 1997, and increased revenues from certain Government contracts.

Gross profit of Dunn for the first quarter 1998 increased 86.8% to $2.4
million from $1.3 million for the first quarter 1997. However, the gross profit
as a percentage of net revenues during the same periods decreased to 23.4% from
23.7%. The decrease in gross profit margin is a result of an increase in the
percentage of lower margin third party hardware sales associated with the
network services business.

Selling and marketing expense of Dunn increased for the first quarter 1998
by 204.1% to $552,000 from $182,000 for the first quarter 1997. During the same
periods, as a percentage of net revenues, selling and marketing expenses
increased to 5.3% from 3.3%. The increase was primarily attributable to
increased sales and marketing expenses related to its network service products.

General and administrative expenses of Dunn for the first quarter 1998
increased 192.8% to $738,000 from $252,000 for the first quarter 1997. As a
percentage of net revenues, general and administrative expense increased to 7.1%
for the first quarter 1998 from 4.6% for the first quarter 1997. This increase
was primarily the result of additional administrative costs associated with
personnel retained from the STMS Acquisition.

Other income (expense) for the first quarter 1998 decreased to an expense of
$43,000 from income of $8,000 for the first quarter 1997. The increase in cost
is attributable to increased interest expense. The effective tax rate decreased
to 37.8% for the first quarter 1998 from 38.0% for the first quarter 1997. The

40
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Company's net income increased by 26.2% for the first quarter 1998 to $689,000
from $546,000 for the first quarter 1997. Net income as a percentage of revenue
during the same periods declined to 6.6% from 9.9%.

FISCAL YEAR ENDED OCTOBER 31, 1997 COMPARED TO FISCAL YEAR ENDED OCTOBER 31,
1996

Net revenues of Dunn for the fiscal year ended October 31, 1997 ("fiscal
1997") increased 20.3% to $21.8 million from $18.1 million for fiscal year ended
October 31, 1996 ("fiscal 1996"). This increase was primarily due to additional
revenue resulting from the fourth quarter acquisition of STMS and increased
revenues from Government contracts.

Gross profit of Dunn for fiscal 1997 increased 5.5% to $4.2 million from
$4.0 million for fiscal 1996. However, the gross profit as a percentage of net
revenues during the same periods decreased to 19.4% from 22.1%. The decrease in
gross profit margin is a result of an increase in the percentage of lower margin
third party hardware sales, initial lower margins realized on two new contracts
and increased production costs.

Selling and marketing expense of Dunn increased for fiscal 1997 by 77.2% to
$842,000 from $475,000 for fiscal 1996. During the same periods, as a percentage
of net revenue, selling and marketing expenses increased to 3.9% from 2.6%. The
increase was primarily attributable to increased advertising in selected
publications, increased attendance at trade shows and the development of a
marketing campaign aimed at selected businesses.

General and administrative expense of Dunn for fiscal 1997 declined 9.5% to
$1.4 million from $1.5 million for fiscal 1996. As a percentage of net revenue,
general and administrative expense declined to 6.2% for fiscal 1997 from 8.3%
for fiscal 1996. Although Dunn increased its costs in almost all aspects of
general and administrative expenses, the increased costs were offset by a
decline in executive officers' incentive compensation.

Other income (expense) for fiscal 1997 increased to income of $98,000 from
an expense of $9,000 for fiscal 1996. The increase is a result of use of
proceeds from Dunn's initial public offering in April 1997 to reduce debt
obligations and to invest in tax-exempt securities. Dunn's effective tax rate
declined to 37.5% for fiscal 1997 from 38.5% for fiscal 1996 as a result of the
non-taxable interest income. Dunn's net income grew by 6.7% for fiscal 1997 to
$1.3 million from $1.2 million for fiscal 1996. Net income as a percentage of
revenue during the same periods declined to 6.1% from 6.8%.

FISCAL YEAR ENDED OCTOBER 31, 1996 COMPARED TO FISCAL YEAR ENDED OCTOBER 31,
1995

Net revenues of Dunn for fiscal 1996 increased 141.6% to $18.1 million from
$7.5 million for fiscal year ended October 31, 1995 ("fiscal 1995"). The
increase was due to four new contracts. Three of which were with commercial
customers that sell to the federal Government. Revenues in fiscal 1996 from each
of these contracts were $1.6 million, $2.9 million, $3.1 million, and $2.4
million.

Gross profit of Dunn for fiscal 1996 increased 176.6% to $4.0 million from
$1.4 million for fiscal 1995. The increase was a result of increased sales and
an increase in gross profit as a percentage of sales. The gross profit as a
percentage of net revenues during the same periods increased to 22.1% from
19.3%. The increase in gross profit margins resulted from an increase in volume
discounts for computer components and a reduction in warranty expense.

Selling and marketing expense of Dunn for fiscal 1996 increased by 208.5% to
$475,000 from $154,000 for fiscal 1995. During the same periods, as a percentage
of net revenue, selling and marketing expenses increased to 2.6% from 2.1%. The
increase was primarily attributable to increased sales personnel and
advertising.

General and administrative expense of Dunn for fiscal 1996 increased 84.3%
to $1.5 million from $812,000 for fiscal 1995. As a percentage of net revenue,
general and administrative expense declined to 8.3% for fiscal 1996 from 10.8%
for fiscal 1995. The increase in expense was attributable to increased incentive
compensation for executive officers.

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<PAGE>
Other income (expense) for fiscal 1996 declined to an expense of $9,000 from
an income of $8,000 for fiscal 1995 as a result of increased interest expense.
Dunn's effective tax rate declined to 38.5% for fiscal 1996 from 50.1% for
fiscal 1995. Dunn's net income grew by 409.8% for fiscal 1996 to $1.2 million
from $243,000 for fiscal 1995. Net income as a percentage of revenue during the
same periods increased to 6.8% from 3.2%.

RESULTS OF OPERATIONS OF IDP

The following table sets forth for the fiscal years ended September 30,
1995, 1996 and 1997 and the three months ended December 31, 1996 and 1997,
certain income and expense items of IDP as a percentage of net revenues.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------- --------------------
1995 1996 1997 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues.......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues...................... 85.8% 85.3% 82.0% 85.7% 83.7%
--------- --------- --------- --------- ---------
Gross profit.......................... 14.2% 14.7% 18.0% 14.3% 16.3%
Operating expense..................... 10.8% 13.3% 16.1% 10.1% 14.7%
--------- --------- --------- --------- ---------
Income from operations................ 3.4% 1.4% 1.9% 4.2% 1.6%
Other income (expense)................ (0.6%) -- (0.8%) (0.5%) (0.9%)
--------- --------- --------- --------- ---------
Income before income taxes............ 2.8% 1.4% 1.1% 3.7% 0.7%
Income tax expense (benefit).......... 0.4% -- (0.5%) 0.8% 0.2%
--------- --------- --------- --------- ---------
Net income............................ 2.4% 1.4% 1.6% 2.9% 0.5%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1996

Net revenues of IDP for the three months ended December 31, 1997 decreased
30.0% to $25.2 million from $36.0 million for the three months ended December
31, 1996. The decrease was primarily attributable to the expiration of a large
agency-specific IDIQ contract in January 1997. This contract accounted for $9.3
million of revenues for the three month period ended December 31, 1996.

Gross profit for IDP's three months ended December 31, 1997 decreased 20.6%
to $4.1 million from $5.2 million for the three months ended December 31, 1996.
Gross profit as a percentage of revenues during the same periods increased to
16.3% from 14.3%. The decrease in gross profit dollars is a result of lower
revenues. The increase in gross profit as a percentage of revenues is a result
of lower component costs due to better negotiated supply contracts.

Operating expense for IDP's three months ended December 31, 1997 and
December 31, 1996 held flat as a gross dollar amount at $3.7 million. As a
percentage of revenues for the same periods, the operating expenses increased to
14.7% from 10.1%. This increase is a result of lower revenues and having kept
the infrastructure intact in order to perform on the Desktop V contract.

An income tax expense of $54,000 was recorded for the three month period
ending December 31, 1997, as compared to $290,000 for the three months ended
December 31, 1996. This decrease was a result of IDP (excluding PRIMO) having a
loss before income taxes of $1.2 million for the three months ended December 31,
1997 compared to income before income taxes of $618,000 for the three months
ended December 31, 1996. An income tax benefit was not recorded for the IDP
loss. PRIMO has a 90% exemption from Puerto Rico income taxes under the Puerto
Rico Tax Incentives Act of 1987, as amended.

FISCAL YEAR ENDED SEPTEMBER 30, 1997 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1996

Net revenues of IDP for the fiscal year ended September 30, 1997 ("IDP's
fiscal 1997") decreased 14.7% to $71.9 million from $84.3 million for fiscal
year ended September 30, 1996 ("IDP's fiscal 1996"). The decrease was
attributable to the expiration of two large agency-specific IDIQ contracts, a
decline in

42
<PAGE>
revenue from its GSA Schedule and an extraordinary delay in sales caused by the
Desktop V contract protest.

Gross profit for IDP's fiscal 1997 increased 4.2% to $12.9 million from
$12.4 million for IDP's fiscal 1996. Gross profit as a percentage of net
revenues during the same periods increased to 18.0% from 14.7%. The increase was
primarily attributable to higher margins achieved in connection with certain
service and warranty revenue.

Operating expense for IDP's fiscal 1997 increased by 3.3% to $11.6 million
from $11.2 million for IDP's fiscal 1996. During the same periods, as a
percentage of net revenues, operating expenses increased to 16.1% from 13.3%.
This increase was primarily related to an increase in the number of technical
personnel in the customer service and sales departments.

Other income for IDP's fiscal 1997 decreased by 96.4% to $31,000 from
$870,000 for IDP's fiscal 1996. This decrease was a result of a one time bid
protest settlement payment of $750,000 that was received in IDP's fiscal 1996.
Other expenses for IDP's fiscal 1997 decreased by 32.4% to $594,000 from
$879,000 for IDP's fiscal 1996. The decrease was largely attributable to reduced
interest expense resulting from improved inventory management and an increased
cash position.

Income tax benefit for IDP's fiscal 1997 increased to $417,000 from $18,000
for IDP's fiscal 1996 as a result of IDP (excluding PRIMO) having a loss before
income taxes of $1.8 million in 1997 compared to a loss before income taxes of
$222,000 in 1996. Income from PRIMO is not subject to federal income taxes and
PRIMO has been granted a 90% exemption from Puerto Rico income taxes under the
Puerto Rico Tax Incentives Act of 1987, as amended. As a result of the IDP
Acquisition, a significant portion of the federal tax benefits that have accrued
to PRIMO will not accrue to the Company.

On January 9, 1998, IDP sold its partnership interest in the Maryland
general partnership known as the Justice Technology Partners ("Partnership"),
for the amount of approximately $758,000. The original investment of $31,200
made in fiscal year ended September 30, 1994 ("IDP's fiscal 1994"), equated to a
24.0% ownership. This amount has been distributed to the IDP Sellers as
performance bonus.

FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1995

Net revenue for IDP's fiscal 1996 increased by 4.8% to $84.3 million from
$80.4 million for the fiscal year ended September 30, 1995 ("IDP's fiscal
1995"). This growth was primarily attributable to increased sales from
agency-specific contracts and its GSA Schedule.

Gross profit for IDP's fiscal 1996 increased by 8.7% to $12.4 million from
$11.4 million for IDP's fiscal 1995. Gross margin as a percentage of net revenue
increased to 14.7% from 14.2% during the same period, as a result of lower
component prices due to increased volume and industry-wide price reductions.

Operating expense for IDP's fiscal 1996 increased by 29.0% to $11.2 million
from $8.7 million for IDP's fiscal 1995. Operating expense as percentage of net
revenue increased to 13.3% from 10.8% during the same period primarily as a
result of increased staffing and larger facilities in anticipation of securing
the U.S. Air Force Desktop V contract, increased professional fees, a write-off
on repair service parts and increased depreciation.

Other income for IDP's fiscal 1996 increased to $870,000 from $37,000 for
IDP's fiscal 1995. The increase was substantially related to a bid protest
settlement of $750,000 received in IDP's fiscal 1996. Other expenses for IDP's
fiscal 1996 increased by 69.1% to $879,000 from $520,000 for IDP's fiscal 1995.
This increase was largely attributable to an increase in interest expense.
Income tax benefit was $17,000 for IDP's fiscal 1996 versus an income tax
expense of $278,000 from IDP's fiscal 1995 as a result of IDP (excluding PRIMO)
having a loss before income taxes in 1996 of $222,000 compared to income before
taxes of $355,000 in 1995.

LIQUIDITY AND CAPITAL RESOURCES

In the first quarter 1998, Dunn used net cash of $3.0 million for its
operating activities. Although Dunn generated net income of $689,000 Dunn used
$7.1 million in cash to reduce its accounts payable

43
<PAGE>
balance, which was primarily funded by increases in its line of credit
facilities. For IDP, for the quarter ended December 31, 1997, net cash used in
operating activities was approximately $5.7 million, which was attributable
mainly to period end sales resulting in increased accounts receivable of $8.9
million, partially offset by increases in accounts payable of $4.7 million. The
net cash used in operating activities was primarily financed through net
drawdowns on the IDP line of credit of $5.7 million.

In fiscal 1997 Dunn used $3.5 million in its operations. Although Dunn
generated cash from its net income of $1.3 million, the increase in accounts
receivable and inventories of $8.2 million was the principal use of funds. The
increase in revenue for fiscal 1997 from fiscal 1996 resulted in the increase in
accounts receivable in the fourth quarter. The $2.9 million increase in
inventory reflects the increased requirement for components to fill orders in
the first quarter of the fiscal year ended October 31, 1998 ("fiscal 1998"). The
use of funds was partially offset by the increase in accounts payable of $3.9
million. The Company used $1.0 million in its investing activities, of which
$900,000 was used in the STMS Acquisition and the balance used for property and
equipment.

IDP has historically met its cash flow needs through cash generated by
operations and its bank credit arrangements. In IDP's fiscal 1997, IDP generated
positive cash flow from operations of $3.1 million. The principal source of cash
was from a decrease in accounts receivable of $912,000 and an increase in
accounts payable of $1.2 million. In IDP's fiscal 1996, IDP generated positive
cash flow from operations of $440,000. The principal source of cash was a
decrease in accounts receivable of $9.2 million, an increase in inventory of
$6.4 million and a decrease in accounts payable of $3.2 million.

Dunn received $3.9 million in net proceeds from its initial public offering
in April 1997. Other significant financing activities were provided by Dunn's
bank line of credit with First Union Bank (formerly Signet Bank). In December
1997, the bank agreed to increase the line from $2.0 to $4.0 million. The line
of credit expires on May 31, 1998 and currently bears interest at prime. As of
January 31, 1998, Dunn had $2.8 million drawn on the line of credit.

IDP has borrowing agreements with Deutsche Financial Services for an
aggregate of $25.0 million, of which $15.0 million is secured by IDP's inventory
and $10.0 million is secured by IDP's accounts receivable. Each of these
facilities bears an annual interest rate of prime. Under the inventory financing
facility, IDP normally receives 30 days free of interest when purchases are made
from distributors, and 45 days free of interest when purchases are made from
manufacturers. Under the accounts receivable financing facility, IDP can borrow
against up to 85% of eligible receivables and is subject to various financial
covenants. There is no formal expiration date on these facilities, although it
is subject to annual re-evaluation.

IDP also maintains a banking relationship with Damascus Community Bank where
it holds a checking account, and has received demand loans, secured by the
checking account. As of December 31, 1997, IDP had notes payable to related
parties of $1.6 million bearing annual interest at rates ranging from 8.0% to
11.0% and are payable upon demand. The Company will assume $1.4 million of these
notes at Closing bearing annual interest rates from 8.0% to 11.0%, and
maturities from one to three years.

On October 31, 1997, Dunn had working capital of $4.3 million. The Company
believes the net proceeds from the Offering, the existing IDP and Dunn bank
facilities, together with cash on hand and the cash generated from operations,
will provide sufficient financial resources to finance the current operations of
the Company through fiscal 1998.

Dunn is the guarantor on $1.0 million of mortgage debt for a partnership
owned and controlled by the President and Vice President of the Company. The
mortgage debt is for the facilities currently occupied by Dunn in Sterling,
Virginia. See "Business--Facilities." In addition, Dunn has obligations under
its operating lease commitments of approximately $500,000 and obligations under
its existing employment contracts of approximately $1.0 million for fiscal 1998.
IDP has lease commitments of approximately $634,000 through December 31, 1998.
With the IDP Acquisition, the Company will assume annual obligations pursuant to
employment agreements of approximately $420,000.

44
<PAGE>
From time to time, the Company may pursue strategic acquisitions or mergers
which may require significant additional capital and, in such event, the Company
may seek additional financing of debt and/or equity.

Recently, national attention has focused on the potential problems and costs
resulting from computer programs being written using two digits rather than four
to define the applicable year. Any computer programs that have date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities. While the Company believes that its internal software applications
and the software in the systems it sells are Year 2000 compliant, there can be
no assurance until the year 2000 that all systems will function adequately.
Further, if the software applications of others on whose services the Company
depends are not Year 2000 compliant, such noncompliance could have a material
adverse effect on the Company. The Year 2000 problem can be corrected either
through software programming or the application can be ported to a client/server
network. The Company believes with its technical services and its client/server
hardware product line, it provides Year 2000 solutions. See "Risk Factors--Year
2000 Uncertainties."

The Desktop V contract was awarded to IDP in 1996 pursuant to the 8(a)
Program and therefore contains a "termination for convenience" clause if the
program-eligible owner(s) relinquish ownership of the firm, unless the procuring
agency requests a waiver from the SBA. The Air Force has been advised of the
pending change in ownership of IDP, and has requested a waiver. The Company
expects that the SBA will not oppose the waiver. In addition to the Desktop V
contract, IDP has other contracts under the 8(a) Program for which a waiver from
the SBA will be required in connection with the Company's acquisition of IDP.
See "Business--Contracts."

RECENT PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "COMPREHENSIVE INCOME,"
which is required to be adopted in the year ended October 31, 1998 consolidated
financial statements. SFAS 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in the financial statements and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the Statement of
Stockholders' Equity. The Company does not expect the adoption of SFAS 130 to be
material to its financial condition and results of operations.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), "DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION," which is required to be adopted in
the year ended October 31, 1998 consolidated financial statements. SFAS 131
changes the way public companies report segment information in annual financial
statements and also requires those companies to report selected segment
information in interim financial reports to stockholders. The disclosures for
segment information in the consolidated financial statements is not expected to
be material to its financial condition and results of operations.

In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting No. 132 ("SFAS 132"), "EMPLOYERS' DISCLOSURES ABOUT
PENSIONS AND OTHER POSTRETIREMENT BENEFITS," which is required to be adopted in
the October 31, 1999 consolidated financial statements. SFAS 132 eliminates
certain existing disclosure requirements, but at the same time adds new
disclosures. The Company does not expect any significant impact on its financial
condition and results of its operations as a result of adoption of SFAS 132.

45
<PAGE>
BUSINESS

THE FOLLOWING IS A DISCUSSION OF THE BUSINESS OF THE COMPANY AS IT WILL
EXIST UPON CONSUMMATION OF THE MERGER AND THE IDP ACQUISITION.

GENERAL

The Company manufactures build-to-order computer systems and provides
related services to the Government and selected businesses. The Company provides
its customers with single-source solutions by manufacturing its own brand of
desktop and portable computers and high performance network client servers and
by offering services, which include network consulting, project implementation,
and technical support. The Company currently derives most of its revenue from
hardware sales to the Government, but also provides hardware and services to
medium and large businesses. The Company sells its products and services to more
than 950 customers, including customers from agencies within the Department of
Defense, Department of Justice, Administrative Office of the U.S. Courts ("U.S.
Courts"), Social Security Administration, Lockheed Martin Corporation
("Lockheed"), Blue Cross and Blue Shield Association and Inova Health Care
Systems, Inc.

The Company believes that the rapid technological change and increased
complexity of the computer industry will result in an increasing number of
entities outsourcing total network solutions to third party providers. To
position the Company as a total network solution provider, Dunn completed the
STMS Acquisition in September 1997. This acquisition expanded Dunn's
capabilities to provide a wide variety of services including network consulting,
project implementation and technical support and provided Dunn with new
opportunities to sell computer hardware into the commercial marketplace as part
of a total network solution. By manufacturing its own computer systems, the cost
of which represents a significant portion of the cost of a total solution, the
Company believes it has a sustainable competitive advantage over other network
service providers and computer resellers.

The Company seeks to establish itself as a leading provider of network
solutions to the Government and to increase sales of its hardware and services
to the commercial market. One of the key elements of this strategy is
integrating the Company's hardware and network services into a total solution
for its Government customers, which management believes will increase revenues
and improve margins. In the commercial market, management plans to leverage the
Company's customer relationships developed through sales of its network services
to expand sales of its hardware products. The Company will continue to focus on
quality to attract and retain customers, increase efficiency and reduce costs.
Consistent with its overall strategy, the Company intends to pursue strategic
acquisitions that will complement its product or service capabilities and
increase its overall value.

MARKET

According to the research firm Workgroup Strategic Services, Inc. ("WGSS"),
sales in the worldwide market for computer hardware totalled approximately $117
billion in 1996 and is projected to grow to approximately $150 billion by 1999.
Sales in the U.S. computer hardware market totaled $49 billion in 1996 and is
projected to grow to approximately $63 billion by 1999.

Worldwide computer hardware shipments are projected to grow at an annual
compounded growth rate of 14.4%, with portable computer shipments among the
fastest growing segments. According to WGSS, shipments of portable computers are
estimated to grow at an annual compound rate of 20.4%, from approximately 11.7
million units in 1996 to approximately 20.4 million units in 1999. Desktop
shipments are estimated to grow at an annual compound rate of 12.9%, from
approximately 54.6 million units in 1996 to 78.5 million units in 1999.
Shipments in the client server network market is estimated to grow at an annual
compound growth rate of 20.0%, from 1.1 million units in 1996 to 1.9 million
units in 1999.

46
<PAGE>
According to IDC, sales in the worldwide systems integration market
increased 9.4% in 1996 to $35.3 billion and is estimated to grow at a compound
annual growth rate of 11.3% over the next five years. Aggregate sales in the
U.S. systems integration market, which accounts for 49.7% of the worldwide
market, increased 13.0% in 1996 to $17.6 billion and is estimated to grow at a
compound annual growth rate of 12.2% over the next five years.

GOVERNMENT MARKET

The Office of Management and Budget ("OMB") submitted to Congress in January
1998 a Government IT budget, which includes funding for hardware and services,
of $29.5 billion. According to market researcher, Input, Inc., the IT budget is
expected to grow from 3% in 1999 to 6% in 2002, to approximately $35.0 billion.
In addition, the Electronic Industries Association, a major industry trade
association, estimated that an additional $20.0 billion would be spent in 1997
by the intelligence community, which is not required to disclose such
expenditures. The Company believes that while Government down-sizing has
decreased the number of federal employees, there has been a corresponding
increase in the demand for productivity tools such as computers. Moreover, the
Company believes the current trend toward outsourcing both products and services
is expected to continue to escalate in coming years. Accordingly, the Company
believes that demand for IT products and services in the Government market will
continue to increase.

The Information Technology Management Reform Act (the "ITMRA"), which took
effect on August 8, 1996, has had a profound effect on the way Government
procures computers and related products and services. The changes were made in
an effort to reduce costs and expedite the IT procurement process. The most
sweeping changes were the repeal of the Brooks Act that had granted sole
authority for IT purchases to the GSA and the change in the GSA Schedule from a
single year small purchase contracting program to a multi-year IDIQ contract
with no limit on the value of purchases. Because all federal Government agencies
may purchase IT products from vendors on the GSA Schedule, the transformation of
the GSA Schedule to an IDIQ contract will permit the Company to sell an
unlimited amount of products and services through the GSA Schedule to Government
entities.

Recently national attention has been focused upon the Year 2000 issue. The
Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any computer programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. OMB has notified all Government agencies that
the funds required to correct the Year 2000 programming problem must come from
existing funding. In addition, the Director of OMB recently stated that no
additional IT funding would be authorized until each agency adequately addressed
any potential Year 2000 problem. Progress includes establishing good management
plans and establishing management structures to address and solve the Year 2000
issues. The Year 2000 problem can be solved either by software programming
corrections or replacement of main frame computers with client server networks.
The Company believes it will be able to increase its sales of client server
equipment and network services to help solve this problem in the Government.

COMMERCIAL MARKET

Heightened competition, deregulation, globalization and rapid technological
advances are forcing organizations to make fundamental changes in their business
processes. These pressures have compelled organizations to improve the quality
of products and services, shorten time to market, reduce costs and strengthen
client relationships. Organizations are addressing these issues by utilizing IT
solutions that facilitate the rapid and flexible collection, analysis and
dissemination of information. Accordingly, an organization's ability to
integrate and deploy new information technologies in a cost-effective manner has
become critical to competing successfully in today's rapidly changing business
environment.

47
<PAGE>
At the same time, rapid technological change is challenging the capabilities
of management information system departments within these organizations. The
pace of this change quickly renders existing IT infrastructure obsolete and
makes it more difficult for organizations to maintain the requisite internal
expertise needed to evaluate, develop and integrate new technologies. The use of
complex networks involving a variety of manufacturers' equipment, operating
systems and applications software has made it increasingly difficult to diagnose
problems and maintain the technical knowledge and repair parts necessary to
provide support services. As a result, organizations are increasingly turning to
third-party IT service providers to help them develop and support complex
systems.

Organizations seeking computer products increasingly require prospective
vendors not only to offer products from many manufacturers and suppliers, but to
have available proficient service expertise to assist them in product selection,
system design, installation and post-installation support and service. The
Company believes that the ability to offer customers a single-source solution to
their IT needs, including the ability to work within customers' corporate
environments as integral members of their management information system staff,
are increasingly important in the commercial marketplace. Because the Company
offers total network solutions which includes experienced technical expertise
together with its own computer hardware, management believes it is well
positioned to meet the growing demand for business solutions and,
simultaneously, to expand its sales of desktops, portables and servers.

STRATEGY

The Company seeks to increase revenues and profits by further penetrating
the Government market and selected businesses with build-to-order computer
systems and network services. The key elements of the strategy include:

LEVERAGE GOVERNMENT CUSTOMER BASE. The Company believes that the Government
market is both quality and cost sensitive and that the ability to manufacture
its own brand products provides significant cost advantages over equipment
resellers. Through targeted marketing programs, the Company intends to leverage
its existing relationships with Government entities to increase sales of its
hardware and network services.

TARGET THE COMMERCIAL MARKET. Management believes that opportunities for
computer hardware sales in the commercial market are directly linked to the
Company's ability to consult, implement and support the customer's IT needs. It
is the Company's experience that computer hardware represents approximately 80%
of the cost of a customer's total solution. The Company intends to leverage its
service capabilities to expand the sales of its own brand-name computer systems
as part of a total network solution. By manufacturing its own computer systems,
the Company believes it has a sustainable competitive advantage over other
network service providers and computer resellers.

FOCUS ON QUALITY. The Company believes that continued commitment to quality
will attract and retain customers, increase efficiency and reduce costs. This
commitment is evidenced by the fact that the Company's Gaithersburg facility is
ISO 9000 certified, and its Sterling and Guayama facilities are in the process
of becoming ISO 9000 certified and are expected to receive certification within
the next 12 months. The Company also intends to obtain ISO 9000 certification
for all of its technical service operations.

PURSUE STRATEGIC ACQUISITIONS. The Company seeks acquisitions that
complement its core skills and that have the potential to increase the overall
value of the Company. Examples of such companies would include those that
broaden the Company's product line, service capabilities or customer base.

PRODUCTS

The Company manufactures, markets, sells and supports a wide range of high
performance desktop and notebook computer systems and network servers under Dunn
and IDP's respective brand names. These systems primarily use Pentium, Pentium
Pro and Pentium II microprocessors manufactured by Intel

48
<PAGE>
Corporation ("Intel") and are assembled according to customer specifications
using various memory, storage, operating system, and application software
configurations. The Company also offers a variety of other system components
with their computer systems and network servers, including monitors, modems,
graphics cards, disk arrays, network cards and CD-ROM drives. All computer
systems are assembled and configured in the U.S. or Puerto Rico. In addition,
the Company provides services, including network consulting, project
implementation, and technical support. The Company's product line includes the
following:

DESKTOPS. The Company produces a complete line of state-of-the-art desktop
computer systems which combine single or dual microprocessors with clock speeds
of up to 300MHz. Typical features include a 17 inch monitor, a 32 MB RAM, a 24x
CD-ROM, a 3.2 GB hard drive and a 3 1/2 inch floppy drive with Microsoft Windows
'95. The systems can be expanded to 21-inch high resolution monitors, 128 MB of
memory and up to 9 GB hard drives. The standard warranty for a desktop is at
least one year but can be increased to up to five years for an additional fee.
The desktops are priced between $1,200 and $6,500.

SERVERS. The Company manufactures a complete line of powerful network
servers. The servers can be configured with up to four microprocessors, two GB
of memory, redundant disk subsystems, redundant hot swappable power supplies and
Microsoft Windows NT software. The Company believes that their servers offer the
latest or "best of breed" component technology with a price-performance
advantage over major competition such as Hewlett Packard Company ("HP") and
Compaq. Due to a higher level of required support, the Company believes that the
server market provides opportunities for higher profit margins compared to other
segments in the computer hardware industry. The typical system retails for
approximately $20,000 and includes a three-year on-site manufacturer's warranty.

PORTABLES. With the IDP Acquisition, the Company will offer its customers a
complete line of portable computer systems and services. The notebooks typically
utilize a modular design that allows the user to carry only those devices
required for the specific task and generally include an Intel Pentium processor,
a removable 20x CD-ROM, a removable 2.1 GB hard drive, a removable floppy drive,
a 56 KB modem and Microsoft Windows '95 software. All units carry a warranty of
at least two years and are priced between $1,500 and $4,500.

NETWORK CONSULTING. The Company provides network consulting services
including requirements analysis, network audits, security audits, security
policy planning, network capacity planning, server capacity planning, and
technology and feasibility studies. These services are generally provided on a
fixed hourly fee basis.

PROJECT IMPLEMENTATION. The Company works closely with its clients to
design, install, implement, test and monitor systems that meet their specific
needs. As part of its strategy, the systems will incorporate the Company's own
hardware in many cases, as well as a variety of third-party network products,
including those manufactured by 3COM Corporation ("3COM"), Banyan Systems
Incorporated, Cisco Systems, Inc. ("Cisco") and Novell Inc., among others.

SUPPORT SERVICES. The Company provides a wide range of support options that
can be customized to each client's specific needs. Clients may purchase blocks
of the Company's technical personnel hours over a period of up to three years
from the purchase date, allowing clients to plan ahead and take advantage of
prepaid discounts. The Company also provides full service, term maintenance
contracts on third-party server and networking equipment which are based on a
fixed price and include all parts and labor. Alternatively, clients may opt for
a labor-only program providing standard technical resources on a one-time or
recurring regular basis.

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<PAGE>
CONTRACTS

In fiscal 1997, Dunn and IDP derived approximately 70% and 99%,
respectively, of their revenues from sales of hardware and services to the
federal Government pursuant to contracts with the GSA or other agencies. Most of
these contracts are IDIQ contracts with a specified estimated value. The
"Estimated Value" of a specified contract is derived from the Company's prices
set forth on its bid submission and the Government agency's own estimate of the
quantities that are likely to be purchased pursuant to the contract over the
term of the contract. Generally, the Government has no significant obligation to
purchase any particular amount of any contract and sometimes awards contracts to
several vendors who compete to supply all of the needs of the Government
agencies purchasing pursuant to each contract. Furthermore, each Government
purchaser is constrained by the amount of its funded budget allotted for IT
products each year. Thus, actual amounts sold under the contract may be
significantly more or less than the Estimated Value. There can be no assurance
that the Company will actually realize revenues in the amount set forth as the
Estimated Value of such contract. Furthermore, such Government contracts are
subject to termination by the Government at its convenience and may or may not
be renewed to the full extent contemplated by the Government. See "Risk
Factors-- Government Contracting Risks."

Since the repeal of the Brooks Act in August of 1996, the GSA Schedule
became an important vehicle for Dunn and IDP to increase their sales of products
and services to the federal Government. The GSA Schedule enables all Government
IT purchasers to fulfill their requirements from any vendor holding a GSA
Schedule. Dunn's and IDP's contracts were awarded in April of 1996 and both are
valid through March 1999. On a pro forma combined basis, for the two fiscal
years ended October 31, 1997, the Company generated GSA Schedule revenues of
approximately $21.3 million, as compared to less than $5.0 million for the two
years ended October 31, 1995. The Company believes that the GSA Schedule will be
the most important contract vehicle for selling products and services to the
federal Government and expects to generate significant revenue from its GSA
Schedules in the future.

In fiscal 1997, Dunn generated revenues of $2.4 million under its contract
with Lockheed to provide computer network servers for the Department of
Defense's Worldwide Defense Messaging System ("DMS"). Lockheed is the prime
contractor on the DMS contract, which is expected to be the largest private
messaging network in the world, supporting approximately 2 million users. The
contract is a year-to-year contract which has been renewed twice and can be
renewed for up to three additional years. Over the expected life of the contract
Dunn estimates the total value to be approximately $33 million based upon
initial requirements and terms described in the contract. As of October 31,
1997, Dunn had received an aggregate of $5.5 million from the Lockheed contract.

In fiscal 1997, Dunn generated revenues of $4.6 million under its contract
with the U.S. Courts. Pursuant to this contract, Dunn provides desktop computer
systems and components, operating system software and peripheral devices and
interfaces. The U.S. Courts contract has a term of three years, and expires in
September 1998. The initial Estimated Value on the contract was in excess of
$15.0 million and as of October 31, 1997, Dunn had earned an aggregate revenue
of $10.9 million from the U.S. Courts contract.

In fiscal 1997, Dunn generated revenues of $1.0 million under its contract
with an agency of the Government responsible for certain intelligence
activities. Pursuant to this contract, Dunn provides a wide array of computer
equipment. This contract, which has a term of two years and expires in May 1999,
has an initial Estimated Value of $24.0 million.

In connection with this contract, Dunn's Sterling facility and certain
employees obtained the necessary security clearances to perform the contract.

During IDP's fiscal 1997, IDP derived $20.6 million, $19.4 million and $15.4
million from the Department of Justice, the Department of the Army and the
Federal Bureau of Investigation contracts, respectively, which have since
expired. Since expiration, IDP has continued to receive orders from the

50
<PAGE>
Department of Justice and the Department of the Army pursuant to its other
contract vehicles such as the GSA Schedule and expects such orders to continue.

In May 1997, IDP was awarded a contract by the U.S. Air Force to provide
high performance desktop computers, portable computers and network servers (the
"Desktop V contract"). The contract has a term of five years and expires in May
2002; however, the period for ordering computer systems is the first three
years. The Desktop V contract is a government-wide acquisition contract that is
open to all departments and agencies of the federal Government except for the
Department of the Army and the Department of the Navy. As of January 31, 1998,
IDP has received orders totalling approximately $8.7 million, of which $7.6
million has been recognized as revenues. In connection with the Desktop V
contract, a protestor has asserted that IDP is bound by a settlement agreement
that calls for payments of 1.8% of its revenues derived from such contract. The
Company contests the assertion. The Desktop V contract was awarded pursuant to
the 8(a) program and therefore contains a "termination for convenience" clause
in the event the program-eligible owners relinquish ownership of the firm,
unless the procuring agency requests a waiver from the SBA. The Air Force has
been advised of the pending change in ownership of IDP and has requested a
waiver. The Company expects that the SBA will not oppose the waiver. Over the
life of the Desktop V contract, IDP estimates the total value to be
approximately $100.0 million. See "Risk Factors-- Risks Related to the IDP
Acquisition and Future Acquisitions" and "Risk Factors--Bid Protests and
Settlements."

In January 1998, IDP was awarded a desktop management contract by the
Department of the Navy. This contract provides the Department of the Navy with
desktop, notebook and networking systems to modernize ship and shore-based IT
systems. The contract, which has a term of five years and expires in January
2003, has an Estimated Value of $21.0 million. The contract provides that the
Department of the Navy will acquire all IDP equipment under a leasing program
that includes technology upgrades and complete technical support. The initial
order under this contract provides for approximately $12.9 million in lease
payments to be received monthly over a five-year period.

SALES AND MARKETING

The Company sells its products and services primarily through an in-house
sales force, program managers and independent representatives. Historically,
sales efforts have been concentrated in the Washington D.C. metropolitan area
(D.C., Northern Virginia and Maryland), which accounts for approximately 68% of
all Government computers procured. Currently, however, IDP receives significant
revenue from its sales efforts outside the Washington, D.C. metropolitan area.
The Company's government sales are the result of prime contracts, sub-contracts
or agency-specific contracts and direct selling of products from the Company's
GSA Schedules or other Government-wide acquisition contracts. The Company also
utilizes its direct sales force to sell its products and services to selected
businesses.

The Company receives qualified network services leads through its marketing
efforts and referrals from suppliers such as Microsoft Corporation
("Microsoft"), Cisco and 3COM. These leads are referred to Dunn's dedicated
sales group, whose background includes both technical and sales experience. This
sales group is responsible for identifying clients' needs and promoting Dunn's
services to potential clients. Once potential clients are further qualified by
the sales group, Dunn assembles a team consisting of sales group members, the
appropriate business unit manager and a project delivery manager. This team
makes the client sales call and is ultimately responsible for closing the sale.

The Company runs major brand recognition marketing campaigns using direct
mail, public relations, radio, seminars, the Internet and selective print
advertising and trade shows. The campaigns promote "best value," single-source
solutions, commitment to customers and "best of breed" component technology. The
Company maintains several web sites wherein its GSA and other contract catalogs
and products can be referenced. The Company also has an interactive web site
which permits its customers to purchase goods and services electronically.

51
<PAGE>
CUSTOMER SERVICE

The Company has dedicated substantial resources to building a customer
service and sales support group that currently employs 43 technical support
staff in three shifts to provide timely response to customers' requests 24-hours
a day, 7 days a week. The Company strives to minimize callers' waiting time and
to make extensive use of the Company's web site to provide on-line technical
support. IDP has recently installed, and the Company intends to utilize, a
knowledge-based problem solving system that builds on the customer support
group's cumulative experience and allows an engineer to duplicate the customer's
specific setup and provide guidance over the telephone. If the customer's issue
cannot be resolved either on-line or over the telephone, the Company guarantees
a 24-hour turnaround for most services performed in-house and a 48-hour
turnaround on all field repairs.

COMPETITION

The computer industry is highly competitive and has been characterized by
intense pricing pressure, declining gross margins, rapid technological advances
in hardware and software, frequent introduction of new products, and rapidly
declining component costs. Competition in the computer industry is based
primarily upon performance, price, reliability, service and support. As a result
of industry standardization, the Company uses many of the same components as its
competitors, typically from the same set of suppliers, which limits its ability
to technologically and functionally differentiate its products. The Company uses
its quality focus and customer services to differentiate itself from its
competitors.

GOVERNMENT MARKET

Since the passage of the ITMRA, the Government has increased the amount of
IT products acquired through the GSA Schedule. Although the Company believes it
has benefited from this reform, the emergence of the GSA Schedule as a
significant procurement vehicle has encouraged traditional mass market
commercial computer companies such as Dell, Gateway 2000, Inc. ("Gateway") and
Micron Electronics, Inc. to pursue the Government market.

However, the Government continues to rely on agency-specific contracts for
its more complex computer requirements. The Company believes that national brand
companies often are dissuaded from bidding for these agency-specific contracts
due to their complex terms and conditions and technical specifications. The
Company principally competes against large regional manufacturers and system
integrators such as Government Technology Solutions, Inc., Win Laboratories,
Inc. and Vanstar (formerly Sysorex Information Systems, Inc.) for these
agency-specific contracts. The Company believes that the Government's criteria
for vendor selection include price, quality, past performance, size and
financial responsibility.

COMMERCIAL MARKET

The Company competes in the Mid-Atlantic region with hundreds of IT service
companies. These companies typically service a small geographic area and resell
national brand computer hardware. By contrast, the Company manufactures its own
brand name computer systems, which it intends to install as part of a total
network solution.

The Company competes with a number of computer hardware manufacturers,
including Dell, Gateway, Compaq, HP, IBM and Toshiba Corporation, among others,
that traditionally have sold their products through distributors, dealers and
value-added resellers, retail stores and direct sales forces.

Many of the Company's competitors offer broader product lines, have
substantially greater financial, technical, marketing and other resources than
the Company and may benefit from component volume purchasing and product and
process technology license arrangements that are more favorable in terms of
pricing and availability than the Company's arrangements. There can be no
assurance that the Company

52
<PAGE>
will be able to compete effectively against existing competitors in the future,
especially companies that have historically focused their energies on the
commercial market or have greater financial resources. See "Risk
Factors--Competition."

SUPPLIERS

The Company devotes significant resources to establishing and maintaining
relationships with its suppliers. The Company, where possible, purchases
directly from component manufacturers such as Intel, Microsoft, Hitachi-Nissei
Sanyo America, Ltd., Sony Electronics Corporation and Clevo Corporation
("Clevo"). The Company also purchases multiple products directly from large
national and regional distributors such as TechData Corporation, Ingram Micro
Incorporated and Decision Support Systems, Incorporated ("DSS").

Suppliers provide the Company with incentives in the form of discounts,
rebates, credits, cooperative advertising and market development funds. In
accordance with the terms of certain of the Company's Government contracts, the
Company provides periodic reporting of pertinent supplier contract terms and
conditions to contracting officials.

As a product reseller, the Company must continue to obtain products at
competitive prices from leading suppliers in order to provide competitively
priced products for its customers. During fiscal 1997, Dunn purchased
approximately 13% of its components from DSS and PRIMO purchased approximately
50% of its components from Clevo. In the event that the Company is unable to
continue to purchase components from these suppliers, the Company believes that
alternative suppliers are readily available. The Company believes its
relationships with its key suppliers to be good and believes that generally
there are multiple sources of supply available should the need arise.

EMPLOYEES

As of October 31, 1997, Dunn employed 85 persons on a full-time basis. Of
such persons, three were employed in executive capacities, 20 in sales and
marketing, 13 in administrative capacities, 23 in technical services and 26 in
operations. As of January 31, 1998, IDP employed 228 persons on a full-time
basis, including 58 in Puerto Rico. Of such persons, 47 are engaged in sales and
marketing, 44 in administrative capacities, 37 in technical services and 98 in
operations. Neither Dunn's nor IDP's employees are covered by a collective
bargaining agreement. Dunn and IDP consider their relationships with their
employees to be good.

FACILITIES

The Company leases approximately 19,000 square feet of office space in
Reston, Virginia which it uses primarily for sales, marketing and technical
services, and approximately 20,000 square foot facility in Sterling, Virginia
used primarily for manufacturing and administrative services. The Reston
facility's lease expires in 2003 and the Sterling facility lease expires in
1999. The Company has an option to renew the Sterling lease for a period of five
years. In addition, the Company is presently seeking ISO 9000 certification for
its Sterling facility. The Sterling facility has obtained a top secret security
clearance in connection with its performance of one of its government contracts.

The Company also leases an approximately 55,000 square-foot facility in
Gaithersburg, Maryland, which it uses for sales, marketing, customer service,
manufacturing, and administrative functions, and an approximately 34,000
square-foot facility in Guayama, Puerto Rico, which is used for manufacturing,
technical support, and personal computer board level repair. The Gaithersburg
facility lease expires in 2000 and the Guayama facility lease expires in 1999.
Concurrently with the Closing of this transaction, the Company intends to enter
into a new lease with the Puerto Rican government under substantially the same
terms as PRIMO's current lease. The Gaithersburg facility is ISO 9000 certified,
and the Company is in the process of obtaining ISO 9000 certification for its
Guayama facility.

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<PAGE>
PATENTS, TRADEMARKS AND LICENSES

The Company does not maintain a traditional research and development group,
but works closely with computer product suppliers and other technology
developers to stay abreast of the latest developments in computer technology.
While the Company does not believe that its continued success will depend upon
the rights to a patent portfolio, there can be no assurance that the Company
will continue to have access to existing or new technology for use in its
products.

The Company will conduct its business under the trademarks and service marks
of "Dunn," "Dunn Computer Corporation," "International Data Products," "IDP" and
"Vaquero." The Company believes its trademarks and service marks have
significant value and are an important factor in the marketing of its products.

Because most software used on the Company's computers is not owned by the
Company, the Company has entered into software licensing arrangements with
several software manufacturers, including Microsoft.

LEGAL PROCEEDINGS

The Company is not a party to any pending legal proceeding other than
routine litigation that is incidental to its business.

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<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information, with respect to the
common stock of Dunn as of February 27, 1998, and with respect to the Common
Stock of the Company, as adjusted to give effect to the Offering, the Merger and
the IDP Acquisition, with respect to the beneficial ownership of each beneficial
owner of more than 5% of the outstanding shares thereof, by each director, each
nominee to become a director and each executive officer named in the Summary
Compensation Table and by all executive officers, directors and nominees to
become directors of the Company as a group both before and after giving effect
to the Offering.

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY
PRIOR TO OWNED AFTER
OFFERING(4) OFFERING(7)
------------------ ------------------
NAME AND ADDRESS OF NUMBER OF NUMBER OF
BENEFICIAL OWNER(1) SHARES PERCENT SHARES PERCENT
- -------------------------------------------------------------------------------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
Thomas P. Dunne (2)............................................................. 2,645,000(5) 51.4% 2,645,000 31.5%(8)
John D. Vazzana (2)............................................................. 1,145,000 22.2% 1,145,000 13.6%(8)
Claudia N. Dunne (2)............................................................ 2,645,000(6) 51.4% 2,645,000 31.5%
VADM E. A. Burkhalter USN (Ret.) (2)............................................ 10,000(1) * 10,000 *
Daniel Sinnott (2).............................................................. 10,000(1) * 10,000 *
George D. Fuster (3)............................................................ -0- -0- 375,000 4.5%(9)
D. Oscar Fuster (3)............................................................. -0- -0- 375,000 4.5%(9)
All Executive Officers and Directors
as a Group before Closing (5 persons)......................................... 3,790,000(1) 73.6%
as a Group after Closing (7 persons).......................................... -- -- 4,540,000(1) 54.0%
</TABLE>

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

* Beneficial ownership is less than 1%

(1) Under the rules of the Commission, a person is deemed to be a beneficial
owner of a security if he or she has or shares the power to vote or direct
the voting of such security or the power to dispose or direct the
disposition of such security. Accordingly, more than one person may be
deemed to be a beneficial owner of the same securities. Unless otherwise
indicated by footnote, the persons named in the table have sole voting and
investment power with respect to the shares of Common Stock beneficially
owned. A person is also deemed to be a beneficial owner of any securities of
which that person has the right to acquire beneficial ownership within 60
days. Accordingly, the beneficial ownership amounts include shares of stock
that may be acquired pursuant to stock options exercisable within 60 days
from February 27, 1998 by VADM E. A. Burkhalter USN (Ret.) (10,000 shares)
and by Daniel Sinnott (10,000 shares) and all directors and executive
officers as a group (20,000 shares).

(2) The address of each such individual is: c/o Dunn Computer Corporation, 1306
Squire Court, Sterling, Virginia 21066.

(3) The address of each such individual is: c/o International Data Products,
Corp., 20 Firstfield Road, Gaithersburg, Maryland 20878.

(4) Calculated based upon 5,150,000 shares outstanding prior to the Closing and
does not give effect to: (a) an aggregate of 2,200,000 shares of Dunn common
stock reserved for issuance pursuant to Dunn's 1997 Stock Option Plan of
which 1,832,000 have been granted; (b) 25,000 shares reserved for issuance
pursuant to an agreement with certain selling shareholders in the STMS
Acquisition; (c) an aggregate of up to 800,000 shares of Common Stock
reserved for issuance pursuant to employment agreements with George D.
Fuster and D. Oscar Fuster; or (d) 200,000 shares of common stock issuable
upon the exercise of certain warrants.

(5) Includes 560,000 shares of stock held by Claudia N. Dunne, the Company's
Vice President, and Mr. Dunne's wife, of which Mr. Dunne disclaims
beneficial ownership.

55
<PAGE>
(6) Includes 2,085,000 shares of stock held by Thomas P. Dunne, the Company's
Chairman, Chief Executive Officer and President, and Ms. Dunne's husband, of
which Ms. Dunne disclaims beneficial ownership.

(7) Assumes 8,400,000 shares outstanding after the Closing giving effect to the
issuance of 750,000 shares of Common Stock of the Company in the IDP
Acquisition and 2,500,000 shares of Common Stock to be issued in the
Offering and not giving effect to: (a) the exercise of an over-allotment
option issued in connection with the Offering (b) an aggregate of 2,200,000
shares of Common Stock reserved for issuance pursuant to the Company's Stock
Option Plan of which options to acquire 1,832,000 have been granted; (c)
25,000 shares reserved for issuance pursuant to an agreement with certain
selling shareholders in the STMS Acquisition; (d) an aggregate of up to
800,000 shares of Common Stock of the Company reserved for issuance pursuant
to employment agreements with George D. Fuster and D. Oscar Fuster or (e)
200,000 shares of common stock issuable upon the exercise of certain
warrants.

(8) If the over-allotment option issued in connection with the Offering is
exercised in full, Thomas P. Dunne will sell 125,000 shares and will
beneficially own 2,520,000 shares representing 30.0% of the Common Stock
outstanding after the Closing, and John D. Vazzana will sell 60,000 shares
and will beneficially own 1,085,000 shares representing 12.9% of the Common
Stock outstanding after the Closing.

(9) Represents 375,000 shares of Common Stock of the Company to be issued
pursuant to the IDP Acquisition.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires Dunn's officers and directors, and persons who own more than 10% of a
registered class of Dunn's equity securities ("insiders"), to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Insiders are required by Commission regulation to furnish
Dunn with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms furnished to Dunn, the Section 16(a) filing
requirements were complied with for the fiscal year ended October 31, 1997,
except that John D. Vazzana, Thomas P. Dunne, Claudia N. Dunne, VADM. E. A.
Burkhalter, Jr. USN. and Daniel Sinnott inadvertently failed to timely file a
Form 3, Initial Statement of Beneficial Ownership of Securities. In addition,
John D. Vazzana and Thomas P. Dunne inadvertently failed to file a Form 4,
Statement of Changes in Beneficial Ownership, each with respect to one
transaction in Dunn's shares.

56
<PAGE>
ELECTION OF DIRECTORS
(ITEM 2 OF PROXY CARD)

Pursuant to Dunn's Certificate of Incorporation and Bylaws, Dunn's Board of
Directors consists of five directors, each elected for a term of one year. The
Board of Directors proposes that the nominees described below, all of whom are
current directors of Dunn, be re-elected for a new one year term and until their
successors are duly elected and qualified.

Each of the nominees has consented to serve as a director of Dunn. Should
any one or more of these nominees become unavailable to serve as a director, it
is intended that the shares of common stock represented by the proxies will be
voted for a nominee who would be designated by the Board of Directors, unless
the Board instead reduces the number of directors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR DIRECTOR
BELOW.

THOMAS P. DUNNE has been Chairman, Chief Executive Officer and President of
Dunn since he founded the company in 1987. From 1982 to 1987, Mr. Dunne was the
Director of Sales of Syntrex Inc., a corporation that supplies computer hardware
and software to the legal profession. Prior thereto, Mr. Dunne spent 12 years
with the computer division of Perkin Elmer Corporation, where he held several
positions, including Director of North American Sales. Mr. Dunne also served in
the United States Army for two years where he was a Senior Instructor with the
Army Electronics Command. Mr. Dunne is married to Ms. Claudia N. Dunne, the Vice
President of the Company.

JOHN D. VAZZANA has been the Executive Vice President, Chief Financial
Officer and a director of Dunn since 1994. From 1992 to 1994, Mr. Vazzana was
the Chief Executive Officer of Hitchler Industry, a manufacturer of plastic
lumber made from recycled plastic. From 1986 to 1992, Mr. Vazzana was founder
and Chief Executive Officer of NRM Steelastic, a company engaged in the
manufacture of capital equipment for the tire industry. Prior thereto, Mr.
Vazzana was Executive Vice President for C3, Inc., a federal computer systems
integrating company, which he joined in 1974.

CLAUDIA N. DUNNE, a co-founder of Dunn, has been Vice President and a
director of Dunn since its inception. From 1985 to 1987, Ms. Dunne was Federal
Proposal Manager for Syntrex, Inc. From 1983 to 1985, Ms. Dunne was Proposal
Manager for Harris & Paulson, which also sold minicomputers and proprietary time
and accounting software for law firms. Ms. Dunne is married to Mr. Thomas P.
Dunne, the President of the Company.

VICE ADMIRAL E. A. BURKHALTER, JR., USN (RET.) has been a director of Dunn
since January 1997. Mr. Burkhalter is currently the President of Burkhalter
Associates, Inc., a consulting firm providing services in the areas of
international and domestic strategy, management policy and technology
applications, for both government and industry. Mr. Burkhalter spent 40 years as
a member of the United States Navy, during which time he held several positions,
including Director of Strategic Operations for the Chairman of the Joint Chiefs
of Staff. He is currently the Chairman of the Attorney General's Policy Advisory
Panel for Law Enforcement Technology, a member of the Director of Central
Intelligence (DCI) Military Advisory Panel and an advisor to the Defense
Intelligence Agency. He is also an officer and director of the Navy Submarine
League.

DANIEL SINNOTT has been a director of Dunn since January 1997. Mr. Sinnott
is currently President and Chief Executive Officer of Worldwide Internet
Solutions Network, Inc. ("WIZnet"). WIZnet provides electronic catalogs and
adaptive recognition search technology and facilitates electronic commerce
linking buyers and sellers via secure mail. Mr. Sinnott has been serving as CEO
of WIZnet since 1995. In 1992 Mr. Sinnott was a founder of Sinnott Bruno &
Company ("SB&C"). SB&C is a management consulting firm providing advisory
services to executive and management organizations that are in the emerging
transition stages of development. Mr. Sinnott worked full time with SB&C from
1992 until joining WIZnet.

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<PAGE>
In 1995, Dunn purchased shares of Common Stock of WIZnet for an aggregate of
$150,000. See "Certain Transactions."

In connection with Dunn's initial public offering in April 1997, Dunn
granted the underwriter, Network 1 Financial, for a three year period from the
effective date of the initial public offering, the right to designate one
director to serve as a member of Dunn's Board of Directors. As of the date of
this Proxy Statement/Prospectus, Network 1 Financial has not named a nominee for
election to board membership.

DUNN'S BOARD OF DIRECTORS, ITS COMMITTEES AND COMPENSATION

THE BOARD OF DIRECTORS

The Board of Directors of Dunn held four meetings during the 1997 fiscal
year. The Board of Directors has two standing committees: the Compensation
Committee and the Audit Committee. Dunn does not have a standing committee on
nominations, but rather the full Board nominates candidates for Director. All
Directors attended at least seventy-five percent of the meetings of the Board of
Directors and the committees on which such Directors served.

COMMITTEES OF DUNN'S BOARD

The Compensation Committee presently consists of VADM E.A. Burkhalter, Jr.,
USN (Ret.), Daniel Sinnott and Thomas P. Dunne. The Compensation Committee held
one meeting during the 1997 fiscal year during which it reviewed employment
agreements with Dunn's executive officers.

The Audit Committee presently consists of VADM Burkhalter and Mr. Sinnott.
The Audit Committee held one meeting during the 1997 fiscal year during which it
met with Dunn's independent auditors to review preparations for the annual audit
of Dunn.

COMPENSATION OF DIRECTORS

Dunn has not paid, and the Company does not presently propose to pay,
compensation to any director for acting in such capacity, except for nominal
sums for attending Board of Directors meetings and reimbursement for reasonable
expenses in attending those meetings. In January 1997, Dunn granted each of its
two outside directors a stock option to purchase 20,000 shares of common stock
at an exercise price of $4.15 per share. Dunn believes the exercise price of
$4.15 per share was the fair market value at the time of the grants.

THE COMPANY'S BOARD OF DIRECTORS

The five current directors of Dunn also serve as the initial directors of
the Company. Upon the Closing of the Merger and the IDP Acquisition the number
of directors of the Company will be raised from five to seven and the
appointment of George D. Fuster and D. Oscar Fuster, two of the IDP Sellers, as
directors of the Company will become effective.

The directors of the Company are divided into three classes with staggered
terms. The current term of John D. Vazzana and Claudia N. Dunne is until the
first annual meeting of shareholders after the Closing, the current term of VADM
E. A. Burkhalter, Jr., USN (Ret.) and Daniel Sinnott is until the second annual
meeting after the Closing, and the current term of Thomas P. Dunne is, and the
term of George D. Fuster and D. Oscar Fuster will be, until the third annual
meeting after the Closing. Directors elected after the Closing will be elected
to three-year terms.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning the executive
officers, directors and director nominees of Dunn and the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Thomas P. Dunne...................................... 55 Chairman, Chief Executive Officer, and President
John D. Vazzana...................................... 54 Executive Vice President, Chief Financial Officer,
Director
Claudia N. Dunne..................................... 38 Vice President, Director
George D. Fuster..................................... 38 President of IDP, Director Nominee *
D. Oscar Fuster...................................... 40 Executive Vice President of IDP, Director Nominee*
VADM E. A. Burkhalter, Jr., USN (Ret.)............... 69 Director
Daniel Sinnott....................................... 63 Director
</TABLE>

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

* Appointment as director of the Company will become effective as of the
Closing.

Each director holds office until the annual meeting at which his term
expires or until a successor is elected and qualified unless the director dies,
resigns, or is removed from office. Executive officers hold office until their
successors are chosen and qualified, subject to earlier removal by the Board of
Directors. Biographical descriptions of the current directors and executive
officers are included under the caption "Election of Directors." Set forth below
is a description of the two IDP Sellers who will become executive officers and
directors of the Company upon the Closing of the Merger and the IDP Acquisition.

GEORGE D. FUSTER has been President of IDP since he founded IDP in 1984.
From 1983 to 1984, he was Eastern Regional Manager for Sales Support Engineering
at Fujitsu Microelectronics Corporation, where his responsibilities included
coordinating third party hardware and software relationships between the
regional offices and the corporate office. Prior thereto, George D. Fuster
served as a Systems Engineer for Advanced Technology Corporation, where he
helped develop financial models for the U.S. Navy Marine Gas Turbines Program.
The principal stockholders of Dunn have agreed to elect George D. Fuster as a
director of the Company immediately preceding the Offering. George D. Fuster is
a brother of D. Oscar Fuster, the Executive Vice President of IDP.

D. OSCAR FUSTER has been Executive Vice President of IDP since 1986, where
his primary responsibility is for the overall operations of the company. Prior
to joining IDP, he was Vice President of Marketing for SMS Data Products,
Financial Analyst for Electronic Data Systems, Incorporated and Accounting
Manager for Genasys Corporation. The principal stockholders of Dunn have agreed
to elect D. Oscar Fuster as a director of the Company immediately preceding the
Offering. D. Oscar Fuster is a brother of George D. Fuster, the President and
founder of IDP.

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<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth certain information regarding compensation
paid by Dunn during each of the last three fiscal years to the Chief Executive
Officer and the executive officers of Dunn who earned in excess of $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------------
ANNUAL COMPENSATION
--------------------------
NAME AND PRINCIPAL POSITION* YEAR SALARY BONUS
- ------------------------------------------------------------------------------ --------- ------------ ------------
<S> <C> <C> <C>
Thomas P. Dunne............................................................... 1997 $ 240,000 0
Chairman, Chief Executive Officer 1996 $ 240,000 $ 275,000
and President 1995 $ 240,000 0

John D. Vazzana............................................................... 1997 $ 240,000 0
Executive Vice President, Chief 1996 $ 240,000 $ 275,000
Financial Officer, Director 1995 $ 240,000 0
</TABLE>

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

* George D. Fuster and D. Oscar Fuster have served, respectively, as President
of IDP and Executive Vice President of IDP during each of the last three
fiscal years. Each of them received compensation from IDP in excess of
$100,000 during each of these three years.

EMPLOYMENT AGREEMENTS

The Company has employment agreements with Thomas P. Dunne and John D.
Vazzana, and will have employment agreements with George D. Fuster and D. Oscar
Fuster (each an "Employee" and collectively the "Employees"). The agreements for
Mr. Vazzana and Mr. Dunne run for a term of three years effective April 1997 and
automatically renew for additional one year terms unless terminated by either
Dunn or the Employee. Both agreements provide for a $240,000 annual salary and a
bonus at the discretion of Dunn's Board of Directors. The bonus may not exceed
5% of the Company's pre-tax income for the preceding fiscal year or $250,000.

The employment agreements with George D. Fuster and D. Oscar Fuster, which
will be effective at Closing, have a term of three years, unless renewed,
provide for a $200,000 annual salary, an annual bonus, and a stock option (the
"Option") to purchase up to 300,000 shares, subject to adjustment up to 400,000
shares under certain conditions, of the Common Stock, at a price per share equal
to the Nasdaq closing bid as of the Closing, to be exercisable as to 50% of the
shares subject to the Option six months from the effective date of the
employment contract, and as to the remaining 50% of the shares within one year
of such date.

All employment contracts contain confidentiality provisions and covenants
not to compete with the Company for a period of one year following the
termination of the agreements.

STOCK OPTION PLAN

Under Dunn's 1997 Stock Option Plan, options to purchase a maximum of
2,200,000 shares of common stock of Dunn (subject to the approval by Dunn's
stockholders of the increase from 600,000 to 2,200,000 shares and further
subject to adjustments in the event of stock splits, stock dividends,
recapitalizations and other capital adjustments) may be granted to employees,
officers and directors of Dunn and other persons who provide services to Dunn.
As of the date of this Proxy Statement/Prospectus, options relating to 1,832,000
shares were previously granted under Dunn's 1997 Stock Option Plan at a weighted
average exercise price of $6.18 per share. As of the date of this Proxy
Statement/Prospectus, options

60
<PAGE>
relating to 86,250 shares are exercisable, and none of the options have been
exercised. In the Merger, each outstanding option under Dunn's 1997 Stock Option
Plan will be converted into an option to purchase, at the same exercise price,
the same number of shares of Common Stock of the Company under a stock option
plan of the Company under which options to purchase a total of 2,200,000 shares
of common stock will be authorized (subject to the approval of Dunn's
stockholders and further subject to adjustments in the event of stock splits,
stock dividends, recapitalizations and other capital adjustments). See "The
Merger and the IDP Acquisition--Treatment of Dunn Stock Options and Warrants."

The options to be granted under the Company's stock option plan may be
designated as incentive stock options or non-incentive stock options by the
Board of Directors, which also has discretion as to the persons to be granted
options, the number of shares subject to the options and the terms of the option
agreements. Only employees, including officers and part time employees of the
Company, may be granted incentive stock options. Officers and directors who
currently own more than 5% of the outstanding stock are not eligible to
participate in the 1997 Stock Option Plan.

RETIREMENT PLANS

Dunn established a discretionary contribution plan effective March 1, 1995
(the "401(k) Plan") for its employees who have completed three months of service
with Dunn. The 401(k) Plan is administered by Dunn and permits pre-tax
contributions by participants pursuant to Section 401(k) of the Code, up to the
maximum allowable contributions as determined by the Code. Dunn may match
participants' contributions on a discretionary basis. In fiscal 1995 and 1996
Dunn contributed $.25 for each $1.00 contributed by the employees.

IDP established a discretionary contribution plan in 1993 (the "IDP 401(k)
Plan") for its employees who have completed one half year of service with IDP.
The IDP 401(k) Plan is administered by IDP and permits pre-tax contributions by
participants pursuant to Section 401(k) of the Code up to the maximum allowable
contributions as determined by the Code. IDP may match a participant's
contributions, on a discretionary basis, up to eight percent of a participant's
annual earnings. In fiscal 1997 and 1996, IDP contributed an aggregate of
$261,000 and $210,000, respectively, matching $1.00 for each $1.00 contributed
by its employees.

During the fiscal year ended October 31, 1995, Dunn established a defined
benefit plan covering substantially all salaried employees (the "Pension Plan").
The Pension Plan benefits are based on the years of service and the employee's
compensation. Dunn contributes, on an annual basis, amounts sufficient to meet
the minimum funding requirements set forth in the Employee Retirement Income
Security Act of 1974 ("ERISA"). Contributions are intended to provide not only
for benefits attributed to service to date, but also for those expected to be
earned in the future. The assets of the Pension Plan are invested in money
markets and investment-grade corporate debt and equity instruments. Dunn
contributed an aggregate of approximately $135,000 for the Pension Plan years
ending October 31, 1995 and 1996, which amount met the minimum funding
requirements under ERISA. Dunn has accrued, but not yet paid, $51,450, which
amount represents its minimum funding requirements under ERISA for fiscal 1997.

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<PAGE>
CERTAIN TRANSACTIONS

At Closing, (i) Merger Sub, a subsidiary of the Company, will merge into
Dunn which will be the surviving corporation and will thereby become a
wholly-owned subsidiary of the Company, and (ii) the Company will acquire all
the issued and outstanding capital stock of IDP Co. and a newly-formed
subsidiary of the Company will acquire substantially all of the net assets of
PRIMO. The aggregate consideration that will be paid for IDP Co. and PRIMO
consists of $14.9 million in cash and 750,000 shares of Common Stock of the
Company, each of which is subject to adjustment, which will be paid to George D.
Fuster, President of IDP Co. and director nominee of the Company, D. Oscar
Fuster, Executive Vice President of IDP Co. and director nominee of the Company
and to PRIMO, which is owned by the wives of George D. Fuster and D. Oscar
Fuster.

Prior to the IDP Acquisition and the Offering, substantially all of the net
assets of F Squared Engineering Corp. which, as of January 31, 1998, had an
aggregate value of approximately $198,000, will be transferred from IDP Co. to F
Squared Engineering, Corp. and will be distributed to the individual IDP Sellers
in partial redemption of their IDP Co. shares.

At Closing, certain IDP Co. notes in the aggregate amount of $1.4 million
payable to the IDP Sellers and certain related parties will be assumed by the
Company. The notes will have terms of one to three years and bear interest at
the annual rate of 8.0% to 11.0%.

In connection with the IDP Acquisition, George D. Fuster and D. Oscar Fuster
have entered employment agreements, pursuant to which each has been granted
options to acquire 300,000 shares, subject to adjustment to 400,000 shares under
certain conditions, of the Company's Common Stock at a price per share equal to
the Nasdaq closing bid as of the Closing. See "Management--Employment
Agreements."

On January 6, 1997, Dunn entered into a share exchange agreement (the "Share
Exchange Agreement") with Dunn Computer Corporation (now named Dunn Computer
Operating Company), a Virginia corporation incorporated in 1987, whereby such
Virginia corporation became a wholly-owned subsidiary of Dunn. Pursuant to the
Share Exchange Agreement, Dunn exchanged its stock on a 2,799.160251 for 1 basis
with the holders of stock of the Virginia corporation.

In April 1996, Dunn entered into a line of credit agreement with a bank that
was personally guaranteed by the principal stockholders of Dunn. In May 1997,
the loan agreement was modified to cancel the personal guarantees of the
principal stockholders of Dunn.

Dunn leases its facility from C&T Partnerships, an entity owned and
controlled by Thomas and Claudia Dunne, both affiliates of the Company. The
lease agreement terminates in October 1999, but provides for a five year renewal
at Dunn's option. Rent expense under this lease was $154,000 for each of the
years ended October 31, 1996 and 1997, respectively. In addition, the mortgage
on the facility of approximately $1,000,000, which has a 25 year term and bears
interest at 2% over prime, is guaranteed by the Company. The Company has been
advised that all payments with respect to the mortgage are current. For
additional terms of the lease and a description of the facility, see
"Business--Facilities."

In 1995, Dunn made a stock investment of $150,000 in WIZnet, an
Internet-related company. Daniel Sinnott, a director of the Company, is the
President and Chief Executive Officer of WIZnet. Mr. Sinnott was not a director
of Dunn at the time of the investment. The Company believes that the transaction
was fair and reasonable.

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<PAGE>
PROPOSAL TO AMEND THE 1997 STOCK OPTION PLAN OF DUNN
AND AUTHORIZE THE STOCK OPTION PLAN OF THE COMPANY
(ITEM 3 OF PROXY CARD)

1997 STOCK OPTION PLAN

On January 6, 1997 the Board of Directors and the stockholders of Dunn first
adopted the Dunn Computer Corporation 1997 Stock Option Plan (the "1997 Stock
Option Plan"). The 1997 Stock Option Plan provides for the granting of stock
options to officers and other employees of Dunn and its subsidiaries and to
non-employee directors, consultants, advisors and other persons who may perform
significant services for or on behalf of Dunn. The Board of Directors believes
that the 1997 Stock Option Plan assists Dunn in attracting and retaining
personnel of high quality and ability by providing such persons incentives and
rewards for superior performance.

In September 1997 the Board of Directors increased the aggregate number of
shares of Dunn common stock subject to issuance under the 1997 Stock Option Plan
from a maximum of 600,000 to 2,200,000 shares (subject to adjustments in the
event of stock splits, stock dividends, recapitalizations and other capital
adjustments). That increase is subject to the approval of Dunn's stockholders.

The Board of Directors believes that it is in the best interests of Dunn to
continue the 1997 Stock Option Plan and recommends that the stockholders approve
an amendment to the 1997 Stock Option Plan to increase the cumulative aggregate
number of shares of common stock subject to issuance thereunder from a maximum
of 600,000 to 2,200,000.

CONTINUING STOCK OPTION PLAN

Dunn proposes to cause the Company, which prior to the Merger is a
wholly-owned subsidiary of Dunn, to adopt a stock option plan (the "Continuing
Stock Option Plan"). In the Merger, each outstanding option to purchase shares
of common stock of Dunn under the 1997 Stock Option Plan will be converted into
an option to purchase, at the same exercise price, the same number of shares of
Common Stock of the Company under the Continuing Stock Option Plan. See "The
Merger and the IDP Acquisition--Treatment of Dunn Stock Options and Warrants."
No options will be granted under the Continuing Stock Option Plan if the Merger
does not occur.

The terms of the Continuing Stock Option Plan will be substantially the same
as the terms of the 1997 Stock Option Plan, and will provide for the granting of
stock options to officers and other employees of the Company and its
subsidiaries and to non-employee directors, consultants, advisors and other
persons who may perform significant services for or on behalf of the Company.

A cumulative aggregate of 2,200,000 shares of Common Stock will be subject
to issuance under the Continuing Stock Option Plan (subject to adjustments in
the event of stock splits, stock dividends, recapitalizations and other capital
adjustments).

VOTES REQUIRED FOR APPROVAL

The affirmative vote of the holders of a majority of the outstanding shares
of Dunn common stock present in person or by proxy at the annual meeting will be
required to approve the amendment of the 1997 Stock Option Plan and to approve
the adoption of the Continuing Stock Option Plan.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
1997 STOCK OPTION PLAN AND TO ADOPT THE CONTINUING STOCK OPTION PLAN.

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<PAGE>
STOCK OPTION PLAN SUMMARY

The following is a brief description of material features of the 1997 Stock
Option Plan of Dunn and the proposed Continuing Stock Option Plan of the
Company. As used herein, the term "Plan" shall refer to both the 1997 Stock
Option Plan and the Continuing Stock Option Plan. The following summary of the
Plan is qualified in its entirety by reference to the Plan which is attached as
Appendix C hereto and incorporated herein by reference.

ADMINISTRATION

The Plan provides that it is to be administered by the Board of Directors,
if each member is a "non-employee director" within the meaning of Rule 16b-3
promulgated by the Commission pursuant to the Exchange Act, or a committee of
two or more directors, each of whom is such a non-employee director (the "Plan
Committee"). To date, all actions with respect to the 1997 Stock Option Plan
have been taken by the full Board of Directors of Dunn.

OPTIONS AUTHORIZED

The Plan authorizes the grant of both incentive stock options ("Incentive
Stock Options") within the meaning of Section 422 of the Code, and stock options
that do not qualify for treatment as Incentive Stock Options ("Non-qualified
Options"). The exercise price of each Incentive Stock Option granted under the
Plan is to be not less than 100% of the fair market value of the stock subject
to the option on the date the option is granted (or 110% in the case of an
Incentive Stock Option granted to an employee owning more than 10% of the voting
stock of the company granting the option). The exercise price of each Non-
qualified Option granted under the Plan is to be not less than 85% of the fair
market value of the stock subject to the option on the date the option is
granted.

Each option granted under the Plan is to be evidenced by a written stock
option agreement between the company granting the option and the option holder.
Each stock option agreement is to set forth, among other terms not inconsistent
with the Plan, when the option subject thereto is to be exercisable and when it
will expire. An Incentive Stock Option granted under the Plan may not be
exercisable after the expiration of ten years after the date such option is
granted. Each option granted under the Plan must become exercisable in full no
later than ten years after such option is granted, and each option must become
exercisable as to at least 10% of the shares covered thereby on each anniversary
of the date such option is granted.

If the shares covered by the Plan are changed into, or exchanged for, cash
or a different number or kind of shares or securities of any corporation through
a reorganization, merger, recapitalization, reclassification, stock split-up,
reverse stock split, stock dividend, stock consolidation, stock combination,
stock reclassification or similar transaction, an appropriate adjustment shall
be made by the Committee in the number and kind of shares as to which options
may be granted.

In the discretion of the Board of Directors or the Plan Committee at the
time an option granted under the Plan is exercised, the exercise price may be
paid in full (1) in cash or by check, (2) by interest-bearing promissory note of
the option holder (subject to any limitations of applicable state corporations
law) delivered at the time of exercise, or (3) subject to certain limitations,
by delivery of shares of the company's stock or other property. The Board of
Directors or the Plan Committee may permit, subject to certain regulatory
limitations, so-called cashless exercises, which involve the payment of the
exercise price from the proceeds of the contemporaneous sale of the shares being
issued pursuant to the exercise of the option.

The Board of Directors or the Plan Committee may at any time suspend, amend
or terminate the Plan, except that without approval of the stockholders given
within twelve months before or after such action, no action of the Board of
Directors or the Plan Committee may materially increase the benefits

64
<PAGE>
accruing to participants under the Plan, materially increase the number of
securities that may be issued under the Plan, or materially modify the
requirements as to eligibility for participation in the Plan.

ELIGIBILITY

Officers and other employees of Dunn (currently approximately ),
non-employee directors (currently 2), consultants and advisors and other persons
who may perform significant services on behalf of Dunn (currently approximately
) are eligible to be granted options under the 1997 Stock Option Plan.
Officers and other employees of the Company (projected to be approximately
upon the Merger), non-employee directors (projected to be 2 upon the
Merger), consultants and advisors and other persons who may perform significant
services on behalf of the Company (projected to be approximately upon the
Merger) are eligible to be granted options under the Continuing Stock Option
Plan. Incentive Stock Options may be granted only to persons who are "employees"
within the meaning of Section 3401(c) of the Code.

FEDERAL INCOME TAX CONSEQUENCES

The following is a brief summary of certain of the federal income tax
consequences to individuals receiving grants of awards under the Plan. The
following summary is based upon federal income tax laws in effect on January 1,
1998 and is not intended to be complete or describe any state or local tax
consequences.

NON-QUALIFIED STOCK OPTIONS. In general, (i) no income will be recognized
by an optionee at the time a non-qualified stock option is granted; (ii) at
exercise, ordinary income will be recognized by the optionee in an amount equal
to the difference between the option price paid for the shares and the fair
market value of the shares, if unrestricted, on the date of exercise; and (iii)
at sale, appreciation (or depreciation) after the date of exercise will be
treated as a capital gain (or loss).

INCENTIVE STOCK OPTIONS. No income generally will be recognized by an
optionee upon the grant or exercise of an Incentive Stock Option. If shares of
common stock are issued to the optionee pursuant to the exercise of an Incentive
Stock Option, and if no disqualifying disposition of such shares is made by such
optionee within two years after the date of grant or within one year after the
transfer of such shares to the optionee, then upon sale of such shares, any
amount realized in excess of the option price will be taxed to the optionee as a
capital gain and any loss sustained will be a capital loss.

If shares of common stock acquired upon the exercise of an incentive stock
option are disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount equal to the excess (if any) of the fair market
value of such shares at the time of exercise (or, if less, the amount realized
on the disposition of such shares if a sale or exchange) over the option price
paid for such shares. Any further gain (or loss) realized by the optionee
generally will be treated as a capital gain (or loss).

TAX CONSEQUENCES TO THE COMPANY. To the extent that a participant
recognizes ordinary income in the circumstances described above, the
participant's employer should be entitled to a corresponding deduction,
provided, among other things, such income meets the test of reasonableness, is
an ordinary and necessary business expense, is not an "excess parachute payment"
within the meaning of Section 280G of the Code and is not disallowed by the $1
million limitation on certain executive compensation.

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<PAGE>
PLAN BENEFITS

The following table sets forth the stock options granted under the 1997
Stock Option Plan, and to be granted under the Continuing Stock Option Plan as
of the effectiveness of the Merger, to each of the following persons or groups.

PLAN BENEFITS

<TABLE>
<CAPTION>
NUMBER OF DOLLAR
NAME AND POSITION STOCK OPTIONS VALUE
- ------------------------------------------------------------------------------------------- ------------- -----------
<S> <C> <C>
Thomas P. Dunne............................................................................ 0 0
(Chairman, Chief Executive Officer and President)
John D. Vazzana............................................................................ 0 0
(Executive Vice President, Chief Financial Officer, Director)
Claudia N. Dunne........................................................................... 0 0
(Vice President, Director)
George D. Fuster........................................................................... 0 0
(President of IDP, Director Nominee)
D. Oscar Fuster............................................................................ 0 0
(Executive Vice President of IDP, Director Nominee)

EXECUTIVE GROUP
VADM E.A. Burkhalter, Jr. USN (Ret.)....................................................... 20,000 (1)
(Director)
Daniel Sinnott............................................................................. 20,000 (1)
(Director)
Non-Executive Director Group............................................................... 40,000 (1)
Non-Executive Officer Employee Group and Consultants....................................... 1,792,000 (1)
</TABLE>

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

(1) Stock options granted under the Plan at exercise prices equal to or
exceeding the fair market value of the common stock subject to the option on
the date of grant. The actual value, if any, a person may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised. The weighted average exercise price of the
1,832,000 stock options granted to directors, non-executive officer
employees and consultants as set forth above is $6.18 per share. On March
16, 1998, the last reported closing price of the Common Stock on the Nasdaq
National Market was $9 1/4.

LEGAL MATTERS

Certain legal matters with respect to the validity of the securities offered
hereby and the Merger will passed upon for Dunn and the Company by Jones, Day,
Reavis & Pogue.

INDEPENDENT AUDITORS

Ernst & Young LLP served as the independent auditors of Dunn for the fiscal
year ended October 31, 1997 and has been selected by the Board of Directors to
serve as Dunn's independent auditors for the fiscal year ending October 31, 1998
and, upon completion of the Merger, as the independent auditors of the Company.
Representatives of the firm of Ernst & Young LLP are expected to be present at
the meeting with the opportunity to make a statement, if they desire to do so,
and to be available to respond to appropriate questions.

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<PAGE>
EXPERTS

The consolidated financial statements of Dunn Computer Corporation, a
Delaware corporation, at October 31, 1996 and 1997, and for each of the three
years in the period ended October 31, 1997, appearing in this Proxy
Statement/Prospectus have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and in
the Registration Statement, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.

The financial statements of STMS at December 31, 1995 and 1996 and for each
of the two years in the period ended December 31, 1996, appearing in this Proxy
Statement/Prospectus have been audited by Davis, Sita & Company, P.A.,
independent auditors, as set forth in their report thereon appearing elsewhere
herein and in the Registration Statement, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.

The combined financial statements of International Data Products, Corp. and
combined company, at September 30, 1996 and 1997, and for each of the three
years in the period ended September 30, 1997, have been included herein and in
the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein and upon
the authority of said firm as experts in accounting and auditing.

The balance sheet of Dunn Computer Corporation, a Virginia corporation, at
February 26, 1998, appearing in this Proxy Statement/Prospectus has been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein and in the Registration Statement, and is included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

OTHER MATTERS

Dunn will bear the cost of preparing and mailing the Proxy
Statement/Prospectus, form of proxy and other material that may be sent to
stockholders in connection with this solicitation. In addition to solicitations
by mail, officers and other employees of Dunn may solicit proxies personally or
by telephone or facsimile.

The Board of Directors does not intend to present and knows of no others who
intend to present at the meeting any matter of business other than those matters
set forth in the accompanying Notice of Annual Meeting of Stockholders. However,
if other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the proxy in accordance with
their best judgment.

FUTURE STOCKHOLDER PROPOSALS

Any stockholder who intends to submit a proposal for inclusion in the proxy
materials for the 1999 annual meeting of Dunn (or the Company upon completion of
the Merger) must submit such proposal to the Secretary of Dunn (or the Company)
by . Commission rules set forth standards as to what stockholder proposals
are required to be included in a proxy statement for an annual meeting.

ADDITIONAL INFORMATION

A Registration Statement on Form S-4, including amendments thereto, relating
to the shares of the Company's Common Stock to be issuable in connection with
the Merger, of which this Proxy Statement/ Prospectus forms a part, has been
filed by the Company with the Commission. This Proxy Statement/ Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. Statements contained in this Proxy
Statement/Prospectus as to the contents of any

67
<PAGE>
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to such
Registration Statement, exhibits and schedules. A copy of the Registration
Statement may be inspected by anyone without charge at the Commission's
principal office located at 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, the Northeast Regional Office located at 7 World Trade Center, 13th
Floor, New York, New York 10048, and the Midwest Regional Office located at
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661-2511, and copies of all or any part thereof may be obtained from the
Public Reference Branch of the Commission upon the payment of certain fees
prescribed by the Commission. In addition, the Registration Statement may be
accessed electronically at the Commission's site on the World Wide Web located
at http://www.sec.gov.

The Company currently is not a reporting company. The Company intends to
furnish to its shareholders annual reports containing audited financial
statements and quarterly reports containing unaudited interim financial
information for each of the first three quarters of each fiscal year of the
Company.

Until the Merger, Dunn is subject to the informational requirements of the
Exchange Act, and in accordance therewith files annual, quarterly and special
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information filed may be inspected without
charge and copies may be had at the prescribed fees at the Commission's
addresses set forth above and at the Commission's website. Dunn common stock is
listed on the Nasdaq National Market under the symbol "DNCC", and material filed
by Dunn can also be inspected at the offices of the Nasdaq National Market, 1735
K Street, Washington, D.C. 20006.

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INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
DUNN COMPUTER CORPORATION (A DELAWARE CORPORATION)
Report of Ernst & Young LLP, Independent Auditors.................................... F-2
Consolidated Balance Sheets as of October 31, 1996 and 1997 and as of January 31,
1998 (unaudited)................................................................... F-3
Consolidated Statements of Income for the three years in the period ended October 31,
1997 and for the three months ended January 31, 1997 and 1998 (unaudited).......... F-4
Consolidated Statements of Stockholders' Equity for the three years in the period
ended October 31, 1997 and for the three months ended January 31, 1998
(unaudited)........................................................................ F-5
Consolidated Statements of Cash Flows for the three years in the period ended
October 31, 1997 and for the three months ended January 31, 1997 and 1998
(unaudited)........................................................................ F-6
Notes to Consolidated Financial Statements........................................... F-7

STMS, INC.
Report of Davis, Sita & Company, P.A., Independent Auditors ......................... F-18
Balance Sheets as of December 31, 1995 and 1996...................................... F-19
Statements of Operations for the years ended December 31, 1995 and 1996.............. F-20
Statements of Stockholders' Deficit for the years ended December 31, 1995 and 1996... F-21
Statements of Cash Flows for the years ended December 31, 1995 and 1996.............. F-22
Notes to Financial Statements........................................................ F-23
Balance Sheet as of June 30, 1997 (unaudited)........................................ F-29
Statements of Operations for the six months ended June 30, 1996 and 1997
(unaudited)........................................................................ F-30
Statements of Cash Flows for the six months ended June 30, 1996 and 1997
(unaudited)........................................................................ F-31
Notes to Financial Statements (unaudited)............................................ F-32

DUNN COMPUTER CORPORATION (A VIRGINIA CORPORATION)
Report of Ernst & Young LLP, Independent Auditors.................................... F-33
Balance Sheet as of February 26, 1998................................................ F-34
Note to Financial Statement.......................................................... F-35

INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY..............................
Report of KPMG Peat Marwick LLP, Independent Auditors................................ F-36
Combined Balance Sheets as of September 30, 1996 and 1997 and as of December 31, 1997
(unaudited)........................................................................ F-37
Combined Statements of Income and Retained Earnings for the three years in the period
ended
September 30, 1997 and for the three months ended December 31, 1996 and 1997
(unaudited)........................................................................ F-38
Combined Statements of Cash Flows for the three years in the period ended September
30, 1997 and for the three months ended December 31, 1996 and 1997 (unaudited)..... F-39
Notes to Combined Financial Statements............................................... F-40
</TABLE>

F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors

We have audited the accompanying consolidated balance sheets of Dunn
Computer Corporation (a Delaware corporation) as of October 31, 1996 and 1997,
and the related consolidated statements of income, stockholders' equity and cash
flows for the three years in the period ended October 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Dunn Computer Corporation as of October 31, 1996 and 1997, and the consolidated
results of its operations and its cash flows for the three years in the period
ended October 31, 1997 in conformity with generally accepted accounting
principles.

/s/ Ernst & Young LLP

Vienna, Virginia
January 7, 1998, except for Notes
2 and 11, with respect to the
earnings per share calculations, as
to which the date is March 5, 1998

F-2
<PAGE>
DUNN COMPUTER CORPORATION

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 31, JANUARY 31,
---------------------------- -------------
<S> <C> <C> <C>
1996 1997 1998
------------- ------------- -------------

<CAPTION>
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 897,664 $ 341,966 $ 162,359
Accounts receivable, net.......................................... 3,174,060 9,712,010 8,373,278
Inventory, net.................................................... 985,603 4,487,301 2,882,118
Prepaid expenses and other assets................................. -- 87,457 120,052
------------- ------------- -------------
Total current assets................................................ 5,057,327 14,628,734 11,537,807
Property and equipment, net......................................... 63,763 633,428 598,257
Goodwill and other intangible assets, net........................... -- 2,974,840 2,920,514
Investments......................................................... 150,000 275,000 275,000
Other assets........................................................ 3,540 191,075 186,958
------------- ------------- -------------
Total assets........................................................ $ 5,274,630 $ 18,703,077 $ 15,518,536
------------- ------------- -------------
------------- ------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 2,452,161 $ 9,296,497 $ 2,153,011
Accrued expenses.................................................. 285,244 490,970 483,151
Income taxes payable.............................................. 519,308 -- 417,662
Deferred tax credit............................................... 11,086 -- --
Line-of-credit.................................................... -- -- 2,826,789
Notes payable--current portion.................................... -- 12,840 12,840
Obligations under capital leases-current portion.................. -- 66,294 54,319
Unearned revenue.................................................. 67,640 422,907 474,345
------------- ------------- -------------
Total current liabilities........................................... 3,335,439 10,289,508 6,422,117

Notes payable-long-term portion..................................... -- 49,952 47,105
Obligations under capital leases-long-term portion.................. -- 25,462 22,453
Deferred tax credit................................................. -- 100,000 100,000
Stockholders' equity:
Preferred Stock, $.001 par value; 2,000,000 shares authorized, no
shares issued and outstanding................................... -- -- --
Common Stock, $.001 par value; 20,000,000 shares authorized,
4,000,000 and 5,150,000 and 5,150,000 shares issued and
outstanding at October 31, 1996 and 1997 and January 31, 1998,
respectively.................................................... 4,000 5,150 5,150
Additional paid-in capital........................................ 111,857 5,087,371 5,087,371
Retained earnings................................................. 1,823,334 3,145,634 3,834,340
------------- ------------- -------------
Total stockholders' equity.......................................... 1,939,191 8,238,155 8,926,861
------------- ------------- -------------
Total liabilities and stockholders' equity.......................... $ 5,274,630 $ 18,703,077 $ 15,518,536
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

See accompanying notes.

F-3
<PAGE>
DUNN COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
------------------------------------------ ----------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
------------ ------------- ------------- ------------- -------------

<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues.......................... $ 7,491,452 $ 18,098,638 $ 21,766,465 $ 5,505,350 $ 10,429,168
Costs of revenues..................... 6,046,480 14,102,442 17,549,655 4,199,577 7,989,879
------------ ------------- ------------- ------------- -------------
Gross profit.......................... 1,444,972 3,996,196 4,216,810 1,305,773 2,439,289
Selling and marketing................. 154,110 475,471 842,281 181,507 551,881
General and administrative............ 812,046 1,496,979 1,355,423 252,119 738,290
------------ ------------- ------------- ------------- -------------
Income from operations................ 478,816 2,023,746 2,019,106 872,147 1,149,118
Other income (expense):
Other income (expense).............. 34,512 49,343 -- 7,668 (5,132)
Interest income..................... -- -- 109,877 -- --
Interest expense.................... (26,246) (57,925) (11,813) -- (37,618)
------------ ------------- ------------- ------------- -------------
Net income before income taxes........ 487,082 2,015,164 2,117,170 879,815 1,106,368
Provision for income taxes............ 244,000 776,000 794,870 334,000 417,662
------------ ------------- ------------- ------------- -------------
Net income............................ $ 243,082 $ 1,239,164 $ 1,322,300 $ 545,815 $ 688,706
------------ ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- -------------
Earnings per share.................... $ 0.06 $ 0.31 $ 0.29 $ 0.14 $ 0.13
------------ ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- -------------
Earnings per share--
assuming dilution................... $ 0.06 $ 0.31 $ 0.28 $ 0.13 $ 0.12
------------ ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- -------------
</TABLE>

See accompanying notes.

F-4
<PAGE>
DUNN COMPUTER CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RECEIVABLE
--------------------- PAID-IN FROM RETAINED
SHARES AMOUNT CAPITAL STOCKHOLDER EARNINGS TOTAL
---------- --------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1994................. 4,000,000 $ 4,000 $ 111,857 $(132,538) $ 341,088 $ 324,407
Cash receipts from Stockholder.............. -- -- -- 32,538 -- 32,538
Net Income.................................. -- -- -- -- 243,082 243,082
---------- --------- ------------ ----------- ------------ ------------
Balance at October 31,1995.................. 4,000,000 4,000 111,857 (100,000) 584,170 600,027
Cash receipts from stockholder.............. -- -- -- 100,000 -- 100,000
Net income.................................. -- -- -- -- 1,239,164 1,239,164
---------- --------- ------------ ----------- ------------ ------------
Balance at October 31, 1996................. 4,000,000 4,000 111,857 -- 1,823,334 1,939,191
Issuance of common stock, net of offering
expenses of $1,083,336.................... 1,000,000 1,000 3,916,664 -- -- 3,917,664
Issuance of stock related to acquisition of
STMS...................................... 150,000 150 974,850 -- -- 975,000
Issuance of options related to STMS
acquisition recorded at fair value........ -- -- 84,000 -- -- 84,000
Net income.................................. -- -- -- -- 1,322,300 1,322,300
---------- --------- ------------ ----------- ------------ ------------
Balance at October 31, 1997................. 5,150,000 5,150 5,087,371 -- 3,145,634 8,238,155
Net income (unaudited)...................... -- -- -- -- 688,706 688,706
---------- --------- ------------ ----------- ------------ ------------
Balance at January 31, 1998 (unaudited)..... 5,150,000 $ 5,150 $ 5,087,371 $ -- $ 3,834,340 $ 8,926,861
---------- --------- ------------ ----------- ------------ ------------
---------- --------- ------------ ----------- ------------ ------------
</TABLE>

See accompanying notes.

F-5
<PAGE>
DUNN COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
--------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
--------- ---------- ---------- ----------- -----------

<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................. $ 243,082 $1,239,164 $1,322,300 $ 545,815 $ 688,706
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization of property and
equipment.............................................. 25,441 32,300 46,029 6,450 47,832
Amortization of goodwill and other intangible assets..... -- -- 22,448 -- 54,326
Changes in operating assets and liabilities:
Accounts receivable.................................... (734,660) (951,553) (5,354,279) 1,782,772 1,338,732
Inventory.............................................. (515,426) 211,763 (2,865,750) (339,822) 1,605,183
Prepaid expenses and other assets...................... (8,000) 9,460 (85,966) (88,039) (28,478)
Accounts payable....................................... 652,864 471,636 3,920,267 (344,813) (7,143,486)
Accrued expenses....................................... 309,471 (193,084) 51,930 35,823 (7,819)
Income taxes payable................................... 223,582 260,947 (519,308) (136,150) 417,662
Deferred tax credit.................................... 9,399 (66,276) 88,914 (8,850) --
Unearned revenue....................................... -- 67,640 (110,734) (67,640) 51,438
--------- ---------- ---------- ----------- -----------
Net cash provided by (used in) operating activities........ 205,753 1,081,997 (3,484,149) 1,385,546 (2,975,904)

INVESTING ACTIVITIES
Purchases of property and equipment........................ (15,617) (21,040) (93,389) -- (12,661)
Acquisition of STMS, net of cash acquired.................. -- -- (928,550) -- --
Purchase of investments.................................... -- (150,000) -- -- --
--------- ---------- ---------- ----------- -----------
Net cash used in investing activities...................... (15,617) (171,040) (1,021,939) -- (12,661)

FINANCING ACTIVITIES
Net proceeds from issuance of common stock................. -- -- 3,917,664 -- --
Proceeds of loans for purchase of certain asset............ -- -- 64,226 -- --
Payments on notes payable.................................. -- -- (10,551) -- (2,847)
Proceeds from bank line of credit.......................... -- 2,122,245 -- 200,000 2,826,789
Payments on bank line of credit............................ (194,809) (2,374,476) -- (200,000) --
Repayment from stockholder................................. 32,538 100,000 -- -- --
Payments on capital leases................................. -- -- (20,949) -- (14,984)
--------- ---------- ---------- ----------- -----------
Net cash (used in) provided by financing activities........ (162,271) (152,231) 3,950,390 -- 2,808,958
Net increase (decrease) in cash and cash equivalents....... 27,865 758,726 (555,698) 1,385,546 (179,607)
Cash and cash equivalents at beginning of the period....... 111,073 138,938 897,664 897,664 341,966
--------- ---------- ---------- ----------- -----------
Cash and cash equivalents at end of the period............. $ 138,938 $ 897,664 $ 341,966 $2,283,210 $ 162,359
--------- ---------- ---------- ----------- -----------
--------- ---------- ---------- ----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.............................................. $ 26,246 $ 57,925 $ 11,813 $ -- $ 38,473
--------- ---------- ---------- ----------- -----------
--------- ---------- ---------- ----------- -----------
Income taxes paid.......................................... $ -- $ 581,000 $1,323,308 $ 479,000 $ --
--------- ---------- ---------- ----------- -----------
--------- ---------- ---------- ----------- -----------
</TABLE>

See accompanying notes.

F-6
<PAGE>
DUNN COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

Dunn Computer Corporation (the "Corporation") was incorporated on July 27,
1987 under the laws of the Commonwealth of Virginia.

On January 3, 1997, Dunn Computer Corporation (the "Company"), a Delaware
corporation, was formed as a holding company for the stock of Dunn Computer
Corporation, the Virginia corporation. On January 6, 1997, the Board of
Directors and stockholders of the Corporation approved and effected a
2,799.160251 for 1 stock exchange with the Company whereby the holders of the
Corporation's Common Stock would receive 2,799.160251 shares of Common Stock in
the Company for each share of Common Stock in the Corporation. All references in
the accompanying consolidated financial statements as to the number of shares of
Common Stock and per-share amounts have been restated to reflect the stock
exchange. Also, the Company authorized 2,000,000 shares of Preferred Stock with
rights and preferences to be determined by the Board of Directors at a later
date.

The Company is engaged in the business of providing build-to-order computer
systems and related equipment to businesses and government agencies.

2. SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of the consolidated 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions eliminate upon consolidation.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.

INVESTMENTS

At October 31, 1996 and 1997, investments consisted of shares of common
stock of a privately-held internet company, Worldwide Internet Solutions
Network, Inc. ("WIZnet"), with a cost basis of approximately $150,000. The
Company believes that this carrying amount represents the lower of cost or
market. The Company is accounting for this investment using the cost method
since the Company's investment represents less than 20% of the privately-held
internet company's outstanding stock. The President and Chief Executive Officer
of WIZnet is a member of the Company's Board of Directors.

In connection with the acquisition of STMS, the Company also purchased a 47%
interest in Glacier Corporation. This investment was recorded at its fair value
of $125,000 on the purchase date. The Company is accounting for this investment
using the equity method. The Company believes that the carrying amount
represents the lower of cost or market at October 31, 1997. During the period
from the

F-7
<PAGE>
DUNN COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
acquisition date (September 12, 1997) to October 31, 1997, the Company's portion
of net income (loss) related to the Glacier investment was immaterial to the
financial statements.

INVENTORY

Inventory is stated at the lower of cost or market as determined by the
first-in first-out (FIFO) method. The Company periodically evaluates its
inventory obsolescence reserve to ensure inventory is recorded at net realizable
amounts.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets (contracts), which resulted from the
Company's acquisition of STMS, Inc. ("STMS") in September 1997, are being
amortized on a straight-line basis over twenty and five years, respectively. At
October 31, 1997, intangible assets were comprised of:

<TABLE>
<S> <C>
Goodwill........................................................ $2,397,287
Contracts....................................................... 600,000
Less accumulated amortization................................... (22,447)
---------
$2,974,840
---------
---------
</TABLE>

IMPAIRMENT OF LONG-LIVED ASSETS

Each year, management determines whether any property and equipment or any
other assets have been impaired based on the criteria established in Statement
of Financial Accounting Standards No. 121, ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of." The
Company made no adjustments to the carrying values of the assets during the
years ended October 31, 1995, 1996 and 1997.

STOCK COMPENSATION

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for
Stock-Based Compensation" which is effective for the Company's fiscal 1997
consolidated financial statements. SFAS 123 allows companies to account for
stock-based compensation under either the new provisions of SFAS 123 or the
provisions of Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting
for Stock Issued to Employees," but requires pro forma disclosure in the
footnotes to the consolidated financial statements as if the measurement
provisions of SFAS 123 had been adopted. The Company intends to continue
accounting for its stock-based compensation in accordance with the provisions of
APB 25.

REVENUE RECOGNITION

The Company generally recognizes revenues based on shipment of products.
Revenues are earned principally pursuant to various contracts with agencies of
the Federal government and commercial customers. The Company generally does not
require collateral on such contracts. The length of the Company's contracts
generally range from one to three years.

F-8
<PAGE>
DUNN COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The products sold are generally covered by a warranty for periods ranging
from two to three years. The Company accrues a warranty reserve for revenues
recognized during the year to record estimated costs to provide warranty
services.

Unearned revenue relates to cash received from credit card sales as of year
end for which the related inventory was shipped subsequent to year end.

During the year ended October 31, 1995, the Company had revenues from two
agencies of the Federal government which represented 73% and 12% of total
revenues. During the year ended October 31, 1996, the Company had revenues from
two agencies of the Federal government which represented 22% and 14% of total
revenues. In addition, during 1996, the Company had revenues from one Federal
government contractor and one commercial customer which represented 17% and 16%
of total revenues, respectively. As of October 31, 1996, accounts receivable
from agencies of the Federal government represented 92% of total accounts
receivable. During the year ended October 31, 1997, the Company had revenues
from one agency of the Federal government and one Federal government contractor
which represented 21% and 11% of total revenues, respectively. As of October 31,
1997, accounts receivable from agencies of the Federal government represented
64% of total accounts receivable.

INCOME TAXES

The Company provides for income taxes in accordance with the liability
method.

FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of cash, investments and accounts receivable.
The cash is held by high credit quality financial institutions. For accounts
receivable, the Company performs ongoing credit evaluations of its customers'
financial condition and generally does not require collateral. The Company
maintains reserves for credit losses, and such losses have been within
management's expectations. The concentration of credit risk is mitigated by the
diverse customer base and the amount of receivables due by the Federal
government. The carrying amount of the receivables approximates their fair
value.

EARNINGS PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement No. 128,
EARNINGS PER SHARE. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to the Statement 128 requirements.

RECENT PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 ("SFAS 130"), "Comprehensive Income",
which is required to be adopted in the year ended October 31, 1998 consolidated
financial statements. SFAS 130 requires that an enterprise (a) classify items of
other comprehensive income by their nature in the financial statements and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional

F-9
<PAGE>
DUNN COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
paid-in capital in the Statement of Stockholders' Equity. The Company will be
required to restate earlier periods provided for comparative purposes, but
doesn't believe that the adoption of SFAS 130 will be material to the Company's
financial statements.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information", which is required to be adopted in
the year ended October 31, 1998 consolidated financial statements. SFAS 131
changes the way public companies report segment information in annual financial
statements and also requires those companies to report selected segment
information in interim financial reports to stockholders. The disclosure for
segment information on the consolidated financial statements is not expected to
be material.

INTERIM FINANCIAL INFORMATION

The unaudited consolidated balance sheet, statements of income,
stockholders' equity and cash flows as of January 31, 1998 and for the three
months ended January 31, 1997 and 1998 have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions of Regulation S-X. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the interim period
are not necessarily indicative of the results that may be expected for any
future period, including the year ended October 31, 1998.

3. PROPERTY AND EQUIPMENT

Property and equipment, including leasehold improvements, are stated at
cost. Property and equipment are depreciated and amortized using the
straight-line method over the estimated useful lives of five years. Leasehold
improvements are amortized over the lesser of the related lease term or the
useful life.

Property and equipment consists of the following:

<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
<S> <C> <C>
1996 1997
---------- ----------
Computer and office equipment......................................... $ 69,626 $ 505,920
Furniture and fixtures................................................ 20,663 57,076
Leasehold improvements................................................ 27,424 96,326
Other................................................................. 78,742 143,060
---------- ----------
196,455 802,382
Less accumulated depreciation and amortization........................ (132,692) (168,954)
---------- ----------
$ 63,763 $ 633,428
---------- ----------
---------- ----------
</TABLE>

4. ACQUISITION OF STMS, INC.

On September 12, 1997, the Company acquired all of the outstanding stock of
STMS, Inc., a Virginia corporation ("STMS"), for 150,000 shares of the Company's
Common Stock, an option to purchase 25,000 shares of the Company's Common Stock,
and $1,044,500 in cash used specifically to repay certain debt of STMS. The
transaction was accounted for using the purchase method. The 150,000 shares of
Common

F-10
<PAGE>
DUNN COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. ACQUISITION OF STMS, INC. (CONTINUED)
Stock were valued at the market price of the Company's common stock or $975,000
on the date of transaction. The options to purchase 25,000 shares of Common
Stock were issued to a stockholder/creditor of STMS and was valued at fair value
of $84,000 using the Black-Scholes option-pricing model. The purchase price was
allocated to the assets and liabilities acquired based on their estimated fair
values. In conjunction with the acquisition, the Company recorded goodwill in
the amount of $2,397,287 and other intangible assets (contracts) in the amount
of $600,000. The operations of STMS are included in the consolidated financial
statements of the Company as of and for the year ended October 31, 1997.

The Company granted options to purchase an aggregate of 1,330,000 shares of
the Company's Common Stock, at an exercise price equivalent to its fair market
value at the date of grant, to the former stockholders of STMS in conjunction
with their three-year employment agreements (see Note 7). The options vest over
a three-year period.

The selected pro forma information for the years ended October 31, 1995,
1996 and 1997 includes the operating results of STMS as if the Company acquired
STMS on November 1, 1994.
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
----------------------------
<S> <C> <C>
1996 1997
------------- -------------

<CAPTION>
(UNAUDITED)
<S> <C> <C>
Pro Forma net revenues............................................................. $ 38,348,000 $ 37,186,000
------------- -------------
------------- -------------
Pro Forma net income (loss)........................................................ $ 1,548,000 $ (101,000)
------------- -------------
------------- -------------
Pro Forma earnings per share....................................................... $ 0.37 $ (0.02)
------------- -------------
------------- -------------
Pro Forma earnings per share--assuming dilution.................................... $ 0.37 $ (0.02)
------------- -------------
------------- -------------
Pro Forma weighted average shares outstanding...................................... 4,150,000 4,681,507
------------- -------------
------------- -------------
Pro Forma weighted average shares outstanding--assuming dilution................... 4,150,000 4,808,295
------------- -------------
------------- -------------
</TABLE>

5. BANK LINES OF CREDIT AND NOTES PAYABLE

In April 1996, the Company entered into a line of credit agreement with a
bank whereby the Company could borrow up to $2,000,000. Outstanding borrowings
bear interest at the prime rate. As of October 31, 1997, there were no
outstanding borrowings under this line of credit facility. The Company pays a
commitment fee equivalent to a certain percentage (approximately . 3/8%) of the
unused borrowings under the line of credit facility. The line of credit is
secured by all assets of the Company. Under the line of credit agreement, the
Company is required to maintain a net worth of $1,250,000 as well as submit
periodic financial statements. For the years ended October 31, 1996 and 1997,
the Company is in compliance with these covenants. The line of credit agreement
expires May 31, 1998.

During July 1997, the Company obtained a certain asset in the amount of
$64,227 through loan proceeds bearing interest annually at 7.9%. The Company is
required to make monthly payments of $1,303 until July, 2004.

6. RELATED PARTY TRANSACTION

Thomas Dunne, the Company's President, and his wife, Claudia Dunne, the
Company's Vice President, acquired a building for the purpose of leasing office
space to the Company. In connection with

F-11
<PAGE>
DUNN COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. RELATED PARTY TRANSACTION (CONTINUED)
the acquisition of the building, the Company guaranteed the building's $1
million mortgage. The term of the mortgage is 25 years. The Company subsequently
executed a noncancelable operating lease with Mr. and Mrs. Dunne. The Company
believes that the lease agreement is on terms no less favorable to the Company
than could be obtained from unaffiliated third parties (see Note 7).

7. COMMITMENTS

OPERATING LEASES

The Company leases office space under a noncancelable operating lease
agreement with two stockholders (see Note 6). The lease agreement terminates in
October 1999, but provides for a five year renewal at the Company's option.
Additionally, the Company leases various office equipment under non-cancelable
operating leases. Rent expense under these leases was $144,000, $154,000 and
$175,000 for the years ended October 31, 1995, 1996, and 1997, respectively.

Future minimum lease payments under noncancelable operating leases,
including the lease assumed in the STMS purchase, at October 31, 1997 are as
follows:

<TABLE>
<S> <C>
1998............................................................ $ 468,995
1999............................................................ 454,982
2000............................................................ 286,170
2001............................................................ 285,709
2002............................................................ 293,843
Thereafter...................................................... 225,304
---------
Total $2,015,003
---------
---------
</TABLE>

CAPITAL LEASES

In connection with the acquisition of STMS, the Company assumed certain
capital lease obligations. The capital leases are related to the use of certain
computer equipment, and are included in fixed assets and depreciated
accordingly. The total obligation under capital lease agreements at October 31,
1997 was $91,756, at an imputed interest rate of 8%. Future minimum lease
payments are $66,294 and $25,462 for the years ending October 31, 1998 and 1999,
respectively.

EMPLOYMENT AGREEMENTS

During the year ended October 31, 1997, the Company executed employment
agreements with certain key executives under which the Company is required to
pay the following base salaries annually over the next three years:

<TABLE>
<S> <C>
1998............................................................................ $1,005,000
1999............................................................................ 1,005,000
2000............................................................................ 637,501
---------
Total........................................................................... $2,647,501
---------
---------
</TABLE>

F-12
<PAGE>
DUNN COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. STOCKHOLDERS' EQUITY

EQUITY TRANSACTIONS

On April 21, 1997, the Company sold 1,000,000 shares of Common Stock in an
initial public offering for net proceeds of $3,917,664. In connection with the
offering, warrants were issued to the underwriter for 100,000 shares of Common
Stock at an exercise price of $6.00 per share. Beginning April 21, 1998, the
warrants are exercisable for a period of four years.

STOCK OPTION PLAN

On January 6, 1997, the Company adopted the 1997 Stock Option Plan (the
"Option Plan") which permits the Company to grant up to 600,000 options to
officers, directors and employees who contribute materially to the success of
the Company. In September 1997, the Company increased the number of options
available for grant under the plan to 2,200,000. Stock options are generally
granted at prices which the Company's Board of Directors believes approximates
the fair market value of its Common Stock at the date of grant. The options vest
over a stated period of time not to exceed four years. The contractual term of
the options is ten years.

Common stock option activity was as follows:

<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
EXERCISE
SHARES PRICE
---------- ---------------
<S> <C> <C>
Outstanding at October 31, 1996.................................... -- $
Options granted.................................................... 1,927,000 6.11
Options exercised.................................................. -- --
Options canceled or expired........................................ 70,000 4.15
---------- -----
Outstanding at October 31, 1997.................................... 1,857,000 $ 6.18
---------- -----
Exercisable at October 31, 1997.................................... -- $ --
---------- -----
---------- -----
</TABLE>

As of October 31, 1997, there were 343,000 options available for future
grants under the Option Plan.

The following table summarizes information about fixed-price stock options
outstanding at October 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- ------------------------------------------------------------------------
<S> <C> <C> <C>
NUMBER AVERAGE WEIGHTED-
RANGE OF OUTSTANDING AT REMAINING AVERAGE
EXERCISE OCTOBER 31, CONTRACTUAL EXERCISE
PRICES 1997 LIFE PRICE
- -------------- ------------------ ------------------- ---------------
$4.01--$6.00 275,000 4.20 $ 4.44
$6.01--$8.00 1,582,000 4.96 6.48
---------- --- -----
$4.01--$8.00 1,857,000 4.67 $ 6.18
---------- --- -----
---------- --- -----
</TABLE>

F-13
<PAGE>
DUNN COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. STOCKHOLDERS' EQUITY (CONTINUED)
Had compensation expense related to the stock option plan been determined
based on the fair value at the grant date for options granted during the years
ended October 31, 1996 and 1997 consistent with the provisions of SFAS 123, the
Company's net income and earnings per share would have been as follows:

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------
<S> <C> <C>
1996 1997
------------ ------------
Net income--pro forma............................................. $ 1,239,164 $ 1,098,900
------------ ------------
Earnings per share--pro forma..................................... $ 0.31 $ 0.24
------------ ------------
------------ ------------
Earnings per share--assuming dilution--pro forma.................. $ 0.31 $ 0.23
------------ ------------
------------ ------------
</TABLE>

The effect of applying SFAS 123 on pro forma net income as stated above is
not necessarily representative of the effects on reported net income for future
years due to, among other things, the vesting period of the stock options and
the fair value of additional stock options in future years.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing fair value model with the following
weighted-average assumptions used for grants in 1997: dividend yield of 0%,
expected volatility of 46%; risk-free interest rate of 5.75%; and expected life
of the option term of 5 years. The weighted average fair values of the options
granted in 1997 with a stock price equal to the exercise price is $6.18.

9. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

Components of the Company's net deferred tax asset (credit) balance are as
follows:

<TABLE>
<CAPTION>
OCTOBER 31,
-----------------------
<S> <C> <C>
1996 1997
---------- -----------
Deferred tax assets:
Accrued expenses................................................... $ 50,037 $ 24,800
Net operating loss carryforwards................................... -- 454,000
Asset reserves..................................................... 14,000 14,000
---------- -----------
Total deferred assets................................................ 64,037 492,800
Deferred tax credit:
Acquisition of intangible assets................................... -- (100,000)
Change from cash to accrual method for tax purposes................ (75,123) (38,800)
Valuation allowance.................................................. -- (454,000)
---------- -----------
Net deferred tax asset (credit).................................... $ (11,086) $ (100,000)
---------- -----------
---------- -----------
</TABLE>

As of October 31, 1997, the Company had approximately $1,100,000 in net
operating loss carryforwards primarily related to STMS, which expire at varying
dates through 2012. These carryforwards may be significantly limited under
Section 382 of the Internal Revenue Service Code and the SRLY rules. The Company
has fully reserved the net deferred tax assets because realizability of such
assets is uncertain.

F-14
<PAGE>
DUNN COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES (CONTINUED)
The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ----------- -----------
Current tax expense:
Federal..................................................................... $ 188,242 $ 709,195 $ 671,070
State....................................................................... 35,340 133,081 125,900
---------- ----------- -----------
223,582 842,276 796,970
Deferred tax expense:
Federal..................................................................... 17,355 (55,800) (1,800)
State....................................................................... 3,063 (10,476) (300)
---------- ----------- -----------
20,418 (66,276) (2,100)
---------- ----------- -----------
Total provision for income taxes............................................ $ 244,000 $ 776,000 $ 794,870
---------- ----------- -----------
---------- ----------- -----------
</TABLE>

The reconciliation of income tax from the statutory rate of 34% is:

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ---------- -----------
Tax at statutory rates...................................................... $ 165,608 $ 685,156 $ 719,838
Non-deductible expenses..................................................... 58,675 9,610 8,291
State income tax net of federal benefit..................................... 19,717 81,234 66,741
---------- ---------- -----------
$ 244,000 $ 776,000 $ 794,870
---------- ---------- -----------
---------- ---------- -----------
</TABLE>

10. RETIREMENT PLANS

401(K) PLAN

Effective April 1, 1995, the Company adopted a 401(k) Plan (the "Plan").
Employees are eligible to participate after completing six months of service and
attaining age 18. Employees can defer up to 15 percent of compensation. Employee
contributions are subject to Internal Revenue Service limitations. All employees
who contribute to the Plan are eligible to share in discretionary Company
matching contribution. During the years ended October 31, 1995, 1996 and 1997,
the Company contributed $4,469, $3,300 and $11,855, respectively, to the Plan.

DEFINED BENEFIT PLAN

During the fiscal year ended October 31, 1995, the Company implemented a
defined benefit plan (the "Pension Plan") covering substantially all salaried
employees. The Pension Plan benefits are based on years of service and the
employee's compensation. The Company's funding policy is to annually contribute
amounts sufficient to meet minimum funding requirements set forth in the
Employee Retirement Income Security Act of 1974 ("ERISA"). Contributions are
intended to provide not only for benefits attributed to service to date, but
also for those expected to be earned in the future. The assets of the Pension
Plan are invested in money markets and corporate debt and equity instruments.
The Company contributed, in the aggregate, approximately $135,000, for the
Pension Plan years ending October 31, 1995 and 1996, which amount met the
minimum funding requirements under ERISA. Dunn has accrued, but not yet paid,
$51,450, which amount represents its minimum funding requirements under ERISA
for fiscal 1997.

F-15
<PAGE>
DUNN COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. RETIREMENT PLANS (CONTINUED)
On January 6, 1997, the Company amended the Pension Plan to change the
benefits to be paid out after retirement from 100% to 40% of its initial
liability. This will result in a reduction of the projected benefit obligation
by $150,000.

The following table sets forth the Pension Plan's funded status as reported
on activity, and amounts recognized in the Company's consolidated financial
statements:

<TABLE>
<CAPTION>
OCTOBER 31,
------------------------
<S> <C> <C>
1996 1997
----------- -----------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of ($238,619) and ($171,593)
at October 31, 1996 and 1997, respectively.......................................... $ (320,973) $ (321,599)
----------- -----------
----------- -----------
Projected benefit obligation............................................................ (320,973) (321,559)
Pension Plan assets at fair value....................................................... 168,336 147,041
----------- -----------
Funded status--projected benefit obligation in excess of fair value of Pension Plan
assets................................................................................ $ (152,637) $ (174,518)
----------- -----------
----------- -----------
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
Net periodic pension cost:
Service cost..................................................................... $ 54,945 $ 59,066 $ 44,140
Interest cost.................................................................... 12,810 17,892 19,355
Actual return on assets.......................................................... -- (33,982) 21,295
Net amortization and deferral.................................................... 6,832 38,127 (33,340)
--------- --------- ---------
Total net periodic pension cost.................................................. $ 74,587 $ 81,103 $ 51,450
--------- --------- ---------
--------- --------- ---------
</TABLE>

Key assumptions used in the actuarial valuation were:

<TABLE>
<CAPTION>
OCTOBER 31,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
Weighted average discount note.................................................................... 7.5% 7.5%
Rate of return on assets:
Pre-retirement.................................................................................. 8.0% 8.0%
Post-retirement................................................................................. 8.0% 8.0%
</TABLE>

F-16
<PAGE>
DUNN COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings
per share:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED OCTOBER 31, JANUARY 31,
---------------------------------------- --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Numerator:
Net income............................... $ 243,082 $ 1,239,164 $ 1,322,300 $ 545,815 $ 688,706
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Denominator:
Denominator for basic earnings per
share--weighted-average shares......... 4,000,000 4,000,000 4,552,055 4,000,000 5,150,000
Effect of dilutive securities:
Employee stock options............... -- -- 124,906 50,150 539,535
Warrants............................. -- -- 1,887 -- 25,373
------------ ------------ ------------ ------------ ------------
Dilutive potential common shares......... -- -- 126,793 50,150 564,908
Denominator for diluted earnings per
share--adjusted weighted-average
shares and assumed conversions..... 4,000,000 4,000,000 4,678,848 4,050,150 5,714,908
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Basic earnings per share................... $0.06 $0.31 $0.29 $0.14 $0.13
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Diluted earnings per share................. $0.06 $0.31 $0.28 $0.13 $0.12
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>

12. SUBSEQUENT EVENT

On December 10, 1997, the Company increased the amount available under the
current line-of-credit arrangement with a bank from $2,000,000 to $4,000,000.

F-17
<PAGE>
REPORT OF DAVIS, SITA & COMPANY, P.A., INDEPENDENT AUDITORS

The Board of Directors
STMS, Inc.

We have audited the accompanying balance sheets of STMS, Inc. as of December
31, 1995 and 1996, and the related statements of operations, stockholders'
deficit and cash flows for the years then ended. 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 STMS, Inc. as of December
31, 1995 and 1996, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

/s/ Davis, Sita & Company, P.A.

Greenbelt, Maryland
August 25, 1997,
except for Note 9, as to which
the date is September 12, 1997

F-18
<PAGE>
STMS, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1995 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 178,167 $ 188,495
Trade accounts receivable, net of $21,744 and $22,363 at December 31, 1995 and 1996,
respectively...................................................................... 2,192,497 6,349,779
Inventory........................................................................... 698,091 263,108
Loans to stockholders............................................................... 89,274 158,402
Prepaid expenses and other current assets........................................... 7,232 76,115
Deposits............................................................................ 22,363 17,444
------------ ------------
Total current assets.................................................................. 3,187,624 7,053,343
Property and equipment:
Equipment........................................................................... 201,751 423,464
Furniture and fixtures.............................................................. 83,019 94,869
Equipment under capital leases...................................................... 46,695 61,928
Leasehold improvements.............................................................. 60,007 82,665
------------ ------------
Less accumulated depreciation and amortization........................................ (108,922) (190,731)
------------ ------------
282,550 472,195
Capitalized software development costs, net of accumulated amortization of $4,588 and
$22,941, at December 31, 1995 and 1996, respectively................................ 148,369 101,438
------------ ------------
Total assets.......................................................................... $ 3,618,543 $ 7,626,976
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses............................................... $ 2,281,644 $ 6,190,597
Current portion of notes payable.................................................... 971,030 54,895
Current portion of capital lease obligations........................................ 16,761 22,020
Deferred revenue.................................................................... 323,222 382,176
------------ ------------
Total current liabilities............................................................. 3,592,657 6,649,688
Notes payable, less current portion................................................. 58,465 4,569
Capital lease obligations, less current portion..................................... 5,395 19,012
Deferred revenue.................................................................... 246,521 --
Commitments
Redeemable convertible Preferred Stock, 18% cumulative, $1,000 par value; 1,235 shares
authorized, issued and outstanding at December 31, 1996............................. -- 1,235,000
Stockholders' deficit:
Class A Common Stock, no par value; 10,000,000 shares authorized, 8,065,600 shares
issued and outstanding............................................................ 1,000 1,000
Class B Common Stock, $1 par value; 100 shares authorized, issued and outstanding at
December 31, 1996................................................................. -- 100
Additional paid-in capital.......................................................... -- 9,900
Accumulated deficit................................................................. (285,495) (292,293)
------------ ------------
Total stockholders' deficit........................................................... (284,495) (281,293)
------------ ------------
Total liabilities and stockholders' deficit........................................... $ 3,618,543 $ 7,626,976
------------ ------------
------------ ------------
</TABLE>

See accompanying notes.

F-19
<PAGE>
STMS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Net revenues...................................................................... $ 10,371,065 $ 20,249,828
Costs of revenues................................................................. 8,354,253 16,716,376
------------- -------------
Gross profit...................................................................... 2,016,812 3,533,452
------------- -------------
General and administrative........................................................ 1,361,340 1,280,997
Selling and marketing............................................................. 716,046 2,026,287
------------- -------------
Income (loss) from operations..................................................... (60,574) 226,168
Interest expense.................................................................. 235,665 232,966
------------- -------------
Net loss.......................................................................... $ (296,239) $ (6,798)
------------- -------------
------------- -------------
</TABLE>

See accompanying notes.

F-20
<PAGE>
STMS, INC.

STATEMENTS OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
CLASS A CLASS B
----------------- ---------------
COMMON STOCK COMMON STOCK ADDITIONAL
----------------- --------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ ------ ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994........................... 8,065,600 $1,000 -- $-- $-- $ 10,744 $ 11,744
Net loss............................................. -- -- -- -- -- (296,239) (296,239)
--------- ------ ------ ------ ---------- ----------- ---------
Balance at December 31, 1995........................... 8,065,600 1,000 -- -- -- (285,495) (284,495)
Issuance of common stock............................. -- -- 100 100 9,900 -- 10,000
Net loss............................................. -- -- -- -- -- (6,798) (6,798)
--------- ------ ------ ------ ---------- ----------- ---------
Balance at December 31, 1996........................... 8,065,600 $1,000 100 $100 $9,900 $(292,293) $(281,293)
--------- ------ ------ ------ ---------- ----------- ---------
--------- ------ ------ ------ ---------- ----------- ---------
</TABLE>

See accompanying notes.

F-21
<PAGE>
STMS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
<S> <C> <C>
1995 1996
------------ -----------
OPERATING ACTIVITIES
Net loss.............................................................................. $ (296,239) $ (6,798)
Adjustments to reconcile net loss to net cash provided by operations:
Depreciation and amortization....................................................... 33,570 100,162
Write-off of capitalized software development costs................................. -- 99,412

Changes in operating assets and liabilities:
Trade accounts receivable........................................................... 298,087 (4,157,282)
Inventory........................................................................... (549,672) 434,983
Deposits............................................................................ (250) 4,919
Prepaid expenses and other current assets........................................... 9,633 (68,883)
Accounts payable and accrued expenses............................................... 462,288 3,908,953
Deferred revenue.................................................................... 486,478 (187,567)
------------ -----------
Net cash provided by operating activities............................................. 443,895 127,899

INVESTING ACTIVITIES
Advances to stockholders.............................................................. -- (69,128)
Purchase of property and equipment.................................................... (77,891) (271,454)
Capitalized software development costs................................................ (152,957) (70,834)
------------ -----------
Net cash used in investing activities................................................. (230,848) (411,416)

FINANCING ACTIVITIES
Proceeds from issuance of Common Stock................................................ -- 10,000
Proceeds from borrowing on notes payable, net of payments............................. (70,650) 283,845
------------ -----------
Net cash (used in) provided by financing activities................................... (70,650) 293,845
------------ -----------
Net increase in cash.................................................................. 142,397 10,328
Cash at beginning of year............................................................. 35,770 178,167
------------ -----------
Cash at end of year................................................................... $ 178,167 $ 188,495
------------ -----------
------------ -----------
Supplemental disclosures:
Interest paid......................................................................... $ 235,665 $ 209,495
------------ -----------
------------ -----------
Significant non-cash transactions:
Notes payable exchanged for convertible Preferred Stock............................... $ 1,235,000 $ --
------------ -----------
------------ -----------
</TABLE>

See accompanying notes.

F-22
<PAGE>
STMS, INC.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

STMS, Inc. (the "Corporation") was incorporated under the laws of the
Commonwealth of Virginia on November 1, 1990. The Corporation is in the business
of selling and installing networked micro computer systems. The Corporation
offers hardware, software, training, on-going support and related consulting to
its customers and provides comprehensive hardware, software and network
maintenance services. The Corporation is headquartered in Sterling, Virginia,
but offers its products and services on a national basis.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.

INVENTORY

Inventory consists of computers, computer software, accessories and other
related items. The inventory is stated at the lower of cost or market as
determined by the first-in, first-out method. Administrative, storage and
material handling costs have been added to inventory in the amount of $22,934
and $8,651 as of December 31, 1995 and 1996, respectively.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

The Corporation accumulates the costs associated with the development of new
software which it plans to offer for sale. Costs to establish the technological
feasibility of the developing product are considered to be research and
development costs and accordingly, are charged to current year operations when
incurred. Once technological feasibility has been established, cost incurred to
produce a master, including coding and testing, are capitalized. When the
product is ready for general release to the public, the capitalization of costs
ends. The Corporation's policy is to amortize capitalized software costs by the
greater of (a) the ratio that current gross revenues for a product bear to the
total of current and anticipated future gross revenues for that product or (b)
the straight-line method over the remaining estimated economic life of the
product (three year period) including the period being reported on. During 1996,
the Corporation amortized the costs of software development over a three year
period on the straight-line basis. Software development costs are reflected on
the financial statements at the lower of the unamortized costs or the net
realizable value. During 1996, the Corporation also discontinued one product and
accordingly, wrote off the accumulated costs of $99,412.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Property and equipment are
depreciated using the straight-line method over the estimated lives of five to
seven years and leasehold improvements are amortized over the lesser of the
related lease term or the useful life of 20 years.

IMPAIRMENT OF LONG-LIVED ASSETS

In the event that facts and circumstances indicate that long-lived assets or
other assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with the asset would be compared to the asset's carrying amount
to determine if a write-down is required. If a write-down is required, the
Corporation would prepare a discounted cash flow analysis to determine the
amount of the write-down.

F-23
<PAGE>
STMS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Corporation to
significant concentrations of credit risk primarily consist of cash equivalents
and trade accounts receivable. The Corporation periodically performs credit
evaluations of its customers' financial condition and generally requires no
collateral. At December 31, 1996, the Corporation maintained cash balances at
$88,495 in excess of the Federal insurance limits. From time to time during the
year cash balances exceeded the Federal insurance limit of $100,000.

DEFERRED REVENUE

The Corporation offers computer hardware, software and network maintenance
services to customers. The services are paid in advance and are packaged in
various arrangements including hours, period of coverage and availability. The
maintenance contracts can extend up to three years. The Corporation records the
maintenance contract revenue when service is provided. At year end, the unearned
portion of each contract is allocated between current and long-term based on the
time remaining on the contract and assuming a straight-line amortization. At the
end of the contract, any unused portion is considered to be revenue in the year
the contract ends.

REVENUE RECOGNITION

The Corporation generally recognizes revenues based on shipment of products.
Revenues are earned pursuant to various contracts with agencies of the Federal
government and commercial customers. The Corporation generally does not require
collateral on such contracts. The length of the Corporation's contracts are
generally range for one year.

STOCK-BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock Based Compensation" which is effective for any
complete set of financial statements for any period presented subsequent to
December 15, 1995. SFAS No. 123 allows companies to account for stock-based
compensation under either the new provisions of SFAS No. 123 or the provisions
of APB No. 25, but disclosure in the footnotes to the financial statements as if
the measurement provisions of SFAS No. 123 had been adopted. The Corporation
intends to continue accounting for stock based compensation in accordance with
the provision of APB No. 25. As such, the implementation of SFAS No. 123 will
not materially impact the financial position or results of operations of the
Company.

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 reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

2. INCOME TAXES

The Corporation provides for income taxes in accordance with the liability
method.

F-24
<PAGE>
STMS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. INCOME TAXES (CONTINUED)
The Corporation incurred net operating losses of $296,239 in the year ended
December 31, 1995 and $6,798 in the year ended December 31, 1996. A net
operating loss results in an income tax benefit due to reductions in either
prior or future income taxes.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
<S> <C> <C>
1995 1996
---------- ---------
Deferred tax assets:
Net operating loss carryforwards............................................................. $ 109,625 $ 1,211
---------- ---------
Total deferred assets........................................................................ 109,625 1,211
Deferred tax credit:
Valuation allowance.......................................................................... (109,625) (1,211)
---------- ---------
Net deferred tax asset....................................................................... $ -- $ --
---------- ---------
---------- ---------
</TABLE>

Prior to December 31, 1994, the Corporation elected to be treated as an S
Corporation for income tax purposes. S Corporations are generally not taxable at
the corporate level, but instead, income is taxable to the stockholders.
Accordingly, as of December 31, 1994, there was no provision for an income tax
liability. Effective January 1995, the Corporation voluntarily terminated its S
Corporation status, and as such, became subject to corporate income taxes as of
that date.

3. TRANSACTIONS WITH RELATED PARTIES

As of December 31, 1996, the Corporation had loaned $133,507 to certain
officer/stockholders. The loans are unsecured. Payments on these loans are due
on demand. Effective January 1, 1996, interest is being charged at 6% per annum.

The Corporation purchases inventory from Primary Telecommunications, Inc., a
company which is owned by a principal stockholder of STMS, Inc. Purchases during
1996 amounted to $341,427. At December 31, 1996, the Corporation owed $160,426
to Primary Telecommunications, Inc.

4. NOTES PAYABLE

At December 31, 1995, notes payable consisted of the following loans from
Barry D. and Jacqueline L. Bergman:

<TABLE>
<S> <C>
Term loans...................................................... $ 144,495
Credit line loan................................................ 885,000
---------
$1,029,495
---------
---------
</TABLE>

F-25
<PAGE>
STMS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. NOTES PAYABLE (CONTINUED)
As of December 31, 1996, notes payable consisted of a term loan from Barry
D. Bergman and Jacqueline L. Bergman dated July 11, 1994, in the amount of
$125,000, secured by the personal guarantees of the stockholders, payable in
monthly installments of $4,645 which includes interest at 12% per annum.

Annual principal curtails are as follows:

5. CAPITAL LEASE OBLIGATIONS

Capital lease obligations at December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997............................................................... $ 28,917
1998............................................................... 23,845
---------
52,762
Amounts representing interest...................................... (11,730)
---------
$ 41,032
---------
---------
</TABLE>

Amortization of assets recorded under capital lease obligations is included
in depreciation and amortization expense.

6. OPERATING LEASES

The Corporation is currently obligated under a lease for its office space
which expires in April 1999. However, under the provisions of a termination
option in the lease, the Corporation has terminated its lease effective during
June 1997. The Corporation has entered into a new lease for 19,195 square feet
of office and warehouse space in Reston, Virginia to be effective upon the
vacating of its current space.

The Corporation is obligated under non-cancelable, long-term leases for
office space with the following minimum annual lease payments as of December 31,
1996:

Rent expense under operating leases were $90,719 and $90,055 for the years
ended December 31, 1995 and 1996, respectively.

F-26
<PAGE>
STMS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. CAPITAL STOCK

REDEEMABLE CONVERTIBLE PREFERRED STOCK

In December 1996 the Corporation authorized and issued 1,235 shares of
$1,000 par value Preferred Stock. The stock provides for cumulative dividends at
18%, payable monthly. The stock is held by a single stockholder who has the
option to convert the Preferred Stock into a senior debt instrument (promissory
note payable) on demand. At the stockholder's option, the stock will convert
into a one year note with interest only payable at 18% per annum until maturity.

COMMON STOCK

On October 1, 1995, the Corporation amended its articles of incorporation to
provide for the authorization of new issues of Common Stock as follows:

CLASS A

10,000,000 shares of no par Common Stock were authorized. Each share of the
previously authorized and issued common stock was exchanged for 6,930 shares of
the new Class A Common Stock. All Common Stock issued prior to October 1, 1995,
was retired.

CLASS B

100 shares of Class B no par Common Stock were authorized. The holders of
Class B Common Stock are limited to a maximum of 10% of the total votes of the
Corporation. Class B stock can be converted to Class A stock upon the occurrence
of the Company achieving certain stated levels of outside financing, as defined
in the amendment to articles of incorporation.

INCENTIVE STOCK OPTION PLAN

In January 1996, the Corporation adopted an Incentive Stock Option Plan
("the Plan") in order to advance the interests of the Corporation by providing
eligible employees with an opportunity to acquire a proprietary interest in the
Corporation. The Corporation has reserved 500,000 shares of its Class A Common
Stock for this purpose. Options are granted at the fair market value of the
Corporation's Common Stock on the date of grant. The term of the stock options
granted under the Plan may not exceed 10 years. The stock options granted as of
December 31, 1996, vest over a 4 year period.

Additional information with respect to stock option activity is summarized
as follows:

<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
----------- -----------------
<S> <C> <C>
Outstanding at beginning of period..................................................... -- --
Options granted........................................................................ 9,500 $ 0.13
Options exercised...................................................................... -- --
Outstanding at end of period........................................................... 9,500 $ 0.13
----- -----
Options exercisable at end of period -- --
----- -----
</TABLE>

At December 31, 1996, there were 490,500 options available for future grants
under the Plan. The Corporation applies APB No. 25 in accounting for the
incentive stock option plan, and, accordingly, recognizes compensation expense
for the difference between the deemed fair market value of the

F-27
<PAGE>
STMS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. CAPITAL STOCK (CONTINUED)
underlying Common Stock and the grant price of the option at the date of grant.
During the year ended December 31, 1996, the Corporation did not grant any
options at exercise prices which were less than the fair market value of the
Common Stock at the grant date.

The Corporation has adopted the disclosure provisions only of SFAS No. 123.
The effect of applying SFAS No. 123 for the year ended December 31, 1996 on pro
forma net loss is not necessarily representative of the effects on reported net
loss for future years due to, among other things, (1) the vesting period of the
stock options and the (2) fair value of additional stock options in future
years.

Had compensation expense for the Corporation's stock options been determined
based upon the fair value at the grant date for awards under the Plan consistent
with the underlying methodology prescribed under SFAS No. 123, the Corporation's
net loss for the year ended December 31, 1996 would have been approximately
$7,110. The fair value of each options grant is estimated on the date of grant
using the Minimum Value option pricing model with the following weighted-average
assumptions for 1996: average risk-free interest rate of 6%, dividend yield 0%,
and expected life of option four years, and a five year contractual life.

8. 401(K) PLAN

The Corporation sponsors a 401(k) plan which covers substantially all
employees who have provided at least six months service and attained the age of
twenty-one. Participants may contribute up to 15% of their annual compensation.
Participants are immediately vested in their voluntary contributions plus their
earnings thereon. The Corporation may make discretionary contributions at the
option of the Board of Directors.

9. SUBSEQUENT EVENTS

SIGNIFICANT CHANGE IN OWNERSHIP

On September 12, 1997, all of the outstanding common stock of STMS, Inc. was
purchased by Dunn Computer Corporation through an exchange of stock in which the
shareholders of STMS, Inc. received 150,000 shares of Dunn Computer Corporation
in exchange for all shares of STMS, Inc.

CONVERSION OF PREFERRED STOCK

As of September 12, 1997, the holder of the preferred stock described in
Note 6 exercised the option which allowed him to convert the preferred stock
into a one year promissory note. Subsequently the note was paid in full.

F-28
<PAGE>
STMS, INC.

BALANCE SHEET

<TABLE>
<CAPTION>
JUNE 30,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................................... $ 104,008
Trade accounts receivable, net of allowance for doubtful accounts of $22,190 3,300,116
Inventory......................................................................................... 426,902
Prepaid expenses and other current assets......................................................... 43,062
Loans to stockholders............................................................................. 148,197
------------
Total current assets................................................................................ 4,022,285
Property and equipment, net......................................................................... 474,264
Capitalized software development costs, net......................................................... 165,832
------------
Total assets........................................................................................ $ 4,662,381
------------
------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.................................................................................. $ 3,832,692
Accrued expenses.................................................................................. 185,766
Current portion of note payable................................................................... 1,253,525
Current portion of capital lease obligations...................................................... 16,037
Deferred revenue.................................................................................. 492,269
------------
Total current liabilities........................................................................... 5,780,289
Capital lease obligations, less current portion..................................................... 8,082
Note payable, less current portion.................................................................. 29,146

Commitments......................................................................................... --

Stockholders' deficit:
Common Stock...................................................................................... 1,100
Additional paid-in capital........................................................................ --
Accumulated deficit............................................................................... (1,156,236)
------------
Total stockholders' deficit......................................................................... (1,155,136)
------------
Total liabilities and stockholders' deficit......................................................... $ 4,662,381
------------
------------
</TABLE>

See accompanying notes.

F-29
<PAGE>
STMS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1997
-------------- --------------
<S> <C> <C>
Net revenues..................................................................... $ 5,957,622 $ 7,812,531
Costs of revenues................................................................ 4,932,821 5,721,002
-------------- --------------
Gross profit..................................................................... 1,024,801 2,091,529
General and administrative....................................................... 353,990 1,034,507
Selling and marketing............................................................ 689,256 1,772,964
-------------- --------------
Loss from operations............................................................. (18,445) (715,942)
Other income (expense)........................................................... 133 (21,372)
Interest expense................................................................. (119,200) (118,003)
-------------- --------------
Net loss......................................................................... $ (137,512) $ (855,317)
-------------- --------------
-------------- --------------
</TABLE>

See accompanying note.

F-30
<PAGE>
STMS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1997
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss......................................................................... $ (137,512) $ (855,317)
Adjustments to reconcile net loss to net cash (used in) provided by operating
activities:
Depreciation and amortization................................................ 30,297 60,427
Changes in operating assets and liabilities:
Trade accounts receivable.................................................... 440,528 3,049,663
Inventory.................................................................... 444,410 (163,794)
Loans to stockholders........................................................ (10,553) 10,205
Prepaid expenses and other current assets.................................... (5,850) 50,497
Accounts payable............................................................. (823,096) (2,357,905)
Accrued expenses............................................................. 77,376 185,766
Deferred revenue............................................................. (70,694) 110,093
-------------- --------------
Net cash (used in) provided by operating activities.............................. (55,094) 89,635

INVESTING ACTIVITIES
Purchases of property and equipment.............................................. (8,542) (62,496)
Capitalized software development costs........................................... (17,463) (64,394)
-------------- --------------
Net cash used in investing activities............................................ (26,005) (126,890)

FINANCING ACTIVITIES
Proceeds from long-term debt..................................................... 42,974 24,577
Payments on capital lease obligations............................................ (8,291) (16,913)
Payments on long-term debt....................................................... (86,030) (54,896)
Distributions to stockholders.................................................... (37,400) --
-------------- --------------
Net cash used in financing activities............................................ (88,747) (47,232)
Net decrease in cash and cash equivalents........................................ (169,846) (84,487)
Cash and cash equivalents at beginning of the period............................. 178,167 188,495
-------------- --------------
Cash and cash equivalents at end of the period................................... $ 8,321 $ 104,008
-------------- --------------
-------------- --------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.................................................................... $ 119,200 $ 123,069
-------------- --------------
-------------- --------------
</TABLE>

See accompanying notes.

F-31
<PAGE>
STMS, INC.

NOTE TO FINANCIAL STATEMENTS

NOTE A:

INTERIM FINANCIAL INFORMATION

The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the interim period are not necessarily indicative of the
results that may be expected for any future period, including the year ended
December 31, 1997. For further information, refer to the audited financial
statements and footnotes thereto included elsewhere herein.

F-32
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors

We have audited the accompanying balance sheet of Dunn Computer Corporation
(a Virginia Corporation) as of February 26, 1998. This financial statement is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.

We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Dunn Computer Corporation as
of February 26, 1998 in conformity with generally accepted accounting
principles.

/s/ Ernst & Young LLP

Vienna, Virginia
February 26, 1998

F-33
<PAGE>
DUNN COMPUTER CORPORATION

BALANCE SHEET

FEBRUARY 26, 1998

<TABLE>
<S> <C>
ASSETS
Cash............................................................................. $ 1
-----------
-----------

LIABILITIES AND STOCKHOLDER'S EQUITY
Preferred stock; $.001 par; 2,000,000 shares authorized;
no shares issued and outstanding............................................... $ --
Common stock; $.001 par; 20,000,000 shares authorized; one share issued and
outstanding.................................................................... --
Additional paid-in capital....................................................... 1
-----------
$ 1
-----------
-----------
</TABLE>

See accompanying note.

F-34
<PAGE>
DUNN COMPUTER CORPORATION

NOTE TO FINANCIAL STATEMENT

FEBRUARY 26, 1998

1. ORGANIZATION

Dunn Computer Corporation was incorporated in the Commonwealth of Virginia
on February 26, 1998 to become a holding company for Dunn Computer Corporation,
a Delaware Corporation, and International Data Products Corp., a Maryland
corporation, as provided in the Acquisition Agreement.

F-35
<PAGE>
REPORT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS

The Boards of Directors
International Data Products, Corp. and Puerto Rico Industrial Manufacturing
Operations, Corp.:

We have audited the accompanying combined balance sheets of International
Data Products, Corp. and combined company as of September 30, 1996 and 1997, and
the related combined statements of income and retained earnings and cash flows
for each of the years in the three-year period ended September 30, 1997. These
combined financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these combined
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 combined financial statements referred to above present
fairly, in all material respects, the financial position of International Data
Products, Corp. and combined company as of September 30, 1996 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1997 in conformity with generally accepted
accounting principles.

/s/ KPMG Peat Marwick LLP

McLean, Virginia
November 7, 1997

F-36
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------------------- -------------
ASSETS 1996 1997 1997
- --------------------------------------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
(UNAUDITED)
Current assets:
Cash and cash equivalents.......................................... $ 314,677 1,013,198 891,493
Accounts receivable--trade (net of allowance of $127,733 as of
September 30, 1996 and $131,821 as of September 30, 1997) 6,635,990 5,724,022 14,595,651
Employee and stockholder advances.................................. 109,883 119,390 118,587
Inventory, net..................................................... 15,339,842 15,991,331 18,652,198
Income taxes receivable............................................ -- 401,775 401,775
Deferred income taxes.............................................. 9,557 443,415 443,415
Prepaid expenses................................................... 1,368,640 790,160 1,631,934
Other current assets............................................... 210,486 327,150 103,335
------------- ------------ -------------
Total current assets................................................. 23,989,075 24,810,441 36,838,388
Fixed assets, net of accumulated depreciation and amortization....... 1,640,423 2,252,851 2,325,143
Deferred income taxes................................................ -- 17,631 17,631
Investment in joint venture, at cost................................. 31,200 31,200 31,200
Other assets......................................................... 77,570 199,732 193,027
------------- ------------ -------------
Total assets....................................................... $ 25,738,268 27,311,855 39,405,389
------------- ------------ -------------
------------- ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit..................................................... $ 6,585,689 5,634,687 11,340,942
Accounts payable--trade............................................ 11,654,404 12,810,200 17,495,811
Accrued expenses................................................... 745,797 1,446,074 2,839,493
Income taxes payable............................................... 180,372 58,456 112,174
Notes payable--current portion..................................... 425,554 368,792 420,467
Notes payable--related parties..................................... 1,604,462 1,498,397 1,579,973
Other liabilities.................................................. 152,553 58,950 69,429
------------- ------------ -------------
Total current liabilities............................................ 21,348,831 21,875,556 33,858,289
Long-term liabilities:
Notes payable, net of current portion.............................. 224,926 164,308 160,860
Deferred income taxes.............................................. 10,538 -- --
Deferred rent...................................................... 226,222 163,165 143,606
------------- ------------ -------------
Total liabilities.................................................... 21,810,517 22,203,029 34,162,755
------------- ------------ -------------
Commitments and contingencies
Stockholders' equity:
International Data Products, Corp. common stock, no par value,
5,000 shares authorized, 100 shares issued and outstanding....... 40,000 40,000 40,000
Puerto Rico Industrial Manufacturing Operations Corp. common stock,
no par value, 10,000 shares authorized, 7,000 shares issued and
outstanding...................................................... 132,000 132,000 132,000
Retained earnings.................................................. 3,755,751 4,936,826 5,070,634
------------- ------------ -------------
Total stockholders' equity........................................... 3,927,751 5,108,826 5,242,634
------------- ------------ -------------
Total liabilities and stockholders' equity........................... $ 25,738,268 27,311,855 39,405,389
------------- ------------ -------------
------------- ------------ -------------
</TABLE>

See accompanying notes to combined financial statements.

F-37
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, --------------------------
----------------------------------------- DECEMBER 31, DECEMBER 31,
1995 1996 1997 1996 1997
------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Sales.................................... $ 80,432,480 84,291,838 71,920,739 35,999,417 25,200,523
Cost of sales............................ 69,024,772 71,889,685 58,995,644 30,838,159 21,100,060
------------- ------------ ------------ ------------ ------------

Gross profit............................. 11,407,708 12,402,153 12,925,095 5,161,258 4,100,463

Operating expenses....................... 8,709,038 11,232,702 11,598,705 3,650,900 3,694,449
------------- ------------ ------------ ------------ ------------

Income from operations................... 2,698,670 1,169,451 1,326,390 1,510,358 406,014

Other income (expenses):
Bid protest settlement................. -- 750,000 --
Interest income........................ 36,736 120,369 31,359 1,442 1,504
Interest expense....................... (524,329) (884,818) (593,012) (222,876) (224,536)
Miscellaneous, net..................... 4,411 5,742 (1,109) 37,169 4,544
------------- ------------ ------------ ------------ ------------

Income before income taxes............... 2,215,488 1,160,744 763,628 1,326,093 187,526

Income tax expense (benefit)............. 278,305 (17,708) (417,447) 289,915 53,718
------------- ------------ ------------ ------------ ------------

Net income............................... 1,937,183 1,178,452 1,181,075 1,036,178 133,808

Retained earnings, beginning of year..... 640,116 2,577,299 3,755,751 3,755,751 4,936,826
------------- ------------ ------------ ------------ ------------

Retained earnings, end of year........... $ 2,577,299 3,755,751 4,936,826 4,791,929 5,070,634
------------- ------------ ------------ ------------ ------------
------------- ------------ ------------ ------------ ------------
</TABLE>

See accompanying notes to combined financial statements.

F-38
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED SEPTEMBER 30, --------------------------
---------------------------------------- DECEMBER 31, DECEMBER 31,
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net income............................................. $ 1,937,183 1,178,452 1,181,075 1,036,178 133,808
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 259,356 411,979 573,228 120,980 205,968
Deferred income taxes.............................. (21,602) (363,121) (462,026) (10,538) --
Loss on disposal of fixed assets................... 3,167 3,963 -- -- --
(Increase) decrease in:
Accounts receivable -- trade, net................ (8,083,405) 9,167,428 911,968 (7,376,401) (8,871,629)
Employee and stockholder advances................ (139,101) 102,282 (9,507) 20,249 803
Inventory, net................................... (4,253,509) (6,374,158) (651,489) 3,972,991 (2,660,867)
Prepaid expenses and other assets................ (90,802) (731,624) 339,654 1,419,743 (611,254)
Income taxes receivable.......................... 76,000 -- (401,775) -- --
Increase (decrease) in:
Accounts payable -- trade........................ 5,465,918 (3,151,190) 1,155,796 1,218,782 4,685,611
Accrued expenses................................. 105,756 148,761 700,277 (52,593) 1,393,419
Other liabilities................................ (141,337) 184,064 (156,660) (139,043) (9,080)
Income taxes payable............................. 317,641 (137,269) (121,916) 419,509 53,718
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) operating activities...... (4,564,735) 439,567 3,058,625 629,857 (5,679,503)
------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Acquisitions of fixed assets........................... (664,085) (882,550) (1,186,157) (434,769) (278,260)
Proceeds from sale of fixed assets..................... 32,378 15,723 -- -- --
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities.................... (631,707) (866,827) (1,186,157) (434,769) (278,260)
------------ ------------ ------------ ------------ ------------
Cash flows from financing activities:
Net (repayments) borrowings on line of credit.......... 524,098 (1,336,363) (951,002) 39,425 5,706,255
Proceeds from notes payable............................ 4,677,424 2,789,644 320,758 118,286 309,466
Principal payments on notes payable.................... (179,977) (811,781) (543,703) (67,488) (179,663)
------------ ------------ ------------ ------------ ------------
Net cash (used in) provided by financing activities...... 5,021,545 641,500 (1,173,947) 90,223 5,836,058
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents..... (174,897) 214,240 698,521 285,311 (121,705)
Cash and cash equivalents, beginning of year............. 275,334 100,437 314,677 314,677 1,013,198
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents, end of year................... $ 100,437 314,677 1,013,198 599,988 891,493
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>

Supplemental Cash Flow Information:

The Company paid income taxes of approximately $26,000, $224,000 and
$713,000, and paid interest of approximately $365,000, $629,000 and $496,000,
during the years ended September 30, 1995, 1996, and 1997, respectively.

See accompanying notes to combined financial statements.

F-39
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS

SEPTEMBER 30, 1995, 1996, AND 1997

(1) BASIS OF PRESENTATION AND RELATED MATTERS

ORGANIZATION

The International Data Products, Corp. combined financial statements include
the accounts of International Data Products, Corp. ("IDP") and Puerto Rico
Industrial Manufacturing Operations, Corp. ("PRIMO"). IDP and PRIMO are under
common family ownership control. All material intercompany accounts and
transactions have been eliminated in combination. IDP and PRIMO combined is
hereinafter referred to as the "Company".

IDP was incorporated in Maryland on February 27, 1984. The Company sells
computer equipment and provides computer training and maintenance service
primarily to agencies and suppliers of the federal government. For each of the
three years ended September 30, 1995, 1996 and 1997, approximately 1 percent, 8
percent and 6 percent, respectively, of the Company's revenue was from federal
contracts that were awarded under section 8(a) of the Small Business Act.

Puerto Rico Industrial Manufacturing Operations, Corp. is incorporated under
the laws of the Commonwealth of Puerto Rico. PRIMO manufactures computers and
peripheral equipment for IDP. Substantially all of PRIMO's sales are to IDP,
which have been eliminated in the accompanying combined financial statements.

The Company operates in a competitive environment subject to technological
change and the emergence of new technologies, although the Company believes that
its products and services are, or would be, upgradable to new technologies.

CASH AND CASH EQUIVALENTS

The Company maintains demand deposits with several financial institutions.
At times, deposits exceed federally insured limits, but management does not
consider this a significant concentration of credit risk. Cash equivalents
consist of highly liquid investments with original maturities of 90 days or
less. The fair market value of such instruments approximates cost.

INVENTORY

Inventory consists of parts and material and is stated at the lower of cost,
using weighted average cost method, or market. The Company has established
reserves for obsolete and excess inventory at $0 and $796,404 as of September
30, 1996 and 1997, respectively.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost and depreciated using the
straight-line method based on estimated useful lives of three to seven years.
Maintenance and repair costs are charged to expense as incurred. Leasehold
improvements are capitalized and amortized over the lesser of the life of the
improvement or the remaining term of the lease.

REVENUE RECOGNITION

The Company recognizes revenues from hardware and software sales at time of
receipt by the customer. Service revenues are recognized over the contractual
period as the service is provided.

F-40
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1995, 1996, AND 1997

(1) BASIS OF PRESENTATION AND RELATED MATTERS (CONTINUED)
ADVERTISING

The Company expenses the production costs of advertising the first time the
advertising is published, except for direct response advertising, which is
capitalized and amortized over its expected period of future benefit (generally
three months) based on the ratio of current direct response revenue to estimated
total direct response revenue. Direct response advertising consists primarily of
magazine advertisements which include item order numbers unique to the
advertising campaign.

At September 30, 1996, approximately $246,000 of advertising costs were
reported as prepaid expenses. There were no advertising costs reported as
prepaid expenses at September 30, 1997. For the years ended September 30, 1995,
1996 and 1997, total advertising expense was approximately $252,000, $255,000,
and $535,000, respectively.

WARRANTY EXPENSE

The Company reserves for estimated future warranty costs that may be
required to satisfy contractual requirements. Such provisions are accrued as the
related revenue is recognized. The typical warranty period ranges from one to
three years.

INCOME TAXES

The Company applies the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts and income tax
bases of assets and liabilities. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred
taxes of a change in tax rates is recognized in income in the period that
includes the enactment date. The income tax provisions for IDP and PRIMO are
prepared separately and combined for financial reporting purposes.

PRIMO has been granted a tax exemption, with certain normal reservations,
from Puerto Rico income (90%), property (90%), and municipal license taxes (60%)
on its manufacturing operations under the Puerto Rico Tax Incentives Act of
1987, Act No. 8, as amended. This tax exemption is for a period of 20 years
ending on September 12, 2014.

CHANGE IN REPORTING PERIODS

PRIMO's reporting periods, as previously audited, were the year ended
December 31, 1995 and the nine months ended September 30, 1996. For purposes of
presenting the combined financial statements of the Company, PRIMO's financial
statements were conformed to reflect each of the years ended September 30, 1995
and 1996, respectively.

USE OF ESTIMATES

The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported assets

F-41
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1995, 1996, AND 1997

(1) BASIS OF PRESENTATION AND RELATED MATTERS (CONTINUED)
and liabilities and disclosures of contingent assets and liabilities. Actual
results may differ from those estimates.

UNAUDITED INTERIM FINANCIAL INFORMATION

The unaudited combined balance sheet, statements of income and retained
earnings and cash flows as of December 31, 1997 and for the three months ended
December 31, 1996 and 1997 have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions of Regulation S-X. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the interim period are
not necessarily indicative of the results that may be expected for any future
period, including the year ending September 30, 1998.

(2) ACCOUNTS RECEIVABLE

Accounts receivable, which are substantially all billed or billable, at
September 30, 1996 and 1997 consist of the following:

<TABLE>
<CAPTION>
1996 1997
------------ ----------
<S> <C> <C>
U.S. Government and agencies....................................... $ 3,934,632 5,236,309
Commercial......................................................... 270,201 327,535
JTP Joint Venture (note 3)......................................... 2,431,157 160,178
------------ ----------
$ 6,635,990 5,724,022
------------ ----------
------------ ----------
</TABLE>

Management of the Company believes that substantially all of the outstanding
accounts receivable will be collected within one year.

Revenues from several U.S. government agencies totaled approximately
$72,820,000, $69,111,000 and $57,871,000, for the years ended September 30,
1995, 1996 and 1997, respectively, including approximately $22,298,000,
$22,117,000 and $15,282,000 from the JTP Joint Venture in 1995, 1996 and 1997,
respectively (see note 3).

(3) INVESTMENT IN JOINT VENTURE

In November 1993, IDP formed a joint venture entity, Justice Technology
Partners Joint Venture ("JTP") with two other companies for the purpose of
obtaining and performing under a certain contract. JTP has a contract with a
federal government agency involving the sale and maintenance of computer
equipment. IDP provides the computer equipment to the joint venture and records
sales at cost plus its estimated share of the joint venture profits.

IDP has a 24 percent interest in JTP and the initial investment of $31,200
is recorded at cost. IDP's equity in the estimated earnings of the joint venture
is included in accounts receivable.

F-42
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1995, 1996, AND 1997

(3) INVESTMENT IN JOINT VENTURE (CONTINUED)
Summarized financial information for this unconsolidated joint venture
entity, as of and for the years ended December 31, 1995 and 1996, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Contract revenue......................................................... $ 44,574 43,417
Net income............................................................... 7,902 5,992
Total current assets..................................................... 3,437 12,252
Total assets............................................................. 3,487 12,293
Total liabilities........................................................ 3,006 9,979
--------- ---------
--------- ---------
</TABLE>

Distributions received in excess of profit recognized, amounting to
approximately $59,000 is included as a reduction of accounts receivable at
September 30, 1996; and profits recognized in excess of distributions received,
amounting to approximately $116,000 is included in accounts receivable at
September 30, 1997.

(4) FIXED ASSETS

Fixed assets as of September 30, 1996 and 1997 consist of the following:

<TABLE>
<CAPTION>
1996 1997
------------ -----------
<S> <C> <C>
Furniture and equipment........................................... $ 1,499,006 2,385,410
Transportation equipment.......................................... 425,404 445,353
Leasehold improvements............................................ 230,105 357,123
Testing lab and equipment......................................... 195,152 340,072
Production equipment.............................................. 159,931 143,585
------------ -----------
Total............................................................. 2,509,598 3,671,543

Less accumulated depreciation and amortization.................... (869,175) (1,418,692)
------------ -----------
Fixed assets, net................................................. $ 1,640,423 2,252,851
------------ -----------
------------ -----------
</TABLE>

(5) INDEBTEDNESS

Notes payable consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
<S> <C> <C>
1996 1997
------------ ------------
Secured demand bank loan, interest at 10.25%...................... $ 374,760 291,689
Secured automobile loans, interest ranging from 3.7% to 11.5%..... 275,720 241,411
------------ ------------
Total notes payable............................................... 650,480 533,100
Less current portion.............................................. 425,554 368,792
------------ ------------
Notes payable, noncurrent......................................... $ 224,926 164,308
------------ ------------
------------ ------------
</TABLE>

F-43
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1995, 1996, AND 1997

(5) INDEBTEDNESS (CONTINUED)
Principal payments on the long-term debt for each of the fiscal years from
1998 to 2002 and thereafter are due as follows:

<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- ----------------------------------------------------------------------------------
<S> <C>
1998.............................................................................. $ 368,792
1999.............................................................................. 65,723
2000.............................................................................. 49,292
2001.............................................................................. 42,598
2002.............................................................................. 6,695
----------
$ 533,100
----------
----------
</TABLE>

Other notes payable consist of automobile loans and a demand bank loan. The
automobile loans are secured by the respective automobile, and the demand loan
is secured by the Company's accounts at the respective bank. The notes mature at
intervals between November 1997 and September 2001. Interest rates on the notes
range from 3.7 percent to 11.5 percent.

Notes payable to related parties are payable to certain stockholders and
their relatives, and employees. All notes payable to related parties are
classified as current liabilities as they are callable by the holder at any
time. Notes payable to related parties bear interest at rates ranging from 8 to
11 percent. The total amounts outstanding on these related party notes payable
were approximately $1,604,000 and $1,498,000 at September 30, 1996 and 1997,
respectively.

The Company has a line of credit facility of $15,000,000, of which
$5,000,000 is secured by the Company's inventory and $10,000,000 is secured by
accounts receivable. The outstanding balance on this line of credit at September
30, 1996 and 1997 was approximately $6,586,000 and $5,635,000, respectively. The
interest rates applicable to this line of credit as of September 30, 1996 and
1997 were 8.25 percent and 8.5 percent, respectively. Subsequent to year-end,
the amounts available under this credit facility were increased to $25,000,000
with an additional temporary overline of $7,000,000 available through January
31, 1998. There is no formal expiration date on this facility although it is
subject to annual re-evaluation by the financial institution.

(6) INCOME TAXES

For combined financial reporting purposes, income (loss) before income taxes
for the years ended September 30, 1995, 1996 and 1997 include the following
components:

<TABLE>
<CAPTION>
1995 1996 1997
------------ ---------- -----------
<S> <C> <C> <C>
Income (loss) before income taxes:
Domestic (IDP)..................................... $ 355,436 (222,933) (1,769,240)
Foreign (PRIMO).................................... 1,860,052 1,383,677 2,532,868
------------ ---------- -----------
$ 2,215,488 1,160,744 763,628
------------ ---------- -----------
------------ ---------- -----------
</TABLE>

As discussed in Note 2, PRIMO has been granted a 90 percent exemption, with
certain reservations, for income taxes on its manufacturing operations under the
Tax Incentives Act of Puerto Rico of 1987, Act No. 8, as amended. This exemption
is for a period of twenty years and ends in September 2014. Further,

F-44
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1995, 1996, AND 1997

(6) INCOME TAXES (CONTINUED)
PRIMO has no temporary differences that would create deferred tax assets or
liabilities as of September 30, 1996 or 1997.

The components of income tax expense (benefit) for the Company for the years
ended September 30, 1995, 1996 and 1997 are as follows:

<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal................................................. $ 197,116 232,015 (60,439)
State................................................... 43,637 51,363 (13,380)
Foreign (PRIMO)......................................... 59,154 62,035 118,398
---------- ---------- ----------
299,907 345,413 44,579
---------- ---------- ----------
Deferred:
Federal................................................. (17,687) (297,303) (356,045)
State................................................... (3,915) (65,818) (105,981)
---------- ---------- ----------
(21,602) (363,121) (462,026)
---------- ---------- ----------
$ 278,305 (17,708) (417,447)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

Income tax expense (benefit) amounted to $278,305 for 1995, an effective
rate of 13 percent; ($17,708) for 1996, an effective rate of (2) percent; and
($417,447) for 1997, an effective rate of (55) percent. The actual expense
(benefit) differs from the "expected expense (benefit)" for those years,
computed by applying the U.S. federal corporate tax rate of 34 percent in 1995,
1996 and 1997 to earnings (loss) before income tax expense, as follows:

<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)......................................... $ 753,266 394,653 259,634
Increase (decrease) in income taxes resulting from:
Foreign income not subject to U.S. federal taxes, net of foreign taxes.......... (573,264) (408,416) (742,756)
State and local income tax expense (benefit), net of federal benefit............ 24,881 (15,605) (78,710)
Increase in valuation allowance................................................. -- -- 122,690
Nondeductible meals and entertainment expenses.................................. 31,645 27,199 17,581
Other, net...................................................................... 41,777 (15,539) 4,114
---------- ---------- ----------
$ 278,305 (17,708) (417,447)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

F-45
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1995, 1996, AND 1997

(6) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at September 30, 1996 and
1997 are presented below:

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Deferred tax assets:
Inventory obsolescence reserve...................................... $ -- 267,870
Warranty reserve.................................................... -- 76,799
Accrued interest on related party notes............................. 67,207 116,331
Deferred rent....................................................... 90,266 85,779
Section 263(A) inventory adjustment................................. 26,682 45,020
Accrued vacation.................................................... 42,319 43,977
Allowance for doubtful accounts..................................... 49,330 50,908
Other............................................................... -- 30,242
---------- ----------
Total gross deferred tax assets....................................... 275,804 716,926
Less: valuation allowance............................................. -- (122,690)
---------- ----------
Net deferred tax assets............................................... -- 594,236
---------- ----------
Deferred tax liabilities:
Income from JTP joint venture....................................... (266,247) (133,190)
Other............................................................... (10,538) --
---------- ----------
Total deferred tax liabilities........................................ (276,785) (133,190)
---------- ----------
Net deferred tax asset (liability).................................... $ (981) 461,046
---------- ----------
---------- ----------
</TABLE>

The net deferred tax asset (liability) is reflected in the accompanying
balance sheets as:

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Current deferred tax assets.............................................. $ 9,557 443,415
Noncurrent deferred tax assets........................................... -- 17,631
Noncurrent deferred tax liabilities...................................... (10,538) --
--------- ---------
Net deferred tax asset (liability)....................................... $ (981) 461,046
--------- ---------
--------- ---------
</TABLE>

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
asset will be realized. The ultimate realization of the deferred tax asset is
dependent upon the generation of future taxable income during the periods in
which temporary differences become deductible. Management considers scheduled
reversals of deferred tax liabilities, projected future taxable income, and tax
planning strategies that can be implemented by IDP in making this assessment.
Management has established a valuation allowance of $122,690 in 1997 to reduce
the deferred tax asset to a level where based upon the level of historical
taxable income, scheduled reversal of deferred tax liabilities, and projections
of future taxable income over the periods in which the temporary differences
become deductible based on available tax planning strategies, management
presently believes that it is more likely than not that IDP will realize the
benefits of these deductible differences.

F-46
<PAGE>
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 1995, 1996, AND 1997

(7) COMMITMENTS AND CONTINGENCIES

LEASES

The Company is obligated under various noncancelable operating leases for
office/warehouse space and office equipment. The future minimum lease
obligations under these noncancelable operating leases as of September 30, 1997
are approximately as follows:

<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- --------------------------------------------------------------------------------
<S> <C>
1998............................................................................ $ 625,283
1999............................................................................ 661,680
2000............................................................................ 292,397
2001............................................................................ 38,568
2002 and thereafter............................................................. --
------------
$ 1,617,928
------------
------------
</TABLE>

Rent expense under these operating leases amounted to approximately
$453,000, $556,000, and $538,000 for the periods ended September 30, 1995, 1996,
and 1997, respectively. Rent payments are being expensed on a straight-line
basis over the life of the lease, with the difference recorded as deferred rent.

BID PROTEST SETTLEMENT

During the year ended September 30, 1996, IDP settled a contract award
dispute with a third party and recorded a $750,000 gain on settlement. Costs
relating to the bid protest were expensed in the period incurred and recorded as
operating expenses.

(8) RETIREMENT PLAN

IDP maintains a tax-deferred savings plan under Section 401(k) of the
Internal Revenue Code which is offered to all employees who have attained the
age of 21. The plan provides for contributions by employees as well as matching
and discretionary contributions by IDP. IDP made contributions of approximately
$150,000, $210,000, and $261,000 to the plan during the years ended September
30, 1995, 1996, and 1997.

F-47
<PAGE>
INDEX TO APPENDICES

A. Merger Agreement

B. Acquisition Agreement

C. 1997 Stock Option Plan
</TABLE>
<PAGE>
APPENDIX A

AGREEMENT OF MERGER
OF
DUNN COMPUTER CORPORATION
(A VIRGINIA CORPORATION),
DUNN MERGER CORP.
(A DELAWARE CORPORATION)
AND
DUNN COMPUTER CORPORATION
(A DELAWARE CORPORATION)

AGREEMENT OF MERGER dated as of March 18, 1998, by and among Dunn Computer
Corporation, a Virginia corporation ("Parent"), Dunn Merger Corp., a Delaware
corporation ("Sub"), and Dunn Computer Corporation, a Delaware corporation
("Company").

WHEREAS the total number of shares of stock which Parent has authority to
issue is 22,000,000, 20,000,000 of which are shares of common stock with a par
value of $.001 each ("Parent Common Stock") and 2,000,000 of which are shares of
preferred stock with a par value of $.001 each; and

WHEREAS the total number of shares of stock which Sub has authority to issue
is 100, all of which are of one class and without par value ("Sub Common
Stock"); and

WHEREAS the total number of shares of stock which Company has authority to
issue is 22,000,000, 20,000,000 of which are shares of common stock with a par
value of $.001 each ("Company Common Stock") and 2,000,000 of which are shares
of preferred stock with a par value of $.001 each; and

WHEREAS, the respective Boards of Directors of Parent, Sub and Company each
have approved the merger of Sub with and into Company (the "Merger") upon the
terms and subject to the conditions set forth in this Agreement, whereby (a)
each issued and outstanding share of Company Common Stock owned by Company will
be retired and canceled, (b) each issued and outstanding share of Company Common
Stock will be converted into the right to receive Parent Common Stock, (c) each
outstanding option to purchase Company Common Stock will be converted into an
option to purchase a like number of shares of Parent Common Stock, (d) each
warrant to purchase shares of Company Common Stock will be converted into a
warrant to purchase shares of Parent Common Stock and (e) each issued and
outstanding share of Sub Common Stock will be converted into a share of common
stock of the Surviving Corporation (as defined in Section 1.1); and

WHEREAS, the respective Boards of Directors of Parent, Sub and Company have
determined that the Merger and the other transactions contemplated hereby are
consistent with, and in furtherance of, their respective business strategies and
goals and are in the best interest of their respective stockholders; and

WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").

NOW, THEREFORE, in consideration of the covenants and agreements contained
in this Agreement, the parties agree as follows:

A-1
<PAGE>
ARTICLE I
THE MERGER

Section 1.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the provisions of the Delaware
General Corporation Law ("DGCL"), Sub shall be merged with and into Company at
the Effective Time (as defined in Section 1.2). Following the Effective Time,
Company shall be the surviving corporation (the "Surviving Corporation") which
shall continue to exist under the name Dunn Computer Corporation and which shall
become a wholly-owned subsidiary of Parent and shall succeed to and assume all
the rights and obligations of Sub in accordance with the DGCL. The separate
existence of Sub shall cease at the Effective Time in accordance with the
provisions of the DGCL.

Section 1.2 THE EFFECTIVE TIME. Subject to the provisions of this
Agreement, as soon as practicable on the date of the closing under the
Acquisition Agreement dated March 9, 1998 among, INTER ALIA, Parent and Company,
the parties shall cause the Merger to be consummated by filing a certificate of
merger or other appropriate documents (in any such case, the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL and
shall make all other filings or recordings required under the DGCL. The merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware, or at such subsequent date
or time as Parent, Sub and Company shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time").

Section 1.3 EFFECT OF THE MERGER. The Merger shall have the effects set
forth in Section 259 of the DGCL.

Section 1.4 CERTIFICATE OF INCORPORATION OF THE SURVIVING CORPORATION. The
Certificate of Incorporation of the Company as now in force and effect shall
continue to be the Certificate of Incorporation of the Surviving Corporation,
and said Certificate of Incorporation shall continue in full force and effect
until further amended and changed as provided therein or by applicable law.

Section 1.5 BY-LAWS OF THE SURVIVING CORPORATION. The by-laws of the
Company as in effect immediately prior to the Effective Time will become the
by-laws of the Surviving Corporation at the Effective Time and will continue in
full force and effect until changed, altered or amended as provided therein or
by applicable law.

Section 1.6 DIRECTORS AND OFFICERS. The directors and officers in office
of the Company shall, at the Effective Time, become the members of the first
Board of Directors and the first officers of the Surviving Corporation, all of
whom shall hold their directorships and offices until the election and
qualification of their respective successors or until their tenure is otherwise
terminated in accordance with the by-laws of the Surviving Corporation.

ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OPTIONS AND WARRANTS;
EXCHANGE OF CERTIFICATES

Section 2.1 EFFECT ON CAPITAL STOCK, OPTIONS AND WARRANTS. As of the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any shares of Company Common Stock, Company Stock Options (as
hereinafter defined), Bergman Stock Options (as hereinafter defined) or Warrants
(as hereinafter defined):

(a) CANCELLATION OF TREASURY STOCK. Each share of Company Common Stock
that is owned directly or indirectly by the Company shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.

A-2
<PAGE>
(b) CONVERSION OF COMPANY COMMON STOCK. Each issued and outstanding share
of Company Common Stock (other than shares to be canceled in accordance with
Section 2.1(a)) shall be converted into the right to receive one validly issued,
fully paid and nonassessable share of Parent Common Stock. Subject to 2.1(a), as
of the Effective Time, all such shares of Company Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto, except
the right to receive the same number of shares of Parent Common Stock upon
surrender of such certificate in accordance with Section 2.2 and any dividends
or distributions to which such holder is entitled pursuant to Section 2.2 (c).

(c) CONVERSION OF COMPANY STOCK OPTIONS. The option holders listed on
Schedule 1 attached hereto each hold outstanding stock options as of the date
hereof, whether or not fully exercisable, to purchase shares of Company Common
Stock (the "Company Stock Options") heretofore granted or assumed by Company
pursuant to a stock option, stock purchase or similar plan adopted, assumed or
maintained at any time by Company, any of its controlled affiliates or any of
their respective predecessors in interest, including but not limited to the Dunn
Computer Corporation 1997 Stock Option Plan, as amended and in effect on the
date hereof (collectively, the "Company Stock Option Plans"). The option
exercise price, the number of shares subject to the option, any related stock
appreciation rights, the dates of grant, vesting, exercisability and expiration
of the option and whether the option is an incentive stock option or a non-
qualified stock option with respect to each Company Stock Option are set forth
in the respective stock option agreement between such option holder and Company.
All rights under the Company Stock Options shall be treated as provided herein,
and to the extent the terms of the Company Stock Option Plans and/or of any
related agreements are inconsistent with the treatment to be accorded to the
Company Stock Options as provided herein, then Company shall cause the Company
Stock Option Plans and/or any related agreements with affected participants to
be amended, and all required third party, governmental and regulatory body
consents or approvals to such amendments to be procured, such that all such
inconsistencies shall be eliminated by the Effective Time.

Each Company Stock Option outstanding immediately prior to the Effective
Time shall be converted at the Effective Time into an outstanding option to
purchase Parent Common Stock ("Parent Stock Option"), so that (i) from and after
the Effective Time, each such Company Stock Option may be exercised only for
shares of Parent Common Stock notwithstanding any contrary provision of the
Company Stock Option Plans or stock option agreements executed in connection
therewith and (ii) each such Parent Stock Option shall at the Effective Time be,
on substantially the same terms and conditions as were applicable to the Company
Stock Option to which it relates, an option to purchase an equal number of
shares of Parent Common Stock at an exercise price per share equal to the
exercise price per share applicable to the Company Stock Option to which it
relates; PROVIDED, HOWEVER, that in the case of any option to which Section 421
of the Code applies by reason of its qualification under any of Sections 422-424
of the Code, the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be further
adjusted to the extent necessary in order to comply with Section 424(a) of the
Code; and PROVIDED FURTHER, that the number of shares of Parent Common Stock
that may be purchased upon exercise of such stock option shall not include any
fractional share and, upon exercise of such stock option, a cash payment shall
be made for any fractional share based upon the closing price of a share of
Parent Common Stock on the last trading day of the calendar month immediately
preceding the date of exercise.

(d) CONVERSION OF BERGMAN STOCK OPTIONS. Barry D. Bergman and Jacqueline
L. Bergman each hold outstanding stock options as of the date hereof, whether or
not fully exercisable, to purchase shares of Company Common Stock (the "Bergman
Stock Options") heretofore granted by Company pursuant to Attachment 1 to the
Stock Acquisition, Stock Option, Settlement, and Reciprocal Release Agreement
dated September 12, 1997 entitled Dunn Computer Corporation Common Stock Option
(the "Bergman Stock Option Agreement"). The option exercise price, the number of
shares subject to the option, any

A-3
<PAGE>
related stock appreciation rights and the dates of grant, vesting,
exercisability and expiration of the option with respect to each Bergman Stock
Option are set forth in the Bergman Stock Option Agreement. All rights under the
Bergman Stock Options shall be treated as provided herein, and to the extent the
terms of the Bergman Stock Option Agreement are inconsistent with the treatment
to be accorded to the Bergman Stock Options as provided herein, then Company
shall cause the Bergman Stock Option Agreement to be amended, and all required
third party, governmental and regulatory body consents or approvals to such
amendments to be procured, such that all such inconsistencies shall be
eliminated by the Effective Time.

Each Bergman Stock Option outstanding immediately prior to the Effective
Time shall be converted at the Effective Time into a Parent Stock Option, so
that (i) from and after the Effective Time, each such Bergman Stock Option may
be exercised only for shares of Parent Common Stock notwithstanding any contrary
provision of the Bergman Stock Option Agreement and (ii) each such Parent Stock
Option shall at the Effective Time be, on substantially the same terms and
conditions as were applicable to the Bergman Stock Option to which it relates,
an option to purchase an equal number of shares of Parent Common Stock at an
exercise price per share equal to the exercise price per share applicable to the
Bergman Stock Option to which it relates; PROVIDED, HOWEVER, that the number of
shares of Parent Common Stock that may be purchased upon exercise of such stock
option shall not include any fractional share and, upon exercise of such stock
option, a cash payment shall be made for any fractional share based upon the
closing price of a share of Parent Common Stock on the last trading day of the
calendar month immediately preceding the date of exercise.

(e) CONVERSION OF WARRANTS. Richard Hunt, Network 1 Financial Services,
Inc., William Hunt and Damon Testaverde each hold outstanding warrants as of the
date hereof, whether or not fully exercisable, to purchase shares of Company
Common Stock (collectively, the "Warrants") heretofore granted or assumed by
Company pursuant to the Underwriting Agreement between Company and Network 1
Financial Securities, Inc. dated April 21, 1997 (the "Underwriting Agreement").
The warrant exercise price, the number of shares subject to the warrant, any
related stock appreciation rights, the dates of grant, vesting, exercisability
and expiration of the warrant are set forth in the respective Underwriter's
Warrant to Purchase 100,000 shares of Company Common Stock. All rights under the
Warrants shall be treated as provided herein, and to the extent the terms of the
Underwriting Agreement and/or of any related agreements are inconsistent with
the treatment to be accorded to the Warrants as provided herein, then Company
shall cause the Underwriting Agreement and/or any related agreements to be
amended, and all required third party, governmental and regulatory body consents
or approvals to such amendments to be procured, such that all such
inconsistencies shall be eliminated by the Effective Time.

At the Effective Time, the Warrants shall be assumed by Parent.
Notwithstanding any contrary provision of the Underwriting Agreement or any
related agreements executed in connection therewith, the Warrants shall, at and
after the Effective Time, evidence a warrant to purchase 100,000 shares of
Parent Common Stock on the same terms and conditions as stated in the respective
Underwriter's Warrant to Purchase 100,000 shares of Company Common Stock.

(f) CONVERSION OF SUB COMMON STOCK. Each issued and outstanding share of
Sub Common Stock shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $.001 per share, of the Surviving
Corporation.

Section 2.2 EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. As of the
Effective Time, Parent shall enter into an agreement with such bank or trust
company as may be designated by Parent and reasonably satisfactory to Company
(the "Exchange Agent"), which shall provide that Parent shall deposit with the
Exchange Agent as of the Effective Time, for the benefit of the holders of
shares of Company Common Stock, Company Stock Options, Bergman Stock Options and
Warrants, for exchange in accordance with this Article II, through the Exchange
Agent, certificates representing the shares of Parent Common Stock issuable
pursuant to Section 2.1 (b) in exchange for outstanding shares of Company Common
Stock, new option agreements representing options to purchase Parent Common
Stock executed and delivered

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<PAGE>
pursuant to Sections 2.1(c) and (d) in exchange for outstanding Company Stock
Options and Bergman Stock Options, respectively and new warrants representing
the right to purchase shares of Parent Common Stock pursuant to Section 2.1(e)
in exchange for the Warrants (such shares of Parent Common Stock, together with
any dividends or distributions with respect thereto with a record date after the
Effective Time, new option agreements and new warrants being hereinafter
referred to as the "Exchange Fund").

(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
stock certificate, option agreement or warrant which immediately prior to the
Effective Time represented rights with respect to shares of Company Common Stock
("Certificates") whose shares, options or warrants, as the case may be, were
converted into similar rights with respect to Parent Common Stock pursuant to
Section 2.1, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as the Company and Parent may
reasonably specify) and (ii) instructions for use in surrendering the
Certificates in exchange for Parent Common Stock, a new option agreement or a
new warrant, as the case may be. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock, a new option agreement or a new warrant which such holder
has the right to receive pursuant to the provisions of this Article II and
dividends or other distributions on such shares of Parent Common Stock which
such holder has the right to receive pursuant to Section 2.2(c), and the
Certificate so surrendered shall forthwith be canceled. In the event of a
surrender of a Certificate which is not registered in the transfer records of
Company or otherwise documented in the books and records of the Company under
the name of the person surrendering such Certificate, a new stock certificate,
new option agreement or new warrant, as the case may be, representing the proper
number of shares of Parent Common Stock to which the Certificate relates may be
issued or delivered, as the case may be, to a person other than the person in
whose name the Certificate so surrendered is registered or recorded if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance and/or delivery shall pay any
transfer or other taxes required by reason of the issuance of shares of Parent
Common Stock or delivery of an option agreement or warrant to purchase Parent
Common Stock to a person other than the registered or recorded holder of such
Certificate or establish to the satisfaction of Parent that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
2.2, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Parent Common Stock,
the new option agreement or the new warrant, as the case may be, in respect of
such Certificate pursuant to the provisions of this Article II and dividends or
other distributions in respect of such Parent Common Stock which such
Certificate holder has the right to receive pursuant to Section 2.2(c). No
interest shall be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II.

(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock issuable hereunder in respect
thereof, and all such dividends and other distributions shall be paid by Parent
to the Exchange Agent and shall be included in the Exchange Fund, in each case
until the surrender of such Certificate in accordance with this Article II,
subject to Section 2.2(e). Subject to the effect of applicable escheat or
similar laws, following surrender of any such Certificate there shall be paid to
the holder of the certificate representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the

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<PAGE>
Effective Time and with a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.

(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK, COMPANY STOCK
OPTIONS, BERGMAN STOCK OPTIONS OR WARRANTS. All shares of Parent Common Stock,
new option agreements and new warrants issued or delivered upon the surrender
for exchange of Certificates in accordance with the terms of this Article II
shall be deemed to have been issued or delivered in full satisfaction of all
rights pertaining to the shares of Company Common Stock theretofore represented
by such Certificates, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by the
Company on such shares of Company Common Stock which remain unpaid at the
Effective Time, and there shall be no further registration or recordation of
transfers on the stock transfer books or other records of the Surviving
Corporation of the shares of Company Common Stock, the Company Stock Options,
the Bergman Stock Options and the Warrants which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Exchange Agent for any reason
other than the exchange as provided in this Article II, they shall be canceled
and exchanged as provided in this Article II, except as otherwise provided by
law.

(e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of their claim with respect to Parent
Common Stock or any dividends or distributions with respect to Parent Common
Stock.

(f) NO LIABILITY. None of Parent, Sub, Company, the Surviving Corporation
or the Exchange Agent shall be liable to any person in respect of any shares of
Parent Common Stock, any dividends or distributions with respect thereto, any
new options, any new warrants or any cash from the Exchange Fund, in each case
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.

(g) INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent (provided that such cash
shall be invested only in high quality short-term instruments with low risk of
loss of principal), on a daily basis. Any interest and other income resulting
from such investments shall be paid to Parent. If, as a result of any loss
resulting from such investments, the amount of cash remaining in the Exchange
Fund is insufficient to pay the full amount to which holders of certificates
formerly representing rights with respect to Company Common Stock are entitled,
Parent shall, promptly upon demand by the Exchange Agent, deposit additional
cash into the Exchange Fund in an amount sufficient to satisfy its obligations
to such holders.

(h) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and the posting by such person
of a bond in such reasonable amount as Parent may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the Parent Common Stock, any unpaid dividends and distributions
related thereto, new option agreement or new warrant deliverable in respect
thereof pursuant to this Agreement.

ARTICLE III
MISCELLANEOUS

Section 3.1 FURTHER ASSURANCES. In the event that this Agreement shall
have been fully approved and adopted upon behalf of Parent, Sub and Company in
accordance with the provisions of DGCL, such corporations agree that they will
cause to be executed and filed and recorded any document or documents

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<PAGE>
prescribed by the laws of the State of Delaware, and that they will cause to be
performed all necessary acts within the State of Delaware and elsewhere to
effectuate the merger herein provided for.

Section 3.2. AUTHORIZATION. The Board of Directors and the proper officers
of Parent, Sub and Company are hereby authorized, empowered, and directed to do
any and all acts and things, and to make, execute, deliver, file and record any
and all instruments, papers and documents which shall be or become necessary,
proper, or convenient to carry out or put into effect any of the provisions of
this Agreement or of the merger herein provided for.

Section 3.3. TERMINATION. Notwithstanding the full adoption of this
Agreement, this Agreement may be terminated at any time prior to the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
in the event that such Agreement is abandoned by action of the Board of
Directors of each corporation party hereto, whether before or after approval by
the stockholders of any or all of such corporations.

IN WITNESS WHEREOF, this Agreement of Merger is hereby executed and
acknowledged on behalf of each of the corporations party hereto.

Dated: as of March 18, 1998.

<TABLE>
<S> <C> <C>
DUNN MERGER CORP.

By: /s/ JOHN D. VAZZANA
------------------------------------------
John D. Vazzana
Vice President and
Treasurer

DUNN COMPUTER CORPORATION
(Delaware)

By: /s/ JOHN D. VAZZANA
------------------------------------------
John D. Vazzana
Executive Vice President and
Chief Financial Officer

DUNN COMPUTER CORPORATION
(Virginia)

By: /s/ JOHN D. VAZZANA
------------------------------------------
John D. Vazzana
Executive Vice President and
Chief Financial Officer
</TABLE>

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<PAGE>
APPENDIX B

ACQUISITION AGREEMENT

This ACQUISITION AGREEMENT (the "Agreement") is made and entered into on the
9th day of March, 1998 among George Fuster, an individual resident in Maryland,
D. Oscar Fuster, an individual resident in Maryland, Carol N. Fuster, an
individual resident in Maryland and Wendy E. Fuster, an individual resident in
Maryland (collectively the "Sellers", and individually each a "Seller"), Dunn
Computer Corporation, a Delaware corporation, with its principal place of
business in Virginia (the "Purchaser") and Dunn Computer Corporation, a Virginia
corporation ("AHC");

RECITALS

A. George Fuster and D. Oscar Fuster (the "IDP Sellers") together own all of
the issued and outstanding capital stock of International Data Products, Corp.,
a Maryland corporation ("IDP");

B. Carol N. Fuster and Wendy E. Fuster (the "PRIMO Sellers") together own
all of the issued and outstanding capital stock of Puerto Rico Industrial
Manufacturing Operations Corp., a Puerto Rican corporation ("PRIMO");

C. The Purchaser has caused to be established AHC, and AHC will cause to be
established two wholly-owned subsidiaries of AHC, Dunn Computer Merger
Subsidiary, Inc., a Delaware corporation ("Merger Sub"), a company set up solely
for the purpose of carrying out the merger contemplated in Section 1.2 hereof,
and a Puerto Rican corporation to which will be transferred the PRIMO Assets and
the PRIMO Liabilities at Closing (as such terms are defined below) ("PAC"), all
with a view to carrying out the following transactions concurrently with the
closing of the initial public offering of shares of common stock of AHC referred
to in Sections 5.1(i) and 5.2(j) hereof (the "IPO"): (i) Merger Sub will merge
into the Purchaser which will be the surviving corporation (and all of the
outstanding securities of the Purchaser will be converted into and become
securities of AHC), (ii) all of the outstanding capital stock of IDP after
giving effect to the Redemption (as defined in Section 1.9 hereof) (the "IDP
Shares") will be contributed by the IDP Sellers to AHC in exchange for shares of
AHC and cash and (iii) the PRIMO Sellers will cause all of the assets of PRIMO
(as defined in Section 2.11(h) hereof) except for the Inter-company Indebtedness
(as defined in Section 1.7 hereof) (the "PRIMO Assets"), and all of the
liabilities of PRIMO reflected on the audited balance sheet of PRIMO as of
September 30, 1997 attached hereto as Schedule A, and liabilities incurred by
PRIMO in the ordinary course of business in arms length transactions, or
incurred by PRIMO with the consent of the Purchaser in accordance with Section
4.4 hereof, since September 30, 1997, (the "PRIMO Liabilities") to be
transferred to PAC for cash, all with the result that AHC will acquire and own
all of the capital stock of the Purchaser and of IDP and PAC will acquire and
own all of the PRIMO Assets and assume all of the PRIMO Liabilities.

NOW, THEREFORE, in consideration of the mutual promises, representations and
covenants set forth herein, and other good and valuable consideration, the
parties hereto hereby agree as follows:

I. THE ACQUISITION TRANSACTIONS

1.1 THE CLOSING. Each of the transactions described in Sections 1.2-1.4
hereof (collectively, the "Closing") shall take place concurrently with the
closing of the IPO (the "Closing Date").

1.2 THE MERGER. On the terms and conditions of the Agreement of Merger
attached hereto as Exhibit A (the "Agreement of Merger"), Merger Sub will be
merged into the Purchaser which will be the surviving corporation, and which
will be named Dunn Computer Corporation (the "Merger"). Pursuant to the Merger
the shareholders of Purchaser will receive solely AHC voting stock in exchange
for their Purchaser stock.

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<PAGE>
1.3 CONTRIBUTION OF IDP SHARES. On the terms and conditions hereof, the
IDP Sellers shall contribute to AHC the IDP Shares. In consideration of the
contribution of the IDP Shares, AHC shall issue to the IDP Sellers 750,000
shares of AHC (Dunn Computer Corporation) common stock, par value $.001 per
share ("Dunn Common") (the "Share Portion") and shall pay to the IDP Sellers in
cash the "IDP Cash Amount" as determined as provided on Exhibit B hereto. If AHC
declares or effects a stock dividend, reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction between the
date of this Agreement and the Closing Date, the Share Portion shall be
appropriately adjusted to account therefor.

1.4 TRANSFER OF PRIMO ASSETS AND LIABILITIES. On the terms and conditions
hereof, the PRIMO Sellers shall cause PRIMO to transfer to PAC (i) good and
valid, and as to owned real property, marketable, title to all of the PRIMO
Assets, free and clear of any mortgage, claim, lien, security interest or other
encumbrance whatsoever (collectively, "Liens"), except as provided in Section
2.11(g) hereof, and (ii) the PRIMO Liabilities. All of the other liabilities of
PRIMO shall be retained by and shall be the sole responsibility of PRIMO. In
consideration of the transfer of the PRIMO Assets and the other undertakings of
the Sellers herein, AHC shall pay to the PRIMO Sellers in cash $2,500,000, the
"PRIMO Cash Amount".

1.5 ADJUSTMENT TO SHARE PORTION. If the Average Closing Price (as defined
below) for a share of Dunn Computer Corporation (the Purchaser) common stock,
par value $.001 per share ("Purchaser Common") is less than $7.50, the Share
Portion shall be adjusted upward to that number of shares which multiplied by
the Average Closing Price equals $5,625,000. "Average Closing Price" shall be
the average of the mean between the closing high bid and asked prices for a
share of Purchaser Common, as reported on the Nasdaq National Market System for
the twenty consecutive trading days immediately preceding the date two business
days before the Closing Date. If the Purchaser declares or effects a stock
dividend, reclassification, recapitalization, split-up, combination, exchange of
shares or similar transaction between the date of this Agreement and the Closing
Date, the Share Portion shall be appropriately adjusted to account therefor.

1.6 ADJUSTMENT TO PURCHASE PRICE.

(a) The "Purchase Price" shall mean the Share Portion plus the sum of the
IDP Cash Amount, the PRIMO Cash Amount and the Inter-company Indebtedness (which
sum shall equal $14,900,000).

(b) The Purchase Price shall be adjusted downward if and to the extent that
the Closing Balance Sheet (as defined in Section 1.6(c) hereof) reflects a net
asset value (net worth) of IDP and PRIMO on a combined basis of less than
$5,108,826 at Closing (any such difference, the "Shortfall Amount"), and the
Sellers shall pay to AHC the Shortfall Amount, in cash or shares of Dunn Common
(valued for this purpose at $8.50 per share), or a combination thereof, as the
IDP Sellers shall elect, within ten days of written acceptance by AHC of the
Closing Balance Sheet or within ten days of completion of the Revised Closing
Balance Sheet (as defined in Section 1.6(d) hereof), as the case may be.

(c) Within thirty days after the Closing Date, the Sellers shall cause to be
delivered to AHC a combined balance sheet of IDP and PRIMO as at the Closing
Date prepared on the basis of the same accounting principles, consistently
applied, as were used in the preparation of the Sellers' Balance Sheet (as
defined in Section 2.4 hereof) and reviewed by KPMG Peat Marwick, LLP ("Sellers'
Accountants") (the "Closing Balance Sheet").

(d) Sellers' Accountants shall make available to the Purchaser's independent
public accountants, Ernst & Young ("Purchaser's Accountants") all work papers
used in connection with the preparation of the Closing Balance Sheet. Upon
review of the Closing Balance Sheet and such work papers, if Purchaser's
Accountants disagree with the Closing Balance Sheet and if Purchaser's
Accountants and Sellers' Accountants fail to resolve such disagreement within
thirty days following receipt by the Purchaser of the Closing Balance Sheet and
the work papers of Sellers' Accountants, then at the request of either Purchaser
or

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<PAGE>
Sellers, a third independent public accountant, selected jointly by the Sellers'
Accountants and the Purchaser's Accountants shall resolve the disagreement
between Purchaser's Accountants and Sellers' Accountants and shall revise the
Closing Balance Sheet (the "Revised Closing Balance Sheet") to reflect the
resolution. On the basis of the Closing Balance Sheet, if Purchaser advises
Sellers in writing that the Closing Balance Sheet is accepted (either after
review or after Purchaser's Accountants and Sellers' Accountants have resolved
any disagreements in respect of the Closing Balance Sheet) or, if required, on
the basis of the Revised Closing Balance Sheet, it shall be determined whether
or not there is a Shortfall Amount.

(e) The Purchase Price shall be adjusted upward if the Closing Balance
Sheet, or if there is a Revised Closing Balance Sheet, the Revised Closing
Balance Sheet, reflects a net asset value (net worth) of IDP and PRIMO on a
combined basis of more than $5,242,634 at Closing (any such difference, the
"Excess Amount"); such adjustment shall be the amount of the Excess Amount up to
a maximum adjustment of $500,000. For purposes of this Section 1.6(e) there
shall be deducted from the liabilities reflected on the Closing Balance Sheet
(or the Revised Closing Balance Sheet, as the case may be) any amounts reflected
in the liabilities for accounting, investment banking and legal fees in
connection with this Agreement and the IPO.

1.7 DISCHARGE OF IDP INDEBTEDNESS. Promptly after the Closing, AHC shall
pay to PRIMO on behalf of IDP, and in full discharge thereof, the inter-company
indebtedness running from IDP to PRIMO, which amount shall be agreed in good
faith by the Sellers and the Purchaser two business days before Closing (the
"Inter-company Indebtedness"). The Inter-company Indebtedness shall not exceed
$12,400,000 as provided on Exhibit B hereto.

1.8 PAYMENTS BY WIRE TRANSFER. All of the cash payments to be made in this
Article I shall be made by bank wire transfers to accounts designated by the
appropriate Seller to AHC prior to the Closing.

1.9 REDEMPTION. The IDP Sellers shall surrender to IDP for redemption an
appropriate number of IDP Shares (the "IDP Redemption Shares") pursuant to the
procedures, and in exchange for the consideration, described in Section 1.10
hereof (the "Redemption"), so that after the Redemption the IDP Shares shall
constitute all of the then issued and outstanding shares of capital stock of
IDP.

1.10 REDEMPTION PROCEDURES AND CONSIDERATION. Prior to the Closing, IDP
shall transfer and assign all of the assets and liabilities of its IDP F2
Engineering division (as described in Exhibit G hereto) to F2 Engineering Corp.,
an inactive corporation previously formed by IDP which has issued no shares of
capital stock, has no assets or liabilities and has conducted no activities, and
at the Closing, IDP shall transfer, or cause F2 Engineering Corp. to issue, all
of the authorized shares of capital stock of F2 Engineering Corp. to the IDP
Sellers as consideration for the IDP Redemption Shares.

II. REPRESENTATIONS AND WARRANTIES OF THE SELLERS

Each Seller hereby jointly and severally represents and warrants to the
Purchaser as follows:

2.1 ORGANIZATION OF IDP AND PRIMO AND RELATED MATTERS. IDP is a
corporation duly organized, validly existing and in good standing under the laws
of Maryland; PRIMO is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Puerto Rico; each of IDP and
PRIMO has all requisite power and authority to own, operate and lease its
assets, and to carry on its business as heretofore and as presently conducted.
True and complete copies of the currently effective articles of incorporation
and bylaws of IDP and PRIMO are attached to this Agreement as Schedules 2.1(a)
and (b). Each of IDP and PRIMO is duly authorized, qualified or licensed as a
foreign corporation and is in good standing in each jurisdiction where its
business, operations or assets requires it so to be. Schedule 2.1(c) identifies
all of the jurisdictions in which IDP and PRIMO, respectively, are authorized,
qualified or licensed as a foreign corporation. Neither IDP nor PRIMO has any
subsidiaries or equity interests in any other entity.

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<PAGE>
2.2 THE SHARES.

(a) Each Seller owns of record and beneficially, free and clear of any
Liens, the number of IDP Shares (before giving effect to the Redemption, which
shall reduce such number of Shares by the number of IDP Redemption Shares) or
PRIMO Shares listed by such Seller's name on Exhibit C; collectively the Sellers
so own all of the Shares. The only authorized, issued and outstanding capital
stock of IDP are the IDP Shares; the only authorized, issued and outstanding
capital stock of PRIMO are the PRIMO Shares.

(b) Each of the Shares is duly authorized, validly issued and outstanding,
fully paid and non-assessable. None of the Shares has been issued in violation
of, or is subject to, any preemptive or subscription rights and there are no
outstanding convertible or exchangeable securities, calls, preferential rights,
options or warrants relating to any of the Shares. Except as set forth on
Schedule 2.2, there are no voting trust agreements or other agreements
restricting or otherwise relating to the voting, dividend rights or the
disposition of any of the Shares.

2.3 DUE AUTHORIZATION AND EXECUTION; NO CONFLICT; CONSENTS. Each Seller
has all requisite power and authority and full capacity to execute, deliver and
perform this Agreement. This Agreement has been duly and validly executed and
delivered by each Seller, and constitutes a valid and binding obligation of each
Seller enforceable against each Seller in accordance with its terms except to
the extent that enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, conservatorship, receivership or other similar laws
now or hereafter in effect relating to or affecting the enforcement of
creditors' rights generally. Except as set forth on Schedule 2.3, the execution,
delivery and performance of this Agreement will not (a) conflict with or violate
(i) the articles of incorporation or bylaws of IDP or PRIMO, (ii) any term of
any agreement, contract, instrument, lease, commitment or other obligation to
which IDP, PRIMO or any Seller is a party or by which IDP, PRIMO or any Seller
is bound, (iii) any order, judgment or decree to which IDP, PRIMO or any Seller
is a party or subject, or by which any properties and assets of IDP or PRIMO are
bound or (iv) any provision of any applicable law, statute, ordinance, rule or
regulation or common law obligation and (b) will not result in the creation or
imposition of any Lien in favor of any third party with respect to any of the
properties and assets of IDP or PRIMO. Except as described on Schedule 2.3, (y)
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Sellers will not require the consent or
approval of or notice to any governmental authority, or constitute a violation
of any law, regulation or order of any such authority, by IDP, PRIMO, or any
Seller; and (z) none of IDP, PRIMO or any Seller is a party to or bound by any
agreement, instrument, order, judgment or decree which would require the consent
of another person to the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.

2.4 FINANCIAL STATEMENTS. The Sellers have delivered to the Purchaser the
combined statements of profit and loss for the years ended September 30, 1996
and 1997 and the combined balance sheet as at September 30, 1996 and 1997 (the
balance sheet at September 30, 1997 shall be referred to as the "Sellers'
Balance Sheet" and September 30, 1997 shall be referred to as the "Sellers'
Balance Sheet Date") of IDP and PRIMO, as audited by Sellers' Accountants, and
the respective individual statements of profit and loss and balance sheets for
IDP and PRIMO for such period and at such date, as audited by Sellers'
Accountants (collectively, the "Sellers' Financial Statements"). The Sellers'
Financial Statements were prepared in accordance with generally accepted
accounting principles, consistently applied as in prior periods, are correct and
complete, and fairly present the financial condition of IDP and PRIMO on a
combined basis, and of IDP and PRIMO individually, as the case may be, and the
results of their combined operations, or their respective operations, as the
case may be, as of the dates and for the periods indicated therein.

2.5 LIABILITIES. Except as set forth on Schedule 2.5 hereto, neither IDP
nor PRIMO has any liabilities or obligations (whether accrued, absolute,
contingent, known, unknown, derivative or otherwise) other than those (i)
reflected in the Sellers' Balance Sheet and not since paid or otherwise
discharged,

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<PAGE>
(ii) listed or described on any Schedule hereto and (iii) liabilities arising
after the Sellers' Balance Sheet Date in the ordinary course of business of IDP
or PRIMO.

2.6 INTERIM OPERATIONS.

(a) ORDINARY COURSE. Except as described on Schedule 2.6 hereto, the
business of each of IDP and PRIMO has been conducted only in the ordinary course
since the Sellers' Balance Sheet Date.

(b) ABSENCE OF ADVERSE CHANGE. There has not been, since the Sellers'
Balance Sheet Date, any material adverse change in the business, assets or
financial condition of IDP and PRIMO considered as one entity. To the knowledge
of Sellers, there has been no occurrence, circumstance or combination thereof
which might reasonably be expected to result in any such material adverse
change.

2.7 LITIGATION. Except as set forth on Schedule 2.7 hereto, there is no
action, suit, proceeding, arbitration, demand, claim or investigation pending
or, to any Seller's knowledge, threatened against or involving IDP or PRIMO or
affecting or which might materially adversely affect this Agreement or the
business or assets of IDP or PRIMO or the consummation of the transactions
contemplated hereby before any court or arbitral tribunal or before or by any
governmental department, agency or body, or otherwise. Neither IDP nor PRIMO is
subject to any judgment, order, writ, injunction, decree, settlement agreement,
compliance agreement or consent decree of any court, administrative or
governmental authority or arbitrator except as set forth on Schedule 2.7 hereto.

2.8 AGREEMENTS AND COMMITMENTS.

(a) WRITTEN AND ORAL AGREEMENTS AND COMMITMENTS. Schedules 2.8(a)(i)
through and including 2.8(a)(xii) hereto set forth a complete list as of the
date hereof of all written agreements (true and correct copies of each of which
have heretofore been delivered to Purchaser) and describe all oral agreements
and commitments of IDP and of PRIMO in force as of the date hereof, as follows:

(i) SUPPLY CONTRACTS; PURCHASE ORDERS. Each outstanding supply contract or
purchase order and commitment as of December 31, 1997 exceeding $250,000 for the
purchase by IDP or PRIMO of capital assets, inventory, semi-finished goods,
supplies, services or other items.

(ii) CUSTOMER CONTRACTS. Each outstanding contract and commitment as of
December 31, 1997 exceeding $150,000 for the sale by IDP or PRIMO of goods or
services, including all Government Contracts (as defined in Section 2.9(g)).

(iii) LICENSES. Each patent, trademark, copyright, technology and other
license agreement to which IDP or PRIMO is a party, either as licensor or as
licensee.

(iv) REAL ESTATE DOCUMENTS. Each lease and sublease relating to the real
estate interests of IDP and of PRIMO; neither IDP nor PRIMO owns any real
estate.

(v) LEASES. Each lease to which either IDP or PRIMO is a party, either as
lessor or as lessee not identified in response to Section 2.8(a)(iv);

(vi) DISTRIBUTORSHIP AND SALES REPRESENTATION AGREEMENTS. Each
distributorship, sales representation and similar agreement to which either IDP
or PRIMO is a party.

(vii) INDEBTEDNESS. Each outstanding loan, loan agreement, credit
agreement, note, guarantee, security agreement, book entry advance in respect of
borrowing or commitment (including, without limitation, any amounts owing to IDP
or PRIMO from, or owed by IDP or PRIMO to, any affiliated individual or entity)
to which either IDP or PRIMO is a party or by which any of the assets of either
are bound.

(viii) EMPLOYMENT AND BENEFIT AGREEMENTS. Each employment, consulting, or
collective bargaining agreement to which either IDP or PRIMO is a party, and
each, pension, retirement, profit sharing,

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deferred compensation, bonus, life insurance and other benefit plan or agreement
which applies in any way to past or present directors, officers, employees or
consultants of either IDP or PRIMO.

(ix) STOCK OPTION PLANS. Each stock option plan and each option granted
under each stock option plan of IDP or PRIMO.

(x) INSURANCE CONTRACTS. Each insurance contract to which either IDP or
PRIMO is a party.

(xi) PRODUCT AND SERVICE WARRANTIES. A sample of each type of product,
service or other guarantee, warranty or indemnity by which IDP or PRIMO is
bound.

(xii) OTHER AGREEMENTS. Each material contract, agreement, and commitment
to which either IDP or PRIMO is a party or by which the assets of either are
bound other than those disclosed pursuant to the preceding clauses of this
Section 2.8.

(b) STATUS OF AGREEMENTS. Except as set forth on Schedule 2.8(b) hereto,
each of the contracts, agreements, commitments, licenses and leases to which
either IDP or PRIMO is a party, is a valid, legally binding and enforceable
obligation of IDP or PRIMO, and is in full force and effect. There is no default
by either IDP or PRIMO or, to the knowledge of any Seller, by the other parties
thereto under the terms of any such material contract, commitment, license or
lease, and no condition (including without limitation, the execution, delivery
and performance of this Agreement) exists which, with the passage of time, the
giving of notice, or both, is likely to result in a default by IDP or PRIMO, as
the case may be, under the terms of any thereof.

2.9 GOVERNMENT CONTRACTS.

(a) Except as set forth on Schedule 2.9 hereto, to the knowledge of the
Sellers, each of IDP and PRIMO has complied in all material respects with all
applicable laws, rules, policies, procedures, regulations, accounting standards,
cost principles, cost accounting standards, solicitation provisions and contract
clauses in conducting all past and present activities relating to Government
Contracts (as defined in Section 2.9(g)) and Government Contract procurements,
including, without limitation, accounting and record keeping activities,
disclosures, reports, wage and hour regulations, certifications and
representations, product testing, marketing activities, proposal and bid
preparation and submissions, negotiations and contract performance. To the
knowledge of the Sellers, all proposals, representations, statements,
disclosures, reports, invoices and certifications made in connection with
Government Contracts were, when made, current, accurate and complete in all
material respects. Except as set forth on Schedule 2.9 hereto, there are not
now, nor have there been since the formation of IDP or PRIMO, as the case may
be, any government investigations or audits of the IDP or PRIMO, or any officer
or employee of either in connection with Government Contract activities. Each
Government Contract of IDP and of PRIMO, as the case may be, is expected to
finish on schedule and within budget and neither IDP nor PRIMO presently has any
basis to conclude that existing schedules or budgets are not reasonable.

(b) To the knowledge of the Sellers, neither IDP nor PRIMO has been
determined by a governmental agency to be "non-responsible" in connection with
any Government Contract procurement. Neither IDP nor PRIMO has received any
notice, and neither IDP, nor PRIMO, nor any Seller is aware of any circumstances
that reasonably would be expected to justify such a notice, that any of its
Government Contracts have been or may be terminated for default. Neither IDP nor
PRIMO is debarred or suspended, or proposed for debarment or suspension from
procurements or other activities at the federal, state or local governmental
levels, and none of IDP, PRIMO or any Seller is aware of any circumstances that
would justify a proposal or decision to suspend or debar IDP or PRIMO from
procurement or other activities. IDP and PRIMO and their respective personnel
have all necessary security clearances to perform outstanding Government
Contracts and neither IDP, nor PRIMO, nor any Seller is aware of any
circumstances (including the transfer of the IDP Shares to the Purchaser) that
may lead to the suspension or revocation of such security clearances. Neither
IDP nor PRIMO has engaged in any illegal or fraudulent conduct in connection
with Government Contract activities.

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(c) Each Government Contract of IDP and of PRIMO that was awarded, or is
being considered for award, on the basis that IDP or PRIMO, as the case may be,
is classified as a small business, a small disadvantaged business or a
minority-owned business under a set aside or similar program under any federal,
state or local laws or procurement regulations is identified on Schedule 2.9
hereto.

(d) Neither IDP, nor PRIMO, nor any Seller has received written notice from,
or engaged in any discussions with, any Governmental Authority (as defined in
Section 2.9(g)) regarding the termination of any Government Contract, the
cessation of any delivery orders thereunder, any reduction by any Governmental
Authority in the amount of its business with IDP or PRIMO or allegations of
defective pricing in connection with Government Contract activities.

(e) Except as set forth on Schedule 2.9 hereto, there have been no
outstanding claims (as defined by the Federal Acquisition Regulations) by any
government procurement agency submitted by or against IDP or PRIMO in connection
with its Government Contract activities and neither IDP nor PRIMO has any basis
to conclude that any claims may be submitted by or against either company in
connection with past or present government contracting activities.

(f) To the knowledge of Sellers, each of IDP and PRIMO has at all times
complied in all material respects with all governmental and state rules, laws
and regulations relating to the payment of commissions or contingent fees and
those relating to disclosure of the payment of commissions or contingent fees in
connection with Government Contract activities.

(g) For purposes of this Agreement, (i) "Government Contracts" shall mean
contracts for procurements by or on behalf of any Governmental Authority,
including instances when IDP, PRIMO or Purchaser, as the case may be, has acted
as a subcontractor at any tier, and (ii) "Governmental Authority" shall mean any
government or political subdivision, whether federal, state, local or foreign,
or any agency or instrumentality of any such government or political
subdivision, or any federal, state, local or foreign court or arbitrator.

2.10 CERTAIN GOVERNMENTAL MATTERS.

(a) TAXES.

(i) Each of IDP and PRIMO has filed all federal, state and local returns,
reports, schedules, declarations and estimates related to taxes ("Tax Returns")
required to be filed. All such Tax Returns were correct and complete in all
respects. All taxes owed by IDP and PRIMO, as the case may be, for all periods
(and any portion of any period) have been paid or reflected as a liability on
the Sellers' Balance Sheet or will be reflected as a liability on the Closing
Balance Sheet. No claim has ever been made by an authority in a jurisdiction
where either IDP or PRIMO does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction. There are no security interests on any of the
assets of IDP or PRIMO that arose in connection with any failure (or asserted
failure) to pay any tax.

(ii) Each of IDP and PRIMO has withheld and paid all taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.

(iii) There is no dispute or claim concerning any tax liability of either of
IDP or PRIMO either (A) claimed or raised by any authority in writing or (B) as
to which any of the Sellers has knowledge based upon personal contact with any
agent of such authority. Schedule 2.10(a) lists all federal, state, local, and
foreign income tax returns filed with respect to either IDP or PRIMO for taxable
periods ended on or after January 1, 1992, indicates those tax returns that have
been audited, and indicates those tax returns that currently are the subject of
audit. The Sellers have delivered to the Purchaser correct and complete copies
of all federal, state, and foreign income tax returns, examination reports, and
statements of deficiencies assessed against or agreed to by IDP or PRIMO since
January 1, 1992.

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(iv) Neither IDP nor PRIMO has waived any statute of limitations in respect
of taxes or agreed to any extension of time with respect to a tax assessment or
deficiency.

(v) Neither IDP nor PRIMO has filed a consent under Code Section 341(f)
concerning collapsible corporations. Neither IDP nor PRIMO has made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"). Neither IDP nor PRIMO has been a United States real
property holding corporation within the meaning of Code Section 897(c)(2) during
the applicable period specified in Code Section 897(c)(1)(A)(ii). Neither IDP
nor PRIMO is a party to any tax allocation or sharing agreement. Neither IDP nor
PRIMO (A) has been a member of an affiliated group filing a consolidated federal
income tax return, or (B) has any liability for the taxes of any person under
Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.

(vi) For purposes of this Agreement, the following definitions shall apply:
"tax" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not; and "tax return" means any return,
declaration, report, claim for refund, or information return or statement
relating to taxes, including any schedule or attachment thereto, including any
amendment thereof.

(b) COMPLIANCE WITH LEGAL REQUIREMENTS. The business and operations of
each of IDP and PRIMO have not involved and do not now involve, and, assuming
that no changes occur in applicable law, the continuation thereof in the manner
in which they are now conducted will not involve, a violation of any material
legal requirement of or administered by any federal, state or local governmental
agency. To the extent that compliance with this Section 2.10 (b) depends upon
the existence or continuing validity of any governmental permit or other
authorization, each such permit or authorization is identified on Schedule 2.10
(b) hereto, and the Sellers have heretofore delivered or have caused to be
delivered to Purchaser true and correct copies of each thereof. Except as set
forth on Schedule 2.10(b), each such permit and other authorization is valid and
in full force and effect, and will not be affected by the execution, delivery
and performance of this Agreement and the change in control of IDP and PRIMO
resulting therefrom. All material obligations with respect to such permits and
other authorizations have been fulfilled, and no event has occurred which
allows, or after notice or lapse of time or both, would allow suspension,
revocation, material adverse variation or termination thereof or result in any
other impairment of the rights of IDP or PRIMO, and no Seller is aware of any
facts or circumstances which will or are likely to result in any of such permits
or other authorizations being suspended, revoked, materially and adversely
varied or terminated, or which may prejudice their renewal. To the knowledge of
the Sellers, all certificates of occupancy and permits necessary for the present
use and occupancy of any building by IDP or PRIMO have been obtained.

(c) ERISA. Schedule 2.10(c) attached hereto is a complete list of all
employee benefit plans, as such term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), life insurance,
hospitalization, medical and dental plans, severance, executive compensation,
bonus, deferred compensation, pension, retirement, profit sharing, excess
benefit, stock purchase and option plans (including multi-employer and multiple
employer plans), and all other plans, arrangements or practices whether written
or oral, qualified or nonqualified, sponsored, maintained, contributed to or
required to be contributed to by IDP or PRIMO or any trade or business whether
or not incorporated that together with IDP and/or PRIMO is treated as a "single
employer" under Section 414(b), (c), (m) or (o) of the Code and the rules and
regulations promulgated thereunder (referred to as "ERISA Affiliate") (each such
plan is hereinafter referred to as an "Employee Benefit Plan"). Neither IDP nor
PRIMO nor its

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ERISA Affiliates maintains or has any liability in respect of any Employee
Benefit Plan which is not disclosed on Schedule 2.10(c) hereto. Each Employee
Benefit Plan has been operated and administered in accordance with its
provisions and is in compliance in all respects with all applicable federal and
state laws, rules and regulations governing each such plan including but not
limited to ERISA, the Code, and the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA") except to the extent that failure to so
qualify, administer or comply would not have a material adverse effect on the
business of IDP and PRIMO taken as a whole.

There have been no non-exempt "prohibited transactions" within the meaning
of Section 4975 of the Code or Section 406 of ERISA resulting in the imposition
of excise taxes or other monetary liability on IDP or PRIMO. Neither IDP nor
PRIMO nor any ERISA Affiliate has sponsored, ever maintained, or contributed to
an Employee Benefit Plan that is subject to Title IV of ERISA. Each Employee
Benefit Plan intended to be "qualified" within the meaning of Section 401(a) of
the Code is so qualified and the trusts maintained thereunder are exempt from
taxation under Section 501(a) of the Code. No Employee Benefit Plan provides
benefits, including without limitation, death or medical benefits (whether or
not insured), with respect to current or former employees of the company or any
ERISA Affiliate beyond their retirement or other termination of service other
than coverage mandated by COBRA or applicable state or local law. There is no
pending or, to the knowledge of Sellers threatened assessment, complaint,
proceeding, voluntary compliance application or investigation of any kind in any
court or government agency with respect to any Employee Benefit Plan. All
benefits, expenses and other amounts due and payable under any Employee Benefit
Plan and all contributions, transfers or payments required to be made, accrued
or booked to any Employee Benefit Plan, have been paid or made, accrued and
booked. With respect to each Employee Benefit Plan, Sellers have heretofore
delivered to the Purchaser true and complete copies of any documents requested
by the Purchaser.

(d) WORKER'S COMPENSATION. Except as described on Schedule 2.10(d) hereto,
worker's compensation and unemployment compensation matters with respect to IDP
or PRIMO have been conducted and are being conducted so as to be in compliance
in all material respects with all laws and regulations applicable thereto.

(e) PLANT CLOSING LEGISLATION. As of the Closing Date, no employee of IDP
or PRIMO, without 60 days written notice, shall have suffered, an "employment
loss" as a result of a "plant closing" or "mass layoff" as those terms are
defined in the Worker Adjustment and Retraining Notification Act, 29 U.S.C.
SectionSection 2101-2109 ("WARN") in either case during the six month period
ending with and including the Closing Date. Each of IDP and PRIMO is in
compliance in all material respects with the requirements of WARN.

(f) ENVIRONMENTAL MATTERS. Each of IDP and PRIMO and any other person or
entity for whose conduct they are or may be held responsible, have no liability
under, have never violated, and are presently in compliance in all material
respects with all Environmental Laws (as defined below) applicable to the
properties owned, leased or used by such parties (collectively, the "Sellers'
Properties") and any facilities and operations thereon, and, except as set forth
on Schedule 2.10(f) hereto, to the best of each Seller's knowledge, there exists
no Environmental Condition (as defined below) with respect to the Sellers'
Properties or any facilities or operations thereon, or with respect to any
property at which materials from the Sellers' Properties have been disposed.
Neither IDP, nor PRIMO, nor any Seller has generated, manufactured, refined,
transported, treated, stored, handled, disposed, transferred, produced, or
processed any Hazardous Material (as defined below) or any solid waste on, under
or about the Sellers' Properties. Seller has no knowledge of the Release or
threat of Release (as defined below) of any Hazardous Material at the Sellers'
Properties. Neither IDP, nor PRIMO, nor any Seller has received notice under the
citizen suit provision of any Environmental Law in connection with the Sellers'
Properties or any facilities or operations thereon.

For purposes of this Agreement, (i) "Environment" shall mean soil, surface
waters, groundwaters, land, stream sediments, surface or subsurface strata,
ambient air and any environmental medium, (ii)

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"Environmental Condition" shall mean any condition with respect to the
Environment on or off the Sellers' Properties or Purchaser Properties, as the
case may be, that could or does result in any damage, loss, cost, expense,
claim, demand, order or liability to any Seller, IDP, PRIMO or Purchaser by any
third party (including, without limitation, any government entity), including,
without limitation, any condition resulting from the operation of the business
of IDP, PRIMO or Purchaser, as the case may be, or any activity or operation in
the vicinity of the Sellers' Properties or the Purchaser Properties, as the case
may be, or any activity or operation formerly conducted by any person or entity
on or off the Sellers' Properties or the Purchaser Properties, as the case may
be, (iii) "Environmental Law" shall mean any environmental or health and safety
related law, regulation, rule, ordinance, bylaw, order or determination of any
governmental or judicial authority at the federal, state or local level, whether
existing as of the date hereof, previously enforced or subsequently enacted,
(iv) "Hazardous Material" shall include, without limitation, any pollutant,
contaminant, toxic substance, hazardous waste, hazardous material, hazardous
substance, petroleum or petroleum product, asbestos, polychlorinated biphenyls,
underground storage tanks and the contents thereof or any other material defined
in or regulated pursuant to any Environmental Law, whether existing as of the
date hereof, previously enforced, or subsequently enacted, including, without
limitation, the Resource Conservation and Recovery Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Federal Clean Water Act, as amended, and the Toxic Substances
Control Act, as amended, and (v) "Release" shall mean any releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing, dumping or migrating into the Environment.

2.11 ASSETS.

(a) REAL ESTATE. Schedule 2.11(a) hereto sets forth a true and complete
list and a description of all of the land and interests in land of IDP and of
PRIMO (the "Sellers' Land") and a description of all of the buildings and other
structures of IDP and of PRIMO including leases of buildings and other
structures (and fixtures therein and improvements thereto), and the improvements
on and to the Sellers' Land (the "Sellers' Buildings"). The Sellers' Buildings
are located entirely on the Sellers' Land and, except as provided in Schedule
2.11(a) hereto, none of the Sellers' Buildings is subject to any mortgages,
liens, encumbrances, equities, restrictions, easements, rights-of-way or other
conflicting interests except (i) those items that secure liabilities that are
reflected in the Sellers' Balance Sheet, and (ii) statutory liens for amounts
not yet delinquent or which are being contested in good faith. To the knowledge
of Sellers, the Sellers' Buildings are in good structural condition except as
set forth on Schedule 2.11(a) hereto.

(b) INVENTORIES. Schedule 2.11(b) hereto sets forth a description of all
of the inventories as of December 31, 1997, of raw materials, parts, supplies,
work-in-progress and finished goods of IDP and PRIMO (the "Sellers'
Inventories"), and identifies all such inventories that, as of December 31,
1997, are more than 90 days old. Substantially all of the Sellers' Inventories
consist of quantities and qualities usable and salable in the ordinary course of
the business of IDP and PRIMO. Except as set forth on Schedule 2.11(b) hereto,
all of the Sellers' Inventories are located in the Sellers' Buildings.

(c) MACHINERY, EQUIPMENT AND OTHER TANGIBLES. Schedule 2.11(c) hereto sets
forth a description as of December 31, 1997 (including the location) of all of
the machinery, equipment and other tangible assets of every kind and description
and wheresoever situated (whether real or personal and whether attached or
unattached to real estate) which at December 31, 1997 were used or useful in the
business of IDP or PRIMO (the "Sellers' Machinery, Equipment and Other
Tangibles"). The Sellers' Machinery, Equipment and Other Tangibles are in good
operating condition and repair, ordinary wear and tear excepted, and are free of
any material defects, and are located in the Sellers' Buildings.

(d) INTELLECTUAL PROPERTY. The business and operations of neither IDP nor
PRIMO have infringed or violated or required the use of, except as set forth on
Schedule 2.11(d) hereto, and do not now infringe or violate or require the use
of, except as set forth on Schedule 2.11(d) hereto, any patent, copyright,
trademark, trade name, invention, discovery, trade secret, secret process or
other proprietary asset of any

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other person. Except as set forth in Schedule 2.11(d) hereto, there are no
patents or patentable inventions developed by any director, officer or employee
of IDP or PRIMO used or useful in the business of IDP and PRIMO considered as
one enterprise which have not been transferred to, and are not owned free of any
encumbrances by, IDP or PRIMO.

(e) ACCOUNTS AND NOTES RECEIVABLE. All accounts and notes receivable
reflected in the Sellers' Balance Sheet and all accounts and notes receivable
arising subsequent to the Sellers' Balance Sheet Date (the "Sellers' Accounts
and Notes Receivable"), have arisen in the ordinary course of business of IDP or
PRIMO and represent valid obligations due to IDP or PRIMO, as the case may be,
and, except as set forth on Schedule 2.11(e) hereto, have been collected or are
collectible in accordance with their terms in the ordinary course of business of
IDP or PRIMO, as the case may be, in the aggregate recorded amounts thereof less
the bad debt reserve shown on the Sellers' Balance Sheet or accrued after the
Sellers' Balance Sheet Date in accordance with past practice.

(f) ASSETS USED IN BUSINESS. Since one year before the Sellers' Balance
Sheet Date, neither IDP nor PRIMO has utilized any assets in the conduct of its
business and operations other than (i) assets reflected on the Sellers' Balance
Sheet or the combined balance sheet of IDP and PRIMO as of September 30, 1996
included in the Sellers' financial statements, (ii) assets set forth on
Schedules 2.11(a) through and including 2.11(f) hereto and (iii) supplies and
inventories consumed or disposed of by IDP or PRIMO in the ordinary course of
business.

(g) TITLE TO ASSETS. Except as set forth on Schedule 2.11(g) hereto,
either IDP or PRIMO has good, and as to owned real property, marketable, title
to, or in the case of property held under lease, a valid and enforceable right
to use, all of the Sellers' Land, Buildings, Inventories, Machinery, Equipment
and Other Tangibles, Intellectual Property, Accounts and Notes Receivable and
all assets reflected in the Sellers' Balance Sheet except those disposed of in
the ordinary course of business since the Sellers' Balance Sheet Date, and such
assets are not subject to any Liens except as set forth on Schedule 2.11(g)
hereto except (i) those items that secure liabilities that are reflected in the
Sellers' Balance Sheet and (ii) statutory liens for amounts not yet delinquent
or which are being contested in good faith. None of the assets of either IDP or
PRIMO are subject to any pending or, to the knowledge of Sellers, threatened
judicial order, ordinance or planning restriction as to which any Seller has
knowledge which might have a material adverse effect on the business of IDP and
PRIMO. Except as affected by the transactions contemplated hereby, IDP and PRIMO
as lessees have the right under valid and subsisting leases to occupy, use,
possess and control all real property leased by IDP and PRIMO as presently
occupied, used, possessed and controlled by IDP and PRIMO.

(h) PRIMO ASSETS. The assets of PRIMO reflected on the PRIMO Balance
Sheet, the names "PRIMO" and "Puerto Rico Industrial Manufacturing Operations
Corp.", and all other assets of PRIMO and all contracts to which PRIMO is a
party, other than assets disposed of in the ordinary course of business since
the date of the PRIMO Balance Sheet, are the "PRIMO Assets."

2.12 INSURANCE. All of the assets of IDP and of PRIMO are insured in
accordance with good industry practice with respect to loss due to fire and
other risks (except that PRIMO does not have product liability insurance), in
amounts and coverage which are reasonable and customary in light of the business
conducted by IDP or PRIMO, as the case may be, pursuant to the policies of
insurance listed and described on Schedule 2.8(a)(x) hereto. All insurance
policies in effect on the date hereof which relate to product liability of IDP,
together with the amounts reserved on the Sellers' Balance Sheet for product
liability and expenses to contest product liability, are in amounts and coverage
which are reasonable and customary in light of the business conducted by IDP.
The amount of insurance coverage with respect to the risks associated with the
operation of PRIMO meet the minimum requirements mandated by the government of
Puerto Rico.

2.13 DISTRIBUTIONS. PREPAYMENT. ETC. Except as set forth on Schedule 2.13
hereto, neither IDP nor PRIMO has since the Sellers' Balance Sheet Date sold or
disposed of, or created Liens upon, any material

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assets, except in the ordinary course of business. Except as set forth on
Schedule 2.13 hereto, neither IDP nor PRIMO has since the Sellers' Balance Sheet
Date declared or paid any dividend or made any other distribution to any of its
shareholders; and has not prepaid or otherwise discharged any outstanding
indebtedness, or made any expenditures or disbursements of funds or commitments,
except in the ordinary course of business.

2.14 CONCERNING EMPLOYEES.

(a) LABOR RELATIONS. Except as described on Schedule 2.14(a) hereto, there
are no labor controversies pending against either IDP or PRIMO in the form of a
proceeding, claim or litigation. Neither IDP nor PRIMO has, with respect to its
employees, recognized any labor organization; no such organization has been
certified as the exclusive bargaining agent of any such employees; there has
been no demand on behalf of any labor organization to represent any such
employees; and no Seller has any knowledge of any present efforts of any labor
organization seeking to represent any such employees. Except as set forth on
Schedule 2.14(a) hereto, neither IDP nor PRIMO has had, and to the knowledge of
any Seller there is not now threatened, a strike, work stoppage or work
slowdown.

(b) Set forth on Schedule 2.14(b) hereto is a true and complete list of all
employees of IDP and of PRIMO and their respective compensation (including
commissions and bonuses), dates of birth and dates of hire.

(c) There are no employee benefits provided by IDP or PRIMO except for
benefits disclosed on Schedule 2.8(a)(viii) or Schedule 2.10(c) hereto and
matters covered by insurance.

2.15 WARRANTIES. All products and services have been produced, performed
or sold heretofore by IDP and by PRIMO in a condition which meets all applicable
written warranty obligations and applicable governmental and industry standards,
codes and regulations.

2.16 BOOKS AND RECORDS. All books and records of IDP and of PRIMO are in
all material respects complete and correct and have been maintained in
accordance with good industry practice and have heretofore been made available
to Purchaser.

2.17 INVESTMENT INTENT. The IDP Sellers are purchasing the shares included
in the Share Portion for their own account and each IDP Seller has the present
intention of holding such shares for investment purposes and not with a view to
any public distribution of such shares in violation of any federal or state
securities laws.

2.18 REGISTRATION STATEMENT. To the best knowledge and belief of the IDP
Sellers, the descriptions of IDP and PRIMO and their historical businesses and
operations contained in the registration statement of AHC (Dunn Computer
Corporation), draft of the date hereof do not contain any untrue statement of
material fact and do not omit to state a material fact required in order to make
the statements therein not misleading. This representation is made only by the
IDP Sellers.

III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND AHC

The Purchaser (which term shall mean for purposes of this Article III the
Purchaser and Dunn Computer Corporation, a Virginia corporation, except where
the context requires otherwise) and AHC hereby represent and warrant to the
Sellers as follows:

3.1 ORGANIZATION OF PURCHASER AND RELATED MATTERS. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware and has all requisite power and authority to enter into and perform
this Agreement. Dunn Computer Corporation, a Virginia corporation, is a
wholly-owned subsidiary of the Purchaser, is duly organized, validly existing
and in good standing under the laws of Virginia, and has all requisite power and
authority to own its assets and to carry on its business as it has been and is
conducted.

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3.2 DUE AUTHORIZATION AND EXECUTION; NO CONFLICT. This Agreement has been
duly and validly authorized, executed and delivered by the Purchaser and
constitutes a valid and legally binding obligation of the Purchaser enforceable
against the Purchaser in accordance with its terms. The execution, delivery and
performance of this Agreement by the Purchaser does not and will not conflict
with or violate its charter and by-laws or any term of any agreement, contract,
instrument, lease, commitment or other obligation to which the Purchaser is a
party or by which the Purchaser is bound, or any order, judgment or decree to
which the Purchaser is a party or subject, by which any properties and assets of
the Purchaser are bound, or any provision of any applicable law, statute,
ordinance, rule, regulation or common law obligation and will not result in the
creation or imposition of any Lien in favor of any third party with respect to
any of the properties and assets of Purchaser. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby by
the Purchaser and AHC will not require the consent or approval of or notice to
any governmental authority, or constitute a violation of any law, regulation or
order of any such authority by the Purchaser or AHC, and neither the Purchaser
nor AHC is a party to or bound by any agreement, instrument, order, judgement or
decree which would require the consent of another person to the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby.

3.3 CAPITALIZATION. The authorized capital stock of the Purchaser is
20,000,000 shares of Dunn Computer Corporation common stock, $.001 par value per
share ("Purchaser Common") of which (i) 5,150,000 shares are issued and
outstanding, (ii) 2,200,000 shares underlie employee stock options that may be
granted pursuant to the 1997 stock option plan of Purchaser, options to purchase
1,832,000 shares have been granted in accordance therewith, (iii) 25,000 shares
underlie options granted to Barry D. Bergman and Jacqueline L. Bergman in
September 1997 in connection with the Purchaser's acquisition of STMS, and (iv)
100,000 shares underlie warrants held by the underwriters in the initial public
offering of the shares of Purchaser, and 2,000,000 shares of Dunn Computer
Corporation preferred stock, $.001 par value per share, none of which have been
issued, and there is no present intention to issue any such shares. All of such
Purchaser Common are, or when issued upon exercise of such employee stock
options or such warrants will be, duly authorized, validly issued and
outstanding, fully paid and non-assessable. There are no voting trust agreements
or other agreements restricting or otherwise relating to the voting, dividend
rights or the disposition of any Purchaser Common. Except as set forth above,
there are no Purchaser Common reserved for issuance. All of the outstanding
Purchaser Common, and all of the Purchaser Common which underlie such employee
stock options and warrants will be converted into shares of Dunn Common on a
one-for-one basis pursuant to the Agreement of Merger.

3.4 INTERIM OPERATIONS--ORDINARY COURSE. The business of the Purchaser has
been conducted only in the ordinary and usual course since the Purchaser Balance
Sheet Date.

3.5 ABSENCE OF ADVERSE CHANGE. There has not been, since the Purchaser
Balance Sheet Date any material adverse change in the business, assets,
financial condition or prospects of the Purchaser. There has been no occurrence,
circumstance or combination thereof which might reasonably be expected to result
in any such material adverse change.

3.6 INVESTMENT INTENT. AHC is purchasing the IDP Shares for its own
account and AHC has the present intention of holding the IDP Shares for
investment purposes and not with a view to any public distribution of the IDP
Shares in violation of any federal or state securities laws.

3.7 REPORTS.

(a) As of their respective dates, none of the registration statement of AHC
on Form S-1, expected to be filed with the SEC soon after the date hereof, or
the related Prospectus nor the Purchaser's Annual Report on Form 10-KSB for the
fiscal year ended October 31, 1997, nor any other document filed under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date
hereof, each in the form (including exhibits and any documents specifically
incorporated by reference therein) filed with the SEC contained or will contain
any untrue statement of a material fact or omitted or will omit to state a

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material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.

(b) The Purchaser has timely filed all material reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that it was required to file since April 21, 1997, with (i) any federal
or state regulatory authority having jurisdiction over the Purchaser, (ii) the
SEC, and (iii) the National Association of Securities Dealers, Inc., and any
other self-regulatory organization), and has paid all fees and assessments due
and payable in connection therewith.

3.8 FINANCIAL STATEMENTS. The Purchaser has delivered to the Sellers the
statement of profit and loss for the years ended October 31, 1996 and 1997 and
the balance sheet as at October 31, 1996 and 1997 (the balance sheet at October
31, 1997 shall be referred to as the "Purchaser Balance Sheet" and October 31,
1997 shall be referred to as the "Purchaser Balance Sheet Date"), as audited by
Purchaser's Accountants (collectively, the "Purchaser Financial Statements").
The Purchaser Financial Statements were prepared in accordance with generally
accepted accounting principles, consistently applied as in prior periods, are
correct and complete, and fairly present the financial condition of Purchaser
and the results of its operations as of the dates and for the periods indicated
therein.

3.9 LIABILITIES. The Purchaser has no liabilities or obligations (whether
accrued, absolute, contingent, known, unknown, derivative or otherwise) other
than those (i) reflected in the Purchaser Balance Sheet or the notes thereto and
not since paid or otherwise discharged, (ii) listed or described on any Schedule
hereto and (iii) liabilities arising after the Purchaser Balance Sheet Date in
the ordinary course of business of Purchaser.

3.10 LITIGATION. Except for the Pulsar litigation involving a dispute as
to a rebate from Hewlett-Packard in the amount of approximately $125,000, there
is no action, suit, proceeding, arbitration, demand, claim or investigation
pending or, to Purchaser's knowledge, threatened against or involving Purchaser
or affecting or which might materially adversely affect this Agreement or the
business or assets of Purchaser or the consummation of the transactions
contemplated hereby before any court or arbitral tribunal or before or by any
governmental department, agency or body, or otherwise. Purchaser is not subject
to any judgment, order, writ, injunction, decree, settlement agreement,
compliance agreement or consent decree of any court, administrative or
governmental authority or arbitrator except as set forth on Schedule 3.10
hereto.

3.11 AGREEMENTS AND COMMITMENTS. Each of the contracts, agreements,
commitments, licenses and leases to which Purchaser is a party, is a valid,
legally binding and enforceable obligation of Purchaser, and is in full force
and effect. There is no default by Purchaser or, to the knowledge of Purchaser,
by the other parties thereto under the terms of any such material contract,
commitment, license or lease, and no condition (including without limitation,
the execution, delivery and performance of this Agreement) exists which, with
the passage of time, the giving of notice, or both, is likely to result in a
default by Purchaser under the terms of any thereof.

3.12 GOVERNMENT CONTRACTS.

(a) To the knowledge of Purchaser, Purchaser has complied in all material
respects with all applicable laws, rules, policies, procedures, regulations,
accounting standards, cost principles, cost accounting standards, solicitation
provisions and contract clauses in conducting all past and present activities
relating to Government Contracts and Government Contract procurements,
including, without limitation, accounting and record keeping activities,
disclosures, reports, wage and hour regulations, certifications and
representations, product testing, marketing activities, proposal and bid
preparation and submissions, negotiations and contract performance. To the
knowledge of Purchaser, all proposals, representations, statements, disclosures,
reports, invoices and certifications made in connection with Government
Contracts were, when made, current, accurate and complete in all material
respects. Except as set forth on Schedule 3.12 hereto, there are not now, nor
have there been since the formation of Purchaser, any government investigations
or

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audits of Purchaser, or any officer or employee of Purchaser in connection with
Government Contract activities. Each Government Contract of Purchaser is
expected to finish on schedule and within budget and Purchaser presently does
not have any basis to conclude that existing schedules or budgets are not
reasonable.

(b) To the knowledge of Purchaser, Purchaser has not been determined by a
governmental agency to be "non-responsible" in connection with any Government
Contract procurement. Purchaser has not received any notice and Purchaser is not
aware of any circumstances that reasonably would be expected to justify such a
notice, that any of its Government Contracts have been or may be terminated for
default. Purchaser is not debarred or suspended, nor proposed for debarment or
suspension from procurements or other activities at the federal, state or local
governmental levels, and Purchaser is not aware of any circumstances that would
justify a proposal or decision to suspend or debar Purchaser from procurement or
other activities. Purchaser and its personnel have all necessary security
clearances to perform outstanding Government Contracts and Purchaser is not
aware of any circumstances that may lead to the suspension or revocation of such
security clearances. Purchaser has not engaged in any illegal or fraudulent
conduct in connection with Government Contract activities.

(c) Purchaser has not received written notice from, or engaged in any
discussions with, any Governmental Authority regarding the termination of any
Government Contract, the cessation of any delivery orders thereunder, any
reduction by any Governmental Authority in the amount of its business with the
Purchaser or allegations of defective pricing in connection with Government
Contract activities.

(d) There are no outstanding claims (as defined by the Federal Acquisition
Regulations) by any government procurement agency submitted by or against
Purchaser in connection with its Government Contract activities and Purchaser
has no basis to conclude that any claims may be submitted by or against
Purchaser in connection with past or present government contracting activities.

(e) To the knowledge of Purchaser, Purchaser has at all times complied in
all material respects with all governmental and state rules, laws and
regulations relating to the payment of commissions or contingent fees and those
relating to disclosure of the payment of commissions or contingent fees in
connection with Government Contract activities.

3.13 CERTAIN GOVERNMENTAL MATTERS.

(a) TAXES.

(i) Purchaser has filed all Tax Returns required to be filed. All such Tax
Returns were correct and complete in all respects. As of the Purchaser Balance
Sheet Date, all taxes owed by Purchaser for all periods (and any portion of any
period) have been paid or reflected as a liability on the Purchaser Balance
Sheet. No claim has ever been made by an authority in a jurisdiction where
Purchaser does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no security interests on any of the assets of
Purchaser that arose in connection with any failure (or asserted failure) to pay
any tax.

(ii) Purchaser has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.

(iii) There is no dispute or claim concerning any tax liability of Purchaser
either (A) claimed or raised by any authority in writing or (B) as to which
Purchaser has knowledge based upon personal contact with any agent of such
authority.

(iv) Purchaser has not waived any statute of limitations in respect of taxes
or agreed to any extension of time with respect to a tax assessment or
deficiency.

(b) COMPLIANCE WITH LEGAL REQUIREMENTS. The business and operations of
Purchaser have not involved and do not now involve, and, assuming that no
changes occur in applicable law, the continuation

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thereof in the manner in which they are now conducted will not involve, a
violation of any material legal requirement of or administered by any federal,
state or local governmental agency. Except as set forth on Schedule 3.13(b),
each permit and other authorization of Purchaser is valid and in full force and
effect, and will not be affected by the execution, delivery and performance of
this Agreement. All material obligations with respect to such permits and other
authorizations have been fulfilled, and no event has occurred which allows, or
after notice or lapse of time or both, would allow suspension, revocation,
material adverse variation or termination thereof or result in any other
impairment of the rights of Purchaser, and Purchaser is not aware of any facts
or circumstances which will or are likely to result in any of such permits or
other authorizations being suspended, revoked, materially and adversely varied
or terminated, or which may prejudice their renewal. All certificates of
occupancy and permits necessary for the present use and occupancy of any
building by Purchaser have been obtained.

(c) ERISA. Neither Purchaser nor its ERISA Affiliates maintains or has any
liability in respect of any Employee Benefit Plan. Each Employee Benefit Plan
has been operated and administered in accordance with its provisions and is in
compliance in all respects with all applicable federal and state laws, rules and
regulations governing each such plan including but not limited to ERISA, the
Code, and COBRA except to the extent that failure to so qualify, administer or
comply would not have a material adverse effect on the business of Purchaser.

There have been no non-exempt "prohibited transactions" within the meaning
of Section 4975 of the Code or Section 406 of ERISA resulting in the imposition
of excise taxes or other monetary liability on Purchaser. Neither Purchaser nor
any ERISA Affiliate has sponsored, ever maintained, or contributed to an
Employee Benefit Plan that is subject to Title IV of ERISA. Each Employee
Benefit Plan intended to be "qualified" within the meaning of Section 401(a) of
the Code is so qualified and the trusts maintained thereunder are exempt from
taxation under Section 501(a) of the Code. No Employee Benefit Plan provides
benefits, including without limitation, death or medical benefits (whether or
not insured), with respect to current or former employees of Purchaser or any
ERISA Affiliate beyond their retirement or other termination of service other
than coverage mandated by COBRA or applicable state or local law. There is no
pending or, to the knowledge of Purchaser, threatened assessment, complaint,
proceeding, voluntary compliance application or investigation of any kind in any
court or government agency with respect to any Employee Benefit Plan. All
benefits, expenses and other amounts due and payable under any Employee Benefit
Plan and all contributions, transfers or payments required to be made, accrued
or booked to any Employee Benefit Plan, have been paid or made, accrued and
booked.

(d) WORKER'S COMPENSATION. Worker's compensation and unemployment
compensation matters with respect to Purchaser have been conducted and are being
conducted so as to be in compliance in all material respects with all laws and
regulations applicable thereto.

(e) PLANT CLOSING LEGISLATION. As of the Closing Date, no employee of
Purchaser, without 60 days written notice, shall have suffered, an "employment
loss" as a result of a "plant closing" or "mass layoff" as those terms are
defined in WARN. Purchaser is in compliance in all material respects with the
requirements of WARN in either case during the six month period ending with and
including the Closing Date.

(f) ENVIRONMENTAL MATTERS. Purchaser and any other person or entity for
whose conduct it is or may be held responsible, have no liability under, have
never violated, and are presently in compliance in all material respects with
all Environmental Laws applicable to the properties owned, leased or used by
such parties (collectively, the "Purchaser Properties") and any facilities and
operations thereon, and, to the best of Purchaser's knowledge, there exists no
Environmental Condition with respect to the Purchaser Properties or any
facilities or operations thereon, or with respect to any property at which
materials from the Purchaser Properties have been disposed. Purchaser has not
generated, manufactured, refined, transported, treated, stored, handled,
disposed, transferred, produced, or processed any Hazardous Material or any
solid waste on, under or about the Purchaser Properties. Purchaser has no
knowledge of the Release or

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threat of Release of any Hazardous Material at the Purchaser Properties.
Purchaser has not received notice under the citizen suit provision of any
Environmental Law in connection with the Purchaser Properties or any facilities
or operations thereon.

3.14 ASSETS.

(a) REAL ESTATE. None of the real estate assets of Purchaser is subject to
any mortgages, liens, encumbrances, equities, restrictions, easements,
rights-of-way or other conflicting interests. To the knowledge of Purchaser, the
real estate assets of Purchaser are in good structural condition.

(b) INVENTORIES. Substantially all of the Purchaser's inventories consist
of quantities and qualities usable and salable in the ordinary course of the
business of Purchaser.

(c) MACHINERY, EQUIPMENT AND OTHER TANGIBLES. The Purchaser's machinery,
equipment and other tangibles are in good operating condition and repair,
ordinary wear and tear excepted, and are free of any material defects, and are
located at the Purchaser Properties.

(d) INTELLECTUAL PROPERTY. The business and operations of Purchaser have
not infringed or violated or required the use of, and do not now infringe or
violate or require the use of, any patent, copyright, trademark, trade name,
invention, discovery, trade secret, secret process or other proprietary asset of
any other person. There are no patents or patentable inventions developed by any
director, officer or employee of Purchaser used or useful in the business of
Purchaser which have not been transferred to, and are not owned free of any
encumbrances by, Purchaser.

(e) ACCOUNTS AND NOTES RECEIVABLE. All accounts and notes receivable of
Purchaser have arisen in the ordinary course of business of Purchaser and
represent valid obligations due to Purchaser, and have been collected or are
collectible in accordance with their terms in the ordinary course of business of
Purchaser in the aggregate recorded amounts thereof less the bad debt reserve
shown on the Purchaser's balance sheet in accordance with past practice.

(f) ASSETS USED IN BUSINESS. Since one year before the Purchaser Balance
Sheet Date, Purchaser has not utilized any assets in the conduct of its business
and operations other than (i) assets reflected on the Purchaser Balance Sheet
and (ii) supplies and inventories consumed or disposed of by Purchaser in the
ordinary course of business.

(g) TITLE TO ASSETS. Purchaser has good, and as to owned real property,
marketable, title to, or in the case of property held under lease, a valid and
enforceable right to use, all of Purchaser's land, buildings, inventories,
machinery, equipment and other tangibles, intellectual property, accounts and
notes receivable and all assets reflected in the Purchaser Balance Sheet except
those disposed of in the ordinary course of business since the Purchaser Balance
Sheet Date, and such assets are not subject to any Liens. None of the assets of
Purchaser are subject to any pending or, to the knowledge of Purchaser,
threatened judicial order, ordinance or planning restriction as to which
Purchaser has knowledge which might have a material adverse effect on the
business of Purchaser. Purchaser as lessee has the right under valid and
subsisting leases to occupy, use, possess and control all real property leased
by Purchaser as presently occupied, used, possessed and controlled by Purchaser.

3.15 INSURANCE. All of the assets of Purchaser are insured in accordance
with good industry practice with respect to loss due to fire and other risks in
amounts and coverage which are reasonable and customary in light of the business
conducted by Purchaser.

3.16 DISTRIBUTIONS. PREPAYMENT. ETC. Since the Purchaser Balance Sheet
Date, Purchaser has not sold or disposed of, or created Liens upon, any material
assets, except in the ordinary course of business. Since the Purchaser Balance
Sheet Date, Purchaser has not declared or paid any dividend or made any other
distribution to any of its shareholders; and has not prepaid or otherwise
discharged any outstanding indebtedness, or made any expenditures or
disbursements of funds or commitments, except in the ordinary course of
business.

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3.17 EMPLOYEE MATTERS. There are no labor controversies pending against
Purchaser in the form of a proceeding, claim or litigation. Purchaser has not,
with respect to its employees, recognized any labor organization; no such
organization has been certified as the exclusive bargaining agent of any such
employees; there has been no demand on behalf of any labor organization to
represent any such employees; and Purchaser has no knowledge of any present
efforts of any labor organization seeking to represent any such employees.
Except as set forth on Schedule 3.17 hereto, Purchaser has not had, and to the
knowledge of Purchaser, there is not now threatened, a strike, work stoppage or
work slowdown.

3.18 WARRANTIES. All products and services have been produced, performed
or sold heretofore by Purchaser in a condition which meets all applicable
written warranty obligations and applicable governmental and industry standards,
codes and regulations.

3.19 BOOKS AND RECORDS. All books and records of Purchaser are in all
material respects complete and correct and have been maintained in accordance
with good industry practice.

3.20 ORGANIZATION OF AHC AND RELATED MATTERS. AHC is a corporation duly
organized, validly existing and in good standing under the laws of Virginia. AHC
has engaged in no business since the date of its incorporation, except for
entering into this Agreement and preparing and filing the Registration Statement
in connection with the proposed IPO (the "Registration Statement"), and will
engage in no business until the Closing except amending the Registration
Statement. The execution, delivery and performance of this Agreement by AHC does
not and will not conflict with or violate its charter and by-laws or any term of
any agreement, contract, instrument, lease, commitment or other obligation to
which AHC is a party or by which AHC is bound, or any order judgment or decree
to which AHC is a party or subject, by which any properties and assets of AHC
are bound, or any provision of any applicable law, statute, ordinance, rule or
regulation and will not result in the creation or imposition of any Lien in
favor of any third party with respect to any of the properties and assets of
AHC.

3.21 DUE AUTHORIZATION AND EXECUTION BY AHC. AHC has all requisite power
and authority to execute, deliver and perform this Agreement. This Agreement has
been duly and validly executed and delivered by AHC, and constitutes a valid and
binding obligation of AHC enforceable against AHC in accordance with its terms.

3.22 CAPITALIZATION OF AHC. The authorized capital stock of AHC is
20,000,000 shares of common stock, $.001 par value per share ("Dunn Common"), of
which (i) 5,150,000 shares will be issued in the Merger, (ii) 2,200,000 shares
will underlie employee stock options granted pursuant to the 1997 stock option
plan of Purchaser (which plan will be adopted by and become a plan of AHC),
1,832,000 of which have been issued in accordance therewith, (iii) 25,000 shares
will underlie options granted to Barry D. Bergman and Jacqueline L. Bergman in
September 1997 in connection with the Purchaser's acquisition of STMS (which
options will be adopted by and become options of AHC), (iv) 100,000 shares will
underlie warrants held by the underwriters in the initial public offering of the
shares of Purchaser (which warrants will be adopted by and become warrants of
AHC), (v) 7,500,000 shares are proposed to be issued in the IPO, (vi) 750,000
shares will be issued as provided in Section 1.3 hereof, and (vii) 600,000
shares underlie options to be issued (300,000 to each) to the IDP Sellers
pursuant to the employment agreements referred to in Sections 5.1(e) and 5.2(d),
subject to increase to 800,000 (400,000 to each IDP Seller) as provided in such
agreements, and 2,000,000 shares of preferred stock, $.001 par value per share,
none of which have been issued, and there is no present intention to issue any
such shares. All of such shares of Dunn Common when issued will be duly
authorized, validly issued and outstanding, fully paid and non-assessable. There
are no voting trust agreements or other agreements restricting or otherwise
relating to the voting, dividend rights or the disposition of any shares of Dunn
Common.

3.23 CONCERNING MERGER SUB. Merger Sub will be organized by AHC solely for
the purpose of carrying out the Merger; AHC will own all of the outstanding
shares of capital stock of Merger Sub; there will be no options, warrants or
rights to acquire shares of Merger Sub outstanding ; and Merger Sub will

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engage in no business activity and will hold no assets other than those
necessary to consummate the Merger.

IV. PRE-CLOSING COVENANTS

4.1 PRESS RELEASES. Prior to the Closing, no party will issue or cause the
publication of any press release or other public announcement with respect to
this Agreement or the transactions contemplated hereby without the prior consent
of, the other (in the case of the Sellers, George Fuster or D. Oscar Fuster)
which consent will not be unreasonably withheld; provided, however, that nothing
herein will prohibit any party from issuing or causing the publication of any
such press release or public announcement to the extent that such party
determines such action to be required by law or the rules of any stock exchange
applicable to it, in which case the party making such determination will use
reasonable efforts to allow the other parties reasonable time to comment on such
release or announcement in advance of its issuance.

4.2 REGISTRATION STATEMENT. From the date hereof until the Closing Date,
the Sellers and AHC and the Purchaser will cooperate among themselves and use
all reasonable efforts to respond to comments of the Securities and Exchange
Commission ("SEC"), prepare amendments to the Registration Statement, and
generally to seek to have the Registration Statement declared effective by the
SEC as soon as is practicable.

4.3 CONFIDENTIAL NATURE OF INFORMATION. Subject to Section 4.1, whether or
not the Closing occurs, each of the parties hereto will treat, and will cause
their respective advisors and representatives (collectively, "Representatives")
to treat, in confidence all documents, materials and other information disclosed
by the other party, whether during the course of the negotiations leading to the
execution of this Agreement or thereafter, in its investigation of the other
party and in the preparation of agreements and other documents relating to the
consummation of such transactions. Prior to the Closing, and if this Agreement
is terminated, none of the parties will use, and each of them will cause its
Representatives not to use in its business, any non-public information furnished
by any other party. If this Agreement is terminated, each of the parties will
return, and will cause its Representatives to return, to the other party all
originals and copies of non-public documents and materials of the type provided
for in this Section 4.3 which have been furnished in connection with this
Agreement.

4.4 OPERATION OF THE BUSINESS.

(a) Except as contemplated herein or as otherwise consented to by the
Purchaser in writing (which consent will not be unreasonably withheld), prior to
the Closing, the Sellers will cause IDP and PRIMO to:

(i) Use reasonable efforts to keep the business of IDP and of PRIMO intact
and not take or knowingly permit to be taken or do or knowingly suffer to be
done anything other than in the ordinary course of business as the same is
presently being conducted, to maintain the goodwill and reputation associated
with their business;

(ii) Continue their existing practices relating to the maintenance of assets
used in their business;

(iii) Not purchase, sell, lease or dispose of, or make any contract for the
purchase, sale, lease or disposition of, or subject to Lien, any assets other
than in the ordinary course of their business;

(iv) Except to the extent required by law or specifically provided for
elsewhere herein or on Schedule 4.4(d) hereto, not increase the rates of
compensation of any employee except for normal salary increases in the ordinary
course of business consistent with past practice; and

(v) Not amend their governing documents or make any change in their capital
stock or grant any option, warrant or other right to purchase or to convert any
obligation into shares of capital stock

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(b) Except as contemplated herein or as otherwise consented to by the IDP
Sellers in writing (which consent will not be unreasonably withheld), prior to
the Closing, the Purchaser (which shall mean for purposes of this Section 4.4(b)
the Purchaser and Dunn Computer Corporation, a Virginia corporation and AHC)
will:

(i) Use reasonable efforts to keep the business of the Purchaser intact and
not take or not permit to be taken or do or knowingly suffer to be done anything
other than in the ordinary course of business as the same is presently being
conducted, and to maintain the goodwill and reputation associated with the
business of the Purchaser;

(ii) Continue its existing practices relating to the maintenance of assets
used in its business; and

(iii) Not amend its governing documents, or make any change in its capital
stock or, except pursuant to the Purchaser's existing Employee Stock Option
Plan, grant any option, warrant or other right to purchase or to convert any
obligation into shares of capital stock.

4.5 SATISFACTION OF CONDITIONS. Prior to the Closing, each of the parties
hereto will use reasonable efforts to satisfy promptly all conditions required
hereby to be satisfied by such party in order to expedite the consummation of
the transactions contemplated hereby.

4.6 REGISTRATION STATEMENT, AMENDMENTS. At the time the Registration
Statement is filed with the SEC and at the time each amendment thereto is filed
with the SEC, the IDP Sellers shall certify in writing to AHC and the Purchaser
to the effects set forth in Section 2.18 hereof to their best knowledge and
belief, referring to the relevant filing.

4.7 WAIVERS BY SMALL BUSINESS ADMINISTRATION. The Purchaser and the IDP
Sellers shall, together, use reasonable efforts to seek to have IDP's
governmental counterparty in each "Section 8(a)" contract request from the Small
Business Administration a waiver of termination for convenience that would
result from the transfer of control of IDP upon the Closing.

V. CONDITIONS PRECEDENT TO THE CLOSING

5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER. The obligations
of the Purchaser under this Agreement to consummate the transactions
contemplated hereby are subject to the satisfaction, at or prior to the Closing,
of all of the following conditions, any one or more of which, other than the
condition set forth in Section 5.1(i) hereof, may be waived at the option of the
Purchaser:

(a) NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES. There
shall have been no material breach by the Sellers in the performance of any of
the covenants herein to be performed by them prior to the Closing, and the
representations and warranties of the Sellers contained in this Agreement shall
be true and correct in all material respects as of the Closing, except for
representations and warranties made as of a specified date (other than those
contained in Sections 2.11(e) and (f) which shall be dated within two weeks of
the Closing Date), which shall be true and correct in all material respects as
of the specified date, and the Sellers shall have delivered to the Purchaser a
certificate of all of the Sellers certifying each of the foregoing, dated the
Closing Date;

(b) TRANSFER DOCUMENTS. There shall have been delivered to AHC by the IDP
Sellers certificates representing the IDP Shares, which certificates shall be
duly endorsed for transfer or accompanied by duly executed stock powers. There
shall have been delivered to PAC bills of sale and all other documents
appropriate to transfer to PAC all of the PRIMO Assets. There shall have been
entered into assignment and assumption agreements as to all of the contracts of
PRIMO and the PRIMO Liabilities transferring such contracts and Liabilities to
PAC.

(c) CONSENTS; NO LEGAL OBSTRUCTION. Except for (i) the approval of the tax
authority in Puerto Rico, (ii) any approval of the Small Business
Administration, and (iii) the approvals marked with an asterisk,

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<PAGE>
each as referred to on Schedule 2.3 hereto, the governmental and private
approvals and consents identified on Schedule 2.3 hereto shall have been
obtained and shall be in full force and effect. As to the approvals and consents
marked with an asterisk, the Sellers shall use commercially reasonable efforts
to obtain them. There shall not have been entered a preliminary or permanent
injunction, temporary restraining order or other judicial or administrative
order or decree in any jurisdiction, the effect of which prohibits the Closing;

(d) NO MATERIAL ADVERSE CHANGE. Without limiting the generality of Section
5.1(a), since the Sellers' Balance Sheet Date, no material adverse change shall
have occurred with respect to the financial condition, assets or business of IDP
and PRIMO considered as one entity;

(e) EMPLOYMENT AGREEMENTS. IDP and PRIMO shall have entered into
employment agreements with each of George Fuster and D. Oscar Fuster in the
forms attached as Exhibits D and E hereto;

(f) CERTAIN INDEBTEDNESS. The IDP indebtedness in the principal amount of
$1,557,057 as of January 31, 1998, running to the Sellers and certain relatives
of the Sellers and set forth on Exhibit F hereto shall have been refinanced (i)
to provide for three year terms and interest rates of 8% per annum in the case
of indebtedness running to a Seller and (ii) to provide for one year terms and
interest rates of 11% per annum in the other cases. The IDP Sellers shall cause
IDP and PRIMO not to incur indebtedness from any Seller or any relative of any
Seller other than on commercially reasonable and arms length terms between the
date hereof and the Closing Date.

(g) The Redemption provided for in Sections 1.9 and 1.10 hereof shall have
occurred.

(h) OPINION OF COUNSEL. The Sellers shall have furnished to the Purchaser
a favorable opinion of Thacher Proffitt & Wood dated the Closing Date
substantially in the form attached as Exhibit H hereto.

(i) CONCURRENT PUBLIC OFFERING. The IPO in which the net proceeds are at
least equal to the Cash Portion shall have occurred, and the shares of Dunn
Common to be issued in the Merger and such shares to be issued in the IPO shall
have been designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.

5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS. The obligations of
the Sellers under this Agreement to consummate the transactions contemplated
hereby are subject to the satisfaction, at or prior to the Closing, of all the
following conditions, any of or more of which, other than the condition set
forth in Section 5.2(j) hereof, may be waived at the option of the Sellers:

(a) NO MISREPRESENTATION OR BREACH OF COVENANTS AND WARRANTIES. There
shall have been no material breach by the Purchaser in the performance of any of
the covenants herein to be performed by it prior to the Closing, and the
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all material respects as of the Closing, except for
representations and warranties made as of a specified date, which shall be true
and correct in all material respects as of the specified date, and the Purchaser
shall have delivered to the Sellers a certificate certifying each of the
foregoing, dated the Closing Date and signed by one of its executive officers on
its behalf;

(b) PURCHASE PRICE. AHC shall have (i) delivered to the IDP Sellers share
certificates standing in the respective names of the IDP Sellers representing
the Share Portion of the Purchase Price and (ii) delivered to the IDP Sellers
the IDP Cash Amount and to PRIMO the PRIMO Cash Amount.

(c) NO LEGAL OBSTRUCTION. There shall not have been entered a preliminary
or permanent injunction, temporary restraining order or other judicial or
administrative order or decree in any jurisdiction, the effect of which
prohibits the Closing;

(d) EMPLOYMENT AGREEMENTS. IDP and PRIMO shall have entered into
employment agreements with each of George Fuster and D. Oscar Fuster in the
forms attached as Exhibits D and E hereto;

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<PAGE>
(e) NO MATERIAL ADVERSE CHANGE. Without limiting the generality of Section
5.2(a), since the date of this Agreement, no material adverse change shall have
occurred with respect to the financial condition, assets, business or prospects
of the Purchaser;

(f) REGISTRATION RIGHTS AGREEMENT. AHC shall have entered into a
registration rights agreement in the form attached as Exhibit I hereto.

(g) OPINION OF COUNSEL. The Purchaser shall have furnished to the Sellers
a favorable opinion of Jones, Day, Reavis & Pogue dated the Closing Date
substantially in the form set forth in Exhibit J hereto.

(h) FAIRNESS OPINION. Purchaser shall have received an opinion from Ferris
Baker Watts, to the effect that, in its opinion, the consideration to be paid by
the Purchaser hereunder is fair to the Purchaser and its stockholders from a
financial point of view ("Fairness Opinion"), and Purchaser shall not have taken
any action which causes Ferris Baker Watts to withdraw its Fairness Opinion
prior to Closing;

(i) DIRECTORS. George Fuster and D. Oscar Fuster shall be duly appointed
by the Boards of Directors of AHC and PAC to the Boards of Directors of AHC and
PAC effective on the Closing Date;

(j) CONCURRENT PUBLIC OFFERING. The IPO in which the net proceeds are at
least equal to the Cash Portion shall have occurred.

VI. THE CLOSING.

6.1 THE CLOSING. Subject to the fulfillment of the conditions precedent
specified in Article V, the Closing will take place concurrently with the
closing of the IPO or on such other date as the parties may agree. The Closing
will take place at the offices of Jones, Day, Reavis & Pogue at 1450 G Street,
N.W., Washington, D.C. 20005.

6.2 SELLERS' OBLIGATIONS. At the Closing, the Sellers will deliver to the
Purchaser the following:

(a) TRANSFER DOCUMENTS. The documents referred to in Section 5.1(b);

(b) RECEIPTS. Appropriate receipts; and

6.3 AHC'S OBLIGATIONS. At the Closing, AHC will deliver to the Sellers:

(a) PURCHASE PRICE. The Purchase Price, in the manner specified in
Sections 1.3, 1.4 and 1.7; and

(b) OTHER. All other documents and papers required to be delivered by
Section 5.2 as conditions to the Closing.

VII. SURVIVAL AND INDEMNIFICATION

7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the Sellers and of the Purchaser and AHC
herein shall survive until and including the second anniversary of the Closing,
provided that the representations and warranties of the Sellers contained in
Sections 2.2, 2.5, 2.9 and 2.10(a) hereof and of the Purchaser and AHC contained
in Sections 3.3, 3.9, 3.12, 3.13(a) and 3.22 hereof shall survive without
limitation. The parties hereto shall be entitled to rely on the representations
and warranties made pursuant to this Agreement notwithstanding any investigation
conducted before or after the Closing for or on behalf of any party.

7.2 GENERAL INDEMNIFICATION OBLIGATION OF THE SELLERS.

(a) Subject to the limitations contained in Sections 7.1 and 7.4 hereof,
each Seller jointly and severally agrees to indemnify and hold harmless the
Purchaser and AHC from and against any and all losses,

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<PAGE>
liabilities, damages, penalties, costs or expenses (including attorneys fees and
expenses) ("Losses") based upon, arising out of or otherwise in respect of (i)
any alleged or actual inaccuracy in or breach of any representation or warranty
of any Seller contained in this Agreement or in any document delivered
hereunder, or (ii) any breach by any Seller of any covenant contained in this
Agreement.

(b) The IDP Sellers shall indemnify and hold IDP harmless for any tax
liability attributable to any gain realized by IDP by reason of the Redemption.

(c) The Purchaser shall, as to any asserted liability of Sellers for taxes
under Section 7.2(a) or (b), promptly notify Sellers of, and permit the
participation of Sellers in any investigation, audit or other proceeding by any
tax authority empowered to administer or enforce such tax and shall not consent
to the settlement or final determination in such proceeding without the prior
written consent of Sellers, which consent will not be unreasonably withheld;
provided, however that this Section 7.2(c) shall not permit Sellers to have
knowledge of or participate in the resolution of any other issues that may be a
part of any such investigation, audit or proceeding.

7.3 GENERAL INDEMNIFICATION OBLIGATION OF THE PURCHASER AND AHC. Subject
to the limitations contained in Sections 7.1 and 7.4 hereof, the Purchaser and
AHC jointly and severally agree to indemnify and hold harmless the Sellers from
and against any and all Losses based upon, arising out of or otherwise in
respect of (i) any alleged or actual inaccuracy in or breach of any
representation or warranty of the Purchaser and AHC contained in this Agreement
or in any document delivered hereunder, or (ii) of any breach by the Purchaser
or AHC of any covenant contained in this Agreement.

7.4 LIMITATIONS; NOTICE AND OPPORTUNITY TO DEFEND.

(a) LIMITATIONS. Neither the Purchaser, nor AHC nor any Seller shall have
any liability, or be subject to any claim under this Article VII unless a Claims
Notice (as defined in Section 7.4(b) hereof) in respect thereof is given by the
Purchaser or the Sellers, as the case may be, on or before the second
anniversary of the Closing, and unless and until all Losses on account of
matters covered by this Article VII (suffered by the Purchaser and AHC or the
Sellers, as the case may be) exceed $500,000, whereupon the Purchaser and AHC or
the Sellers, as the case may be, shall be entitled to receive indemnity payments
to the full extent of the aggregate amount of Losses not to exceed $10,000,000.
Notwithstanding anything else herein to the contrary, the provisions and
limitations contained in this Section 7.4 shall not apply to Losses (and
indemnifications in respect thereof) arising out of or otherwise in respect of
any alleged or actual (i) inaccuracies in or breach of any representation or
warranty of any Seller contained in Sections 2.2, 2.5, 2.9, or 2.10(a) hereof,
(ii) inaccuracies in or breach of any representation or warranty of the
Purchaser contained in Sections 3.3, 3.9, 3.12, 3.13(a) or 3.22 hereof, or (iii)
breach of any covenant contained in this Agreement by the Purchaser or any
Seller.

(b) NOTICE AND OPPORTUNITY TO DEFEND.

(i) NOTICE OF ASSERTED LIABILITY. As soon as is reasonably practicable
after any party hereto becomes aware of any claim that it has under this Article
VII that may result in a Loss (a "Liability Claim"), the party shall give notice
thereof (a "Claims Notice") to the other parties. A Claims Notice shall be given
in good faith and shall describe the Liability Claim in reasonable detail, and
shall indicate the amount (estimated, if necessary and to the extent feasible)
of the Loss that has been or may be suffered by the party.

(ii) THE SELLERS' OPPORTUNITY TO DEFEND. The Sellers may elect to defend,
at their own expense and by their own counsel, any Liability Claim given by the
Purchaser by giving notice to such effect to the Purchaser within thirty days
(or sooner if circumstances so require) of the receipt of the Claims Notice;
provided that if the Sellers so elect, the Purchaser shall cooperate with such
defense. If the Sellers elect to defend such Liability Claim, the Purchaser
shall have the right to participate, at the expense of the Purchaser, in the
defense of such Liability Claim. If the Sellers do not elect to defend a
Liability Claim, the Purchaser may defend, pay, or settle such Liability Claim
as it determines to be appropriate, provided that

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<PAGE>
the Purchaser may not settle or compromise any proceeding in respect of any
Liability Claim without the prior written consent of the Sellers, which consent
shall not be unreasonably withheld.

(iii) THE PURCHASER'S AND AHC'S OPPORTUNITY TO DEFEND. The Purchaser and
AHC may elect to defend on all the same terms upon which the Sellers may do so
under Section 7.4(b)(ii) hereof.

VIII. TERMINATION

8.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing:

(a) By the mutual written consent of the Purchaser and the Sellers;

(b) By either the Purchaser or the Sellers if the Closing shall not have
occurred on or before June 30, 1998; or

(c) By either the Purchaser or the Sellers if there shall have been
entered a final non-appealable order or injunction of any court or
governmental authority restraining or prohibiting the consummation of the
transactions contemplated hereby or any material part thereof.

8.2 EXPENSES IN THE EVENT OF TERMINATION. In the event of termination of
this Agreement under Section 8.1 (except by the Sellers pursuant to clause (b)
thereof), no party shall have any obligation to reimburse the other for its fees
and expenses incurred in connection with this Agreement or transactions
contemplated hereby. There will be no further liability hereunder on the part of
any party hereto if this Agreement is so terminated, except under Section 4.3
and except by reason of a material breach of any covenant contained in this
Agreement. If this Agreement is terminated as provided in Section 8.1(b) hereof,
the Purchaser shall pay to the Sellers a termination fee in the amount of
$500,000, provided that if the Closing does not occur on or before June 30, 1998
because (i) the conditions in Section 5.1 were not met, or (ii) the IPO is
postponed or terminated because of general market conditions on the basis of a
joint decision of Ferris Baker Watts and Gruntal & Co. (or if such firms do not
agree, upon the decision of a third investment banking firm chosen by Ferris
Baker Watts and Gruntal & Co.), then no termination fee shall be paid.

IX. MISCELLANEOUS PROVISIONS

9.1 NOTICES. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or when
dispatched by telegram or electronic facsimile transfer (confirmed in writing by
mail simultaneously dispatched) to the appropriate party at the address
specified below:

(a) If to the Purchaser or to AHC, to:
Dunn Computer Corporation
1306 Squire Court
Sterling, Virginia 20166
Facsimile No.: 703-450-0406
Attention: President

(b) If to the Sellers, to:
George and D. Oscar Fuster
20 Firstfield Road
Gaithersburg, MD 20878
Facsimile No.: 301-590-8133

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<PAGE>
With a copy not necessary to constitute notice to:
Robert C. Azarow
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Facsimile No.: 212-912-7751

or to such other address or addresses as any such party may from time to
time designate as to itself by like notice.

9.2 BROKERS. Each Seller represents and warrants to the Purchaser and the
Purchaser represents and warrants to the Sellers that it has not dealt with any
broker or finder in connection with any of the transactions contemplated by this
Agreement and, to its knowledge, no broker or other person is entitled to any
commission or finder's fee in connection therewith, except that the Sellers have
engaged and, subject to Section 9.3 hereof, will pay Gruntal & Co. as their
investment bankers in respect of such transactions.

9.3 EXPENSES. Each of IDP and the Sellers will pay one-half of the fees
and expenses of IDP and Sellers (except that to the extent that payments to
Gruntal & Co. for their advice and services exceed $600,000 the excess will be
solely the responsibility of the Sellers), and the Purchaser will pay the
expenses of Purchaser, in connection with this Agreement and the consummation of
the transactions contemplated herein.

9.4 HEADINGS. The headings in this Agreement are included for purposes of
convenience only, and shall not affect the construction or interpretation of any
of its provisions. Terms used in the Exhibits and Schedules hereto that are
defined herein are used therein as so defined.

9.5 INTEGRATION, MODIFICATION AND WAIVER. This Agreement and the
agreements contemplated herein constitute the entire agreement between the
parties pertaining to the subject matter hereof and supersede all prior
understandings of the parties. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by all of the parties. No
waiver of any of the provisions of this Agreement shall be deemed to be or shall
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver.

9.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which together shall constitute one and the same
instrument.

9.7 DEFINITION OF "STATE". For purposes of this Agreement, "state" shall
include the Commonwealth of Puerto Rico.

9.8 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of New York without giving effect to its
principles of conflicts of laws.

9.9 FURTHER ASSURANCES. Each party hereto agrees to execute and deliver
such instruments and take such other actions as may reasonably be requested in
order to carry out the intent of any of the agreements herein.

9.10 KNOWLEDGE. Any reference to a person's knowledge or best knowledge
shall mean, as of the date of the statement in question, such person's actual
knowledge and what such person should have known in the ordinary exercise of
that person's duties as an officer or director of IDP and PRIMO, considering for
these purposes, each Seller to be an officer and director of both IDP and PRIMO.

9.11 PUERTO RICO TAX EXEMPTION. If within 180 days of the Closing Date,
the appropriate tax authority in Puerto Rico has not granted or approved a tax
exemption for PAC that is substantially equivalent to the tax exemption now
enjoyed by PRIMO in Puerto Rico, then the Sellers shall reimburse and indemnify
PAC for the first $200,000 of taxes paid in or to Puerto Rico by PAC for the
period

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<PAGE>
commencing on the Closing Date that PAC would not have paid if such tax
exemption had been granted or approved. Any such reimbursement will not be
subject to or counted against the $500,000 threshold set forth in Section 7.4.

9.12 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors, heirs,
personal representatives and permitted assigns, but will not be assignable by
any party without the prior written consent of the other parties.

IN WITNESS WHEREOF, each party hereto has executed, or caused to be executed
by its representative thereunto duly authorized, this Agreement on the date
first above written.

<TABLE>
<S> <C>
/s/ GEORGE FUSTER
------------------------------------------
George Fuster

/s/ D. OSCAR FUSTER
------------------------------------------
D. Oscar Fuster

/s/ CAROL N. FUSTER
------------------------------------------
Carol N. Fuster

/s/ WENDY E. FUSTER
------------------------------------------
Wendy E. Fuster
</TABLE>

<TABLE>
<S> <C> <C>
DUNN COMPUTER CORPORATION
(VIRGINIA)

By: /s/ JOHN D. VAZZANA
-----------------------------------------
John D. Vazzana
Executive Vice President and
Chief Financial Officer

DUNN COMPUTER CORPORATION
(DELAWARE)

By: /s/ JOHN D. VAZZANA
-----------------------------------------
John D. Vazzana
Executive Vice President and
Chief Financial Officer
</TABLE>

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<PAGE>
INDEX TO THE ACQUISITION AGREEMENT EXHIBITS AND SCHEDULES

<TABLE>
<S> <C>
Exhibit A Agreement of Merger
Exhibit B IDP Cash Amount; Inter-company Indebtedness
Exhibit C Ownership of Shares
Exhibit D and E Employment Agreement of George Fuster;
Employment Agreement of D. Oscar Fuster
Exhibit F IDP Indebtedness
Exhibit G Assets and Liabilities of IDP F Squared Engineering division
Exhibit H Opinion of Sellers' Counsel
Exhibit I Registration Rights Agreement
Exhibit J Opinion of Purchaser's Counsel
</TABLE>

<PAGE>
SCHEDULES TO THE ACQUISITION AGREEMENT

<TABLE>
<S> <C> <C>
Schedule A Audited Balance Sheet of PRIMO as of September 30, 1997

Disclosure Letter, dated February 27, 1998, with schedules and addendums thereto:

Schedule 2.1(a) Articles of Incorporation and Bylaws of IDP
2.1(b) Articles of Incorporation and Bylaws of PRIMO
2.1(c) Foreign Qualifications of IDP and PRIMO
2.2 Restrictions on Shares
2.3 Conflict; Creation of Lien; Consent, Approval, Notice, Violations
2.5 Liabilities
2.6 Interim Operations
2.7 Litigation
2.8(a)(i) Supply Contracts, Purchase Orders
(ii) Customer Contracts
(iii) Licenses
(iv) Real Estate Documents
(v) Leases
(vi) Distributor and Sales Representation Agreements
(vii) Indebtedness
(viii) Employment and Benefit Agreements
(ix) Stock Option Plans
(x) Insurance Contracts
(xi) Product and Service Warranties
(xii) Other Agreements
2.8(b) Status of Agreements
2.9 Government Contracts; Investigations, Audits; Small Disadvantaged
Minority Business Contracts; Claims
2.10(a) Tax Returns
2.10(b) Permits and Authorizations
2.10(c) Employee Benefit Plans
2.10(d) Worker's Compensation
2.10(f) Environmental Matters
2.11(a) Real Estate
2.11(b) Inventories
2.11(c) Machinery, Equipment and Other Tangibles
2.11(d) Intellectual Property
2.11(e) Accounts and Notes Receivable
2.11(f) Assets Used in Business
2.11(g) Title to Assets
2.13 Sold, Disposed of, Created Liens; Dividends, Distributions,
Prepayments, etc.
2.14(a) Labor Relations
2.14(b) Employees
3.10 Litigation
3.17 Employee Matters
4.4(d) Operation of Business--Compensation of Employees
</TABLE>
<PAGE>
APPENDIX C

DUNN COMPUTER CORPORATION
1997 STOCK OPTION PLAN
AS ADOPTED ON JANUARY 6, 1997

1. PURPOSE OF PLAN: ADMINISTRATION

1.1 PURPOSE.

The Dunn Computer Corporation 1997 Stock Option Plan (hereinafter, the
"Plan") is hereby established to grant to officers and other employees of Dunn
Computer Corporation (the "Company") or of its parents or subsidiaries (as
defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code
of 1986, as amended (the "Code")), if any, and to non-employee directors,
consultants and advisors and other persons who may perform significant services
for or on behalf of the Company, a favorable opportunity to acquire common
stock, $.001 par value ("Common Stock"), of the Company and, thereby, to create
an incentive for such persons to remain in the employ of or provide services to
the Company and to contribute to its success.

The Company may grant under the Plan both incentive stock options within the
meaning of Section 422 of the Code ("Incentive Stock Options") and stock options
that do not qualify for treatment as Incentive Stock Options ("Nonstatutory
Options"). Unless expressly provided to the contrary herein, all references
herein to "options," shall include both incentive Stock Options and Nonstatutory
Options.

1.2 ADMINISTRATION.

The Plan shall be administered by the Board of Directors of the Company (the
"Board") if each member is a "Non-Employee Director" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended ("Rule 16b-3"), or a
committee (the "Committee") of two or more directors, each of whom is a
Non-Employee Director. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may be filled
by the Board.

A majority of the members of the Committee shall constitute a quorum for the
purposes of the Plan. Provided a quorum is present, the Committee may take
action by affirmative vote or consent of a majority of its members present at a
meeting. Meetings may be held telephonically as long as all members are able to
hear one another, and a member of the Committee shall be deemed to be present
for this purpose if he or she is in simultaneous communication by telephone with
the other members who are able to hear one another. In lieu of action at a
meeting, the Committee may by written consent of a majority of its members.

Subject to the express provisions of the Plan, the Committee shall have the
authority to construe and interpret the Plan and all Stock Option Agreements (as
defined in Section 3.4) entered into pursuant hereto and to define the terms
used therein, to prescribe, adopt, amend and rescind rules and regulations
relating to the administration of the Plan and to make all other determinations
necessary or advisable for the administration of the Plan; provided, however,
that the Committee may delegate nondiscretionary administrative duties to such
employees of the Company as it deems proper; and, provided, further, in its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan. Subject to the
express limitations of the Plan, the Committee shall designate the individuals
from among the class of persons eligible to participate as provided in Section
1.3 who shall receive options, whether an optionee will receive Incentive Stock
Options or Nonstatutory Options, or both, and the amount, price, restrictions
and all other terms and provisions of such options (which need not be
identical).

Members of the Committee shall receive such compensation or their services
as members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in

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<PAGE>
connection with the administration of this Plan shall be borne by the Company.
The Committee may, with the approval of the Board, employ attorneys,
consultants, accountants, appraisers, brokers or other persons. The Committee,
the Company and the Company's officers and directors shall be entitled to rely
upon the advice, opinions or valuations of any such persons. No members of the
Committee or the Board shall be personally liable for any action, determination
or interpretation made in good faith with respect to the Plan, and all members
of the Committee shall be fully protected by the Company in respect of any such
action, determination or interpretation.

1.3 PARTICIPATION.

Officers and other employees of the Company, non-employee directors,
consultants and advisors and other persons who may perform significant services
on behalf of the Company shall be eligible for selection to participate in the
Plan upon approval by the Committee; provided, however, that only "employees"
(within the meaning of Section 3401(c) of the Code) of the Company shall be
eligible for the grant of Incentive Stock Options. An individual who has been
granted an option may, if otherwise eligible, be granted additional options if
the committee shall so determine. No person is eligible to participate in the
Plan by matter of right; only those eligible persons who are selected by the
Committee in its discretion shall participate in the Plan.

1.4 STOCK SUBJECT TO THE PLAN.

Subject to adjustment as provided in Section 3.5, the stock to be offered
under the Plan shall be shares of authorized but unissued Common Stock,
including any shares repurchased under the terms of the Plan or any Stock Option
Agreement entered into pursuant hereto. The cumulative aggregate number of
shares of Common Stock to be issued under the Plan shall not exceed 2,200,000*,
subject to adjustment as set forth in Section 3.5.

If any option granted hereunder shall expire or terminate for any reason
without having been fully exercised, the unpurchased shares subject thereto
shall again be available for the purposes of the Plan. For purposes of this
Section 1.4, where the exercise price of options is paid by means of the
grantee's surrender of previously owned shares of Common Stock, only the net
number of additional shares issued and which remain outstanding in connection
with such exercise shall be deemed "issued" for purposes of the Plan.

2. STOCK OPTIONS

2.1 EXERCISE PRICE; PAYMENT.

(a) The exercise price of each Incentive Stock Option granted under the Plan
shall be determined by the Committee, but shall not be less than 100% of the
"Fair Market Value" (as defined below) of Common Stock on the date of grant. If
an Incentive Stock Option is granted to an employee who at the time such option
is granted owns (within the meaning of section 424(d) of the Code) more than 10%
of the total combined voting power of all classes of capital stock of the
Company, the option exercise price shall be at least 110% of the Fair Market
Value of Common Stock on the date of grant. The exercise price of each
Nonstatutory Option also shall be determined by the Committee, but shall not be
less than 85% of the Fair Market of Common Stock on the date of grant. The
status of each option granted under the Plan as either an Incentive Stock Option
or a Nonstatutory Option shall be determined by the Committee at the time the
Committee acts to grant the option, and shall be clearly identified as such in
the Stock Option Agreement relating thereto.

"Fair Market Value" for purposes of the Plan shall mean: (i) the closing
price of a share of Common Stock on the principal exchange on which shares of
Common Stock are then trading, if any, on the day immediately preceding the date
of grant, or, if shares were not traded on the day preceding such date of

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

* Formerly 600,000 shares. The increase in the aggregate number of shares of
Common Stock issuable under the Plan from 600,000 to 2,200,000 shares was
approved by the Board of Directors on September 4, 1997, subject to
stockholder approval within twelve months (see Section 3.8 of the Plan).

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grant, then on the next preceding trading day during which a sale occurred; or
(ii) if Common Stock is not traded on an exchange but is quoted on an exchange
but is quoted on Nasdaq or a successor quotation system, (1) the last sales
price (if Common Stock is then listed on the Nasdaq Stock Market) or (2) the
mean between the closing representative bid and asked price (in all other cases)
for Common Stock on the day prior to the date of grant as reported by Nasdaq or
such successor quotation system; or (iii) if there is no listing or trading of
Common Stock either on a national exchange or over-the-counter, that price
determined in good faith by the Committee to be the fair value per share of
Common Stock, based upon such evidence as it deems necessary or advisable.

(b) In the discretion of the Committee at the time the option is exercised,
the exercise price of any option granted under the Plan shall be paid in full in
cash, b check or by the optionee's interest-bearing promissory note (subject to
any limitations of applicable state corporations law) delivered at the time of
exercise; provided, however, that subject to the timing requirements of Section
2.7, in the discretion of the Committee and upon receipt of all regulatory
approvals, the person exercising the option may deliver as payment in whole or
in part of such exercise price certificates for Common Stock of the Company
(duly endorsed or with duly executed stock powers attached), which shall be
valued at its Fair Market Value on the day of exercise of the option, or other
property deemed appropriate by the Committee; and, provided further, that,
subject to Section 422 of the Code, so-called cashless exercises as permitted
under applicable rules and regulations of the Securities and Exchange Commission
and the Federal Reserve Board shall be permitted in the discretion of the
Committee. Without limiting the Committee's discretion in this regard,
consecutive book entry stock-for-stock exercises of options (or "pyramiding")
also are permitted in the Committee's discretion.

Irrespective of the form of payment, the delivery of shares issuable upon
the exercise of an option shall be conditioned upon payment by the optionee to
the Company of amounts sufficient to enable the Company to pay all federal,
state, and local withholding taxes resulting, in the Company's judgment, from
the exercise. In the discretion of the Committee, such payment to the Company
may be effected through (i) the Company's withholding from the number of shares
of Common Stock that would otherwise be delivered to the optionee by the Company
on exercise of the option a number of shares of Common Stock equal in value (as
determined by the Fair Market Value of Common Stock on the date of the exercise)
to the aggregate withholding taxes, (ii) payment by the optionee to the Company
of the aggregate withholding taxes in cash, (iii) withholding by the Company
from other amounts contemporaneously owed by the Company to the optionee, or
(iv) any combination of these three methods, as determined by the Committee in
its discretion.

2.2 OPTION PERIOD.

(a) The Committee shall provide, in the terms of each Stock Option
Agreement, when the option subject to such agreement expires and becomes
unexercisable, but in no event will an Incentive Stock Option granted under the
Plan be exercisable after the expiration of ten years from the date it is
granted. Without limiting the generality of the foregoing, the Committee may
provide in the Stock Option Agreement that the option subject thereto expires 30
days following a Termination of Employment (as defined in Section 3.2 hereof)
for any reason other than death or disability, or six months following a
Termination of Employment for disability or following an optionee's death.

(b) Outside Date for Exercise. Notwithstanding any provisions of this
Section 2.2. in no event shall any option granted under the Plan be exercised
after the expiration date of such option set forth in the applicable Stock
Option Agreement.

2.3 EXERCISE OF OPTIONS.

Each option granted under the Plan shall become exercisable and the total
number of shares subject thereto shall be purchasable, in a lump sum or in such
installments, which need not be equal, as the Committee shall determine;
provided, however, that each option shall become exercisable as to at least 10%
of the shares of Common Stock covered thereby on each anniversary of the date
such option is granted; and provided, further, that if the holder of an option
shall not in any given installment period

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purchase all of the shares which such holder is entitled to purchase in such
installment period, such holder's right to purchase any shares not purchased in
such installment period shall continue until the expiration or sooner
termination of such holder's option. The Committee may, at any time after grant
of the option and from time to time, increase the number of shares purchasable
in any installment, subject to the total number of shares subject to the option
and the limitations set forth in Section 2.5. At any time and from time to time
prior to the time when any exercisable option or exercisable portion thereof
become unexercisable under the Plan or the applicable Stock Option Agreement,
such option, or portion thereof may be exercised in whole or in part; provided,
however, that the Committee may, by the terms of the option, require any partial
exercise to be with respect to a specified minimum number of shares. No option
or installment thereof shall be exercisable except with respect to whole shares.
Fractional share interests shall be disregarded, except that they may be
accumulated as provided above and except that if such a fractional share
interest constitutes the total shares of Common Stock remaining available for
purchase under an option at the time of exercise, the optionee shall be entitled
to receive on exercise a certified or bank cashier's check in an amount equal to
the Fair Market Value of such fractional share of stock.

2.4 TRANSFERABILITY OF OPTIONS.

Except as the Committee may determine as aforesaid, an option granted under
the Plan shall, by its terms, be nontransferable by the optionee other than by
will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order (as defined by the Code), and shall be exercisable
during the optionee's lifetime only by the optionee or by his or her guardian or
legal representative. More particularly, but without limiting the generality of
the immediately preceding sentence, an option may not be assigned, transferred
(except as provided in the preceding sentence), pledged or hypothecated (whether
by operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of any option contrary to the provisions of
the Plan and the applicable Stock Option Agreement, and any levy of any
attachment or similar process upon an option, shall be null and void, and
otherwise without effect, and the Committee may, in its sole discretion, upon
the happening of any such event, terminate such option forthwith.

2.5 LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTIONS.

To the extent that the aggregate Fair Market Value (determined on the date
of grant as provided in Section 2.1 above) of the Common Stock with respect to
which Incentive Stock Options granted hereunder (together with all other
Incentive Stock Option plans of the Company) are exercisable for the first time
by an optionee in any calendar year under the Plan exceeds $100,000, such
options granted hereunder shall be treated as Nonstatutory Options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking options into account in the order in which
they were granted.

2.6 DISQUALIFYING DISPOSITIONS OF INCENTIVE STOCK OPTIONS.

If Common Stock acquired upon exercise of any Incentive Stock Option is
disposed of in a disposition that, under Section 422 of the Code, disqualifies
the option holder from the application of
Section 421(a) of the Code, the holder of the Common Stock immediately before
the disposition shall comply with any requirements imposed by the Company in
order to enable the Company to secure the related income tax deduction to which
it is entitled in such event.

2.7 CERTAIN TIMING REQUIREMENTS.

At the discretion of the Committee, shares of Common Stock issuable to the
optionee upon exercise of an option may be used to satisfy the option exercise
price or the tax withholding consequences of such exercise, in the case of
persons subject to Section 16 of the Securities Exchange Act of 1934, as
amended, only (i) during the period beginning on the third business day
following the date of release of the quarterly or annual summary statement of
sales and earnings of the Company and ending on the twelfth business day
following such date or (ii) pursuant to an irrevocable written election by the
optionee to use shares of Common Stock issuable to the optionee upon exercise of
the option to pay all or part of the option price or

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the withholding taxes made at least six months prior to the payment of such
option price or withholding taxes.

2.8 NO EFFECT ON EMPLOYMENT.

Nothing in the Plan or in any Stock Option Agreement hereunder shall confer
upon any optionee any right to continue in the employ of the Company, any Parent
Corporation or any subsidiary or shall interfere with or restrict in any way the
rights of the company, its Parent Corporation and its Subsidiaries, which are
hereby expressly reserved, to discharge any optionee at any time for any reason
whatsoever, with or without cause.

For purposes of the Plan, "Parent Corporation" shall mean any corporation in
an unbroken chain of corporations ending with the Company if each of the
corporations other than the Company then owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain. For purposes of the Plan, "Subsidiary" shall mean
any corporation in an unbroken chain of corporations beginning with the Company
if each of the corporations other than the last corporation in the unbroken
chain then owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.

2.9 ANTI-DILUTION PROTECTION.

If, at any time during the first 36 months of the Option Period, the
Corporation issues any previously unissued common stock as a result of any
acquisition, joint venture or other business transaction, then, during such
period the number of shares subject to the Option shall be adjusted such that
the holder thereof shall have the right to exercise the Option for the same
percentage of the issued and outstanding commons stock of the Corporation after
giving effect to such transaction (including the future conversion or exercise
of any option or warrants issued in such transaction during the term of the
Option, but converted thereafter) as he held options for immediately prior to
such transaction.

3. OTHER PROVISIONS

3.1 SICK LEAVE AND LEAVE OF ABSENCE.

Unless otherwise provided in the Stock Option Agreement, and to the extent
permitted by Section 422 of the Code, an optionee's employment shall not be
deemed to terminate by reason of sick leave, military leave or other leave of
absence approved by the Company if the period of any such leave does not exceed
a period approved by the Company, or, if longer, if the optionee's right to
reemployment by the Company is guaranteed either contractually or by statute. A
Stock Option Agreement may contain such additional or different provisions with
respect to leave of absence as the Committee may approve, either at the time of
grant of an option or at a later time.

3.2 TERMINATION OF EMPLOYMENT.

For purposes of the Plan "Termination of Employment," shall mean the time
when the employee-employer relationship between the optionee and the Company,
any Subsidiary or any Parent Corporation is terminated for any reason,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of an optionee by
the Company, any Subsidiary or any Parent Corporation, (ii) at the discretion of
the Committee, terminations which result in a temporary severance of the
employee-employer relationship, and (iii) at the discretion of the Committee,
terminations which are followed by the simultaneous establishment of a
consulting relationship by the Company, a Subsidiary or any Parent Corporation
with the former employee. Subject to Section 3.1, the Committee, in its absolute
discretion, shall determine the affect of all maters and questions relating to
Termination of Employment; provided, however, that, with respect to Incentive
Stock Options, a leave of absence or other change in the employee-employer
relationship shall constitute a Termination of Employment if, and to the extent
that such leave of absence or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then-applicable regulations
and revenue rulings under said Section.

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3.3 ISSUANCE OF STOCK CERTIFICATES.

Upon exercise of an option, the Company shall deliver to the person
exercising such option a stock certificate evidencing the shares of Common Stock
acquired upon exercise. Notwithstanding the foregoing, the Committee in its
discretion may require the Company to retain possession of any certificate
evidencing stock acquired upon exercise of an option which remains subject to
repurchase under the provisions of the Stock Option Agreement or any other
agreement signed by the optionee in order to facilitate such repurchase
provisions.

3.4 TERMS AND CONDITIONS OF OPTIONS.

Each option granted under the Plan shall be evidenced by a written Stock
Option Agreement ("Stock Option Agreement") between the option holder and the
Company providing that the option is subject to the terms and conditions of the
Plan and to such other terms and conditions not inconsistent therewith as the
Committee may deem appropriate in each case.

3.5 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; MERGER AND CONSOLIDATION.

If the outstanding shares of Common Stock are changed into, or exchanged for
cash or a different number of kind of shares or securities of the Company or of
another corporation through reorganization, merger, recapitalization,
reclassification, stock split-up, reverse stock split, stock dividend, stock
consolidation, stock combination, stock reclassification or similar transaction,
an appropriate adjustment shall be made by the Committee in the number and kind
of shares as to which options may be granted. In the event of such a change or
exchange, other than for shares or securities of another corporation or by
reason of reorganization, the Committee shall also make a corresponding
adjustment changing the number of kind of shares and the exercise price per
share allocated to unexercised options or portions thereof, which shall have
been granted prior to any such change, shall likewise be made. Any such
adjustment, however, shall be made without change in the total price applicable
to the unexercised portion of the option (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices).

In the event of a "spin-off" or other substantial distribution of assets of
the Company which has a material diminutive effect upon the Fair Market Value of
the Common Stock, the Committee in its discretion shall make an appropriate and
equitable adjustment to the exercise prices of options then outstanding under
the Plan.

Where an adjustment under this Section 3.5 of the type described above is
made to an Incentive Stock Option, the adjustment will be made in a manner which
will not be considered a "modification" under the provisions of subsection
424(b)(3) of the Code.

In connection with the dissolution or liquidation of the Company or a
partial liquidation involving 50% or more of the assets of the Company, a
reorganization of the Company in which another entity is the survivor, a merger
or reorganization of the Company under which more than 50% of the Common Stock
outstanding prior to the merger or reorganization is converted into cash or into
a security of another entity, a sale of more than 50% of the Company's assets,
or a similar event that the Committee determines, in its discretion, would
materially alter the structure of the Company or its ownership, the Committee,
upon 30 days prior written notice to the option holders, may, in its discretion,
do one or more of the following: (i) shorten the period during which options are
exercisable (provided they remain exercisable for at least 30 days after the
date the notice is given); (ii) accelerate any vesting schedule to which an
option is subject; (iii) arrange to have the surviving or successor entity grant
replacement options with appropriate adjustments in the number and kind of
securities and option prices, or (iv) cancel options upon payment to the option
holders in cash, with respect to each option to the extent then exercisable
(including any options as to which the exercise has been accelerated as
contemplated in clause (ii) above), of any amount that is the equivalent of the
Fair Market Value of the Common Stock (at the effective time of the dissolution,
liquidation, merger, reorganization, sale or other event) or the fair market
value of the option. In the case of a change in corporate control, the Committee
may, in considering the advisability or the terms and conditions of any
acceleration of the exercisability of any option pursuant to this Section 3.5,
take into

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account the penalties that may result directly or indirectly from such
acceleration to either the Company or the option holder, or both, under Section
280G of the Code, and may decide to limit such acceleration to the extent
necessary to avoid or mitigate such penalties or their effects.

No fractional share of Common Stock shall be issued under the Plan on
account of any adjustment under this Section 3.5.

3.6 RIGHTS OF PARTICIPANTS AND BENEFICIARIES.

The Company shall pay all amounts payable hereunder only to the option
holder or beneficiaries entitled thereto pursuant to the Plan. The Company shall
not be liable for the debts, contracts or engagements of any optionee or his or
her beneficiaries, and rights to cash payments under the Plan may not be taken
in execution by attachment or garnishment, or by any other legal or equitable
proceeding while in the hands of the Company.

3.7 GOVERNMENT REGULATIONS.

The Plan, and the grant and exercise of options and the issuance and
delivery of shares of Common Stock under options granted hereunder, shall be
subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law) and
federal margin requirements and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and options granted hereunder shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.

3.8 AMENDMENT AND TERMINATION.

The Board or the Committee may at any time suspend, amend or terminate the
Plan and may, with the consent of the option holder, make such modifications of
the terms and conditions of such option holder's option as it shall deem
advisable, provided, however, that, without approval of the Company's
stockholders given within twelve months before or after the action by the Board
or the Committee, no action of the Board or the Committee may, (A) materially
increase the benefits accruing to participants under the Plan; (B) materially
increase the number of securities which may be issued under the Plan; or (C)
materially modify the requirements as to eligibility for participation in the
Plan. No option may be granted during any suspension of the Plan or after such
termination. The amendment, suspension or termination of the Plan shall not,
without the consent of the option holder affected thereby, alter or impair any
rights or obligations under any option theretofore granted under the Plan. No
option may be granted during any period of suspension nor after termination of
the Plan, and in no event may any option be granted under the Plan after the
expiration of ten years from the date the Plan is adopted by the Board.

3.9 TIME OF GRANT AND EXERCISE OF OPTION.

An option shall be deemed to be exercised when the Secretary of the Company
receives written notice from an option holder of such exercise, payment of the
exercise price determined pursuant to Section 2.1 of the Plan and set forth in
the Stock Option Agreement, and all representations, indemnifications and
documents reasonably requested by the Committee.

3.10 PRIVILEGES OF STOCK OWNERSHIP; NON-DISTRIBUTIVE INTENT; REPORTS TO
OPTION HOLDERS.

A participant in the Plan shall not be entitled to the privilege of stock
ownership as to any shares of Common Stock not actually issued to the optionee.
Upon exercise of an option at a time when there is not in effect under the
Securities Act of 1933, as amended, a Registration Statement relating to the
Common Stock issuable upon exercise or payment therefor and available for
delivery a Prospectus meeting the requirements of Section 10(a)(3) of said Act,
the optionee shall represent and warrant in writing to the

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Company that the shares purchased are being acquired for investment and not with
a view to the distribution thereof.

The Company shall furnish to each optionee under the Plan the Company's
annual report and such other periodic reports, if any, as are disseminated by
the Company in the ordinary course to its stockholders.

3.11 LEGENDING SHARE CERTIFICATES.

In order to enforce any restrictions imposed upon Common Stock issued upon
exercise of an option granted under the Plan or to which such Common Stock may
be subject, the Committee may cause a legend or legends to be placed on any
share certificates representing such Common Stock, which legend or legends shall
make appropriate reference to such restrictions, including, but not limited to,
a restriction against sale of such Common Stock for any period of time as may be
required by applicable laws or regulations. If any restriction with respect to
which a legend was placed on any certificate ceases to apply to Common Stock
represented by such certificate, the owner of the Common Stock represented by
such certificate may require the Company to cause the issuance of a new
certificate not bearing the legend.

Additionally, and not by way of limitation, the Committee may impose such
restrictions on any Common Stock issued pursuant to the Plan as it may deem
advisable, including, without limitation, restrictions under the requirements of
any stock exchange upon which Common Stock is then traded.

3.12 USE OF PROCEEDS.

Proceeds realized pursuant to the exercise of options under the Plan shall
constitute general funds of the Company.

3.13 CHANGES IN CAPITAL STRUCTURE; NO IMPEDIMENT TO CORPORATE TRANSACTIONS.

The existence of outstanding options under the Plan shall not affect the
Company's right to effect adjustments, recapitalizations, reorganizations or
other changes in its or any other corporation's capital structure or business,
any merger or consolidation, any issuance of bonds, debentures, preferred or
prior preference stock ahead of or affecting Common Stock, the dissolution or
liquidation of the Company's or any other corporation's assets or business, or
any other corporate act, whether similar to the events described above or
otherwise.

3.14 EFFECTIVE DATE OF THE PLAN.

The Plan shall be effective as of the date of its approval by the
stockholders of the Company within twelve months after the date of the Board's
initial adoption of the Plan. Options may be granted but not exercised prior to
stockholder approval of the Plan. If any options are so granted and stockholder
approval shall not have been obtained within twelve months of the date of
adoption of this Plan by the Board of Directors, such options shall terminate
retroactively as of the date they were granted.

3.15 TERMINATION.

The Plan shall terminate automatically as of the close of business on the
day preceding the tenth anniversary date of its adoption by the Board or earlier
as provided in Section 3.8. Unless otherwise provided herein, the termination of
the Plan shall not affect the validity of any option agreement outstanding at
the date of such termination.

3.16 NO EFFECT ON OTHER PLANS.

The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Subsidiary or any Parent
Corporation. Nothing in the Plan shall be construed to limit the right of the
Company (i) to establish any other forms of incentives or compensation for
employees of the Company, any Subsidiary or any Parent Corporation or (ii) to
grant or assume options or other rights otherwise than under the Plan in
connection with any proper corporate purpose including but not by way of
limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, firm or association.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

VIRGINIA STOCK CORPORATION ACT

Section 697 A of the Virginia Stock Corporation Act ("VSCA") provides that a
corporation may indemnify an individual made a party to a proceeding because he
is or was a director against liability incurred in the proceeding if (1) he
conducted himself in good faith, (2) he believed, in the case of conduct in his
official capacity with the corporation, that his conduct was in its best
interests, and, in all other cases, that his conduct was at least not opposed to
its best interests, and (3) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful. Section 697 C of the VSCA
provides that the termination of a proceeding by judgment, order, settlement or
conviction is not, of itself, determinative that the director did not meet the
standard of conduct set forth in Section 697 A.

Section 697 D of the VSCA provides that a corporation may not indemnify a
director under Section 697 in connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to the corporation, or
in connection with any other proceeding charging improper personal benefit to
him, whether or not involving action in his official capacity, in which he was
adjudged liable on the basis that personal benefit was improperly received by
him. Indemnification permitted under Section 697 of the VSCA in connection with
a proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.

Section 698 of the VSCA states that, unless limited by its articles of
incorporation, a corporation shall indemnify a director who entirely prevails in
the defense of any proceeding to which he was a party because he is or was a
director of the corporation against reasonable expenses incurred by him in
connection with the proceeding.

Section 701 of the VSCA provides that a corporation may not indemnify a
director under Section 697 unless authorized in the specific case after a
determination has been made that indemnification of the director is permissible
in the circumstances because he has met the standard of conduct set forth in
Section 697. Such determination is to be made (1) by the board of directors by a
majority vote of a quorum consisting of directors not at the time parties to the
proceeding, (2) if such a quorum is not obtainable, by majority vote of a
committee duly designated by the board of directors (in which designation
directors who are parties may participate), consisting solely of two or more
directors not at the time parties to the proceeding, (3) by special legal
counsel selected as set forth in the statute, or (4) by the shareholders
(without the vote of shares owned by or voted under the control of directors who
are at the time parties to the proceeding).

Section 699 of the VSCA provides that a corporation may pay for or reimburse
the reasonable expenses incurred by a director who is a party to a proceeding in
advance of the final disposition of the proceeding if (1) the director furnishes
the corporation a written statement of his good faith belief that he has met the
standard of conduct described in Section 697, (2) the director furnishes the
corporation a written undertaking to repay the advance if it is ultimately
determined that he did not meet the standard of conduct, and (3) a determination
is made that the facts then known to those making the determination would not
preclude indemnification. Determinations and authorizations of payments under
Section 699 are to be made in the manner specified in Section 701 of the VSCA.

Under Section 700.1 of the VSCA, an individual who is made a party to a
proceeding because he is or was a director of a corporation may apply to a court
for an order directing the corporation to make advances or reimbursement for
expenses or to provide indemnification. The court shall order the corporation to
make advances and/or reimbursement for expenses or to provide indemnification if
it determines that the director is entitled to such advances, reimbursement or
indemnification and shall also

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order the corporation to pay the director's reasonable expenses incurred to
obtain the order. With respect to a proceeding by or in the right of the
corporation, the court may (1) order indemnification of the director to the
extent of his reasonable expenses if it determines that, considering all the
relevant circumstances, the director is entitled to indemnification even though
he was adjudged liable to the corporation and (2) also order the corporation to
pay the director's reasonable expenses incurred to obtain the order of
indemnification.

Section 702 of VSCA states that, unless limited by a corporation's articles
of incorporation, (1) an officer of the corporation is entitled to mandatory
indemnification under Section 698 of the VSCA, and is entitled to apply for
court-ordered indemnification under Section 700 of the VSCA, to the same extent
as a director, and (2) the corporation may indemnify and advance expenses to an
officer, employee or agent of the corporation to the same extent as to a
director.

Section 703 of the VSCA provides that a corporation may purchase and
maintain insurance on behalf of an individual who is or was a director, officer,
employee or agent of the corporation, or who, while a director, officer,
employee, or agent of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against liability asserted against
him or incurred by him in that capacity, or arising from his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of Sections 697 or 698 of the VSCA.

Section 704 of the VSCA states that a corporation shall have power to make
any further indemnity, including indemnity with respect to a proceeding by or in
the right of the corporation, and to make additional provision for advances and
reimbursement of expenses, to any director, officer, employee or agent that may
be authorized by its articles of incorporation or any bylaw made by the
shareholders or any resolution adopted, before or after the event, by the
shareholders, except an indemnity against (1) his willful misconduct, or (2) a
knowing violation of the criminal law. Unless the articles of incorporation, or
any such bylaw or resolution expressly provide otherwise, any determination as
to the right to any further indemnity shall be made in accordance with Section
701 B of the VSCA. Each such indemnity may continue as to a person who has
ceased to have the capacity referred to above and may inure to the benefit of
the heirs, executors and administrators of such person.

CERTIFICATE OF INCORPORATION

Article 11 of the Company's Articles of Incorporation provides that the
Company shall, to the fullest extent permitted by the law of Virginia, indemnify
an individual who is or was a director or officer of the Company and who was,
is, or is threatened to be made, a named defendant or respondent in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal
(collectively, a "proceeding"), against any obligation to pay a judgment,
settlement, penalty, fine (including any excise tax assessed with respect to any
employee benefit plan) or other liability and reasonable expenses (including
counsel fees) incurred with respect to such a proceeding, except such
liabilities and expenses as are incurred because of such director's or officer's
willful misconduct or knowing violation of criminal law.

Article 11 also provides that unless a determination has been made that
indemnification is not permissible, the Company shall make advances and
reimbursements for expenses reasonably incurred by a director or officer in a
proceeding as described above upon receipt of an undertaking from such director
or officer to repay the same if it is ultimately determined that such director
or officer is not entitled to indemnification.

Article 11 also provides that the determination that indemnification is
permissible, the authorization of such indemnification (if applicable), and the
evaluation as to the reasonableness of expenses in a specific case shall be made
as provided by law. Special legal counsel selected to make determinations under
such Article 11 may be counsel for the Company. The termination of a proceeding
by judgment,

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order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that a director or officer
acted in such a manner as to make him or her ineligible for indemnification.

For the purposes of Article 11, every reference to a director or officer
includes, without limitation, (1) every individual who is a director or officer
of the Company, (2) an individual who, while a director or officer, is or was
serving at the Company's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, (3) an individual who
formerly was a director or officer of the Company or who, while a director or
officer, occupied at the request of the Company any of the other positions
referred to in clause (2) of this sentence, and (4) the estate, personal
representative, heirs, executors and administrators of a director or officer of
the Company or other person referred to herein. Service as a director, officer,
partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
controlled by the Company is deemed service at the request of the Company. A
director or officer is deemed to be serving an employee benefit plan at the
Company's request if such person's duties to the Company also impose duties on,
or otherwise involve services by, such person to the plan or to participants in
or beneficiaries of the plan.

INDEMNIFICATION AGREEMENTS

The Company may enter into indemnification agreements with its directors and
officers for the indemnification of and advancing of expenses to such persons to
the fullest extent permitted by law.

INSURANCE

Dunn has purchased directors and officers liability insurance in the amount
of $1.0 million.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Acquisition Agreement, dated March 9, 1998, by and among Dunn Computer Corporation, a Delaware
corporation, Dunn Computer Corporation, a Virginia corporation, George Fuster, D. Oscar Fuster, Carol N.
Fuster and Wendy E. Fuster. (Included as Appendix B to the Proxy Statement/Prospectus contained in this
Registration Statement).

2.2 Agreement of Merger, dated as of March 18, 1998 between Dunn Computer Merger Subsidiary, Inc., Dunn
Computer Corporation, a Delaware corporation, and Dunn Computer Corporation, a Virginia corporation.
(Included as Appendix A to the Proxy Statement/ Prospectus contained in this Registration Statement).

2.3 Stock Purchase Agreement, dated September 12, 1997, by and among STMS Acquisition Corp., Dunn Computer
Corporation, STMS, Inc., John Signorello, Timothy McNamee, Steve Salmon and certain other stockholders
of Dunn Computer Corporation. (Filed as Exhibit 2.1 to Dunn Computer Corporation's Current Report on
Form 8-K, dated September 12, 1997, filed September 27, 1997 (File No. 0-22263) and hereby incorporated
by reference).

*3.1 Certificate of Incorporation of the Company, dated February 26, 1998.

*3.2 By-laws of the Company, dated February 26, 1998.

3.3 Certificate of Incorporation and amendments thereto of Dunn Computer Corporation (Filed as Exhibit 3.1
to Dunn Computer Corporation's Registration Statement on Form SB-2, dated January 13, 1997 (File No.
333-19635) and hereby incorporated by reference).
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.4 By-Laws and amendments thereto of Dunn Computer Corporation (Filed as Exhibit 3.3 to Dunn Computer
Corporation's Registration Statement, on Form SB-2, dated January 13, 1997 (File No. 333-19635) and
hereby incorporated by reference).

*4.1 Specimen common stock certificate for Dunn Computer Corporation, a Virginia corporation.

4.2 Form of Underwriters Warrants (Filed as Exhibit 4.2 to Dunn Computer Corporation's Registration
Statement on Form SB-2, dated January 13, 1997 (File No. 333-19635) and hereby incorporated by
reference).

4.3 Loan and Security Agreement, dated as of May 28, 1996 by and between Dunn Computer Corporation and
SIGNET BANK and Amendment Nos 1, 2 and 3 thereto (Filed as Exhibit 4.2 to Dunn Computer Corporation's
Form 10-KSB, for the fiscal year ended October 31, 1997 (File No. 0-22263) and hereby incorporated by
reference).

*5.1 Opinion of Jones, Day, Reavis & Pogue regarding the validity of the securities being registered.

*8.1 Opinion of Jones, Day, Reavis & Pogue regarding certain Federal income tax consequences relating to the
Merger.

10.1 GSA Schedule (Filed as Exhibit 10.2 to Dunn Computer Corporation's Registration Statement on Form SB-2,
Amendment 1, dated March 14, 1997 (File No. 333-19635) and hereby incorporated by reference).

10.2 Agreement, dated November 21, 1995, by and between GCH Systems, Inc. and Dunn Computer Corporation
regarding Lockheed (Filed as Exhibit 10.4 to Dunn Computer Corporation's Registration Statement on Form
SB-2, Amendment 1, dated March 14, 1997 (File No. 333-19635) and hereby incorporated by reference).

10.3 Agreement, dated March 25, 1997, by and between Dunn Computer Corporation and the Social Security
Administration (Filed as Exhibit 10.5 to Dunn Computer Corporation's Registration Statement on Form
SB-2, Amendment 2, dated April 4, 1997 (File No. 333-19635) and hereby incorporated by reference).

10.4 Agreement, dated June 12, 1995, by and between Dunn Computer Corporation and the Administrative Office
of the U.S. Courts (Filed as Exhibit 10.6 to Dunn Computer Corporation's Registration Statement on Form
SB-2, Amendment 2, dated April 4, 1997 (File No. 333-19635) and hereby incorporated by reference).

10.5 Agreement, dated September 29, 1994, by and between Dunn Computer Corporation and the Health Care
Finance Administration (Filed as Exhibit 10.7 to Dunn Computer Corporation's Registration Statement on
Form SB-2, Amendment 2, dated April 4, 1997 (File No. 333-19635) and hereby incorporated by reference).

10.6 Agreement effective September 8, 1997, by and between Virginia Contracting Authority and Dunn Computer
Corporation (Filed as Exhibit 10.6 to Dunn Computer Corporation's Form 10-KSB, dated January 30, 1998
(File No. 0-22263) and hereby incorporated by reference).

10.7 Employment Agreement by and between Dunn Computer Corporation and John D. Vazzana (Filed as Exhibit 99.1
to Dunn Computer Corporation's Registration Statement on Form SB-2, Amendment 2, dated April 4, 1997
(File No. 333-19635) and hereby incorporated by reference).

10.8 Employment Agreement by and between Dunn Computer Corporation and Thomas P. Dunne (Filed as Exhibit 99.2
to Dunn Computer Corporation's Registration Statement on Form SB-2, Amendment 2, dated April 4, 1997
(File No. 333-19635) and hereby incorporated by reference).
</TABLE>

II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.9 Deed of Lease, dated October 31, 1994, between C&T Partnership and Dunn Computer Corporation and
addendums thereto (Filed as Exhibit 10.9 to Dunn Computer Corporation's Form 10-KSB, dated January 30 ,
1998 (File No. 0-22263) and hereby incorporated by reference).

10.10 Deed of Lease, dated February 7, 1997, between APA Properties No. 6 L.P. and STMS, Inc. and First
Amendment thereto, dated July 23, 1997 (Filed as Exhibit 10.10 to Dunn Computer Corporation's Form
10-KSB, dated January 30, 1998 (File No. 0-22263) and hereby incorporated by reference).

10.11 1997 Stock Option Plan (Filed as Exhibit 10.11 to Dunn Computer Corporation's Form 10-KSB, dated January
30, 1998 (File No. 0-22263) and hereby incorporated by reference).

*10.12 General Service Administration Schedule for International Data Products, Corp.

*10.13 Agreement, dated May 5, 1997, by and between International Data Products, Corp. and the U.S. Air Force,
the Desktop V Contract.

*10.14 Agreement, dated September 15, 1995, by and between International Data Products, Corp. and FEDSIM.

*10.15 Agreement, dated January 6, 1998, by and between International Data Products, Corp. and the Department
of the Navy.

*10.16 Deed of Lease, dated January 31, 1995, between Northtech Business Park and International Data Products,
Corp. and addendums thereto.

*10.17 Deed of Lease, dated July 15, 1994, between Puerto Rico Industrial Development Company and Puerto Rico
Industrial Manufacturing Operations, Corp. and addendums thereto.

*10.18 Agreement, dated July 11, 1995, by and between International Data Products, Corp. and the Social
Security Administration.

*10.19 Supply Agreement, dated September 23, 1997, by and between International Data Products, Corp. and Intel
Corporation.

*10.20 Supply Agreement, dated November 1, 1997, by and between International Data Products, Corp. and
Microsoft Corporation.

*10.21 Supply Agreement, dated August 7, 1996, by and between International Data Products, Corp. and Tech Data
Corporation.

*10.22 Supply Agreement, dated January 14, 1998, by and between International Data Products, Corp. and Clevo
Corporation.

*10.23 Employment Agreement by and between the Company and D. Oscar Fuster.

*10.24 Employment Agreement by and between the Company and George D. Fuster.

13.1 Annual Report on Form 10-KSB for Dunn Computer Corporation for the fiscal year ended October 31, 1997
filed February 12, 1998 (File No. 0-22263) and hereby incorporated by reference).

13.2 Quarterly Report on Form 10-QSB for Dunn Computer Corporation for the fiscal quarter ended January 31,
1998 (File No. 0-22263) and hereby incorporated by reference).

*21.1 List of Subsidiaries.

23.1 Consents of Ernst & Young LLP, Independent Auditors.

23.2 Consent of KPMG Peat Marwick LLP, Independent Auditors.

23.3 Consent of Davis, Sita & Company, P.A., Independent Auditors

*23.4 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1).
</TABLE>

II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
24.1 Power of Attorney (set forth on page II-7 of this Registration Statement).

27.1 Financial Data Schedule.

99.1 Form of Proxy Card.
</TABLE>

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

* To be filed by amendment.

(b) Financial Statement Schedules

Schedule II--Valuation and Account Reserve

All other schedules have been omitted because they are inapplicable or the
information is provided in the Financial Statements including the Notes thereto
included in the Proxy Statement/Prospectus.

ITEM 22. UNDERTAKINGS.

The Registrant hereby undertakes:

(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.

(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 (the "Securities Act") and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
this Registration Statement through the date of responding to the request.

(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in this Registration Statement when it
became effective.

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

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Sterling, in the
Commonwealth of Virginia, on March 17, 1998.

DUNN COMPUTER CORPORATION

BY: /S/ THOMAS P. DUNNE
-----------------------------------------
Thomas P. Dunne
President

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each of the directors and officers of
the Registrant whose signature appears below hereby constitutes and appoints
each of Thomas P. Dunne and John D. Vazzana, jointly and severally, as his or
her true and lawful attorneys-in-act and agents with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities to sign any or all amendments to this Registration
Statement (including any amendment and any post-effective amendments), and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each of
said attorneys-in-fact and agents, acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, acting alone, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.

SIGNATURE TITLE DATE
- ------------------------------ ------------------------------ --------------

Chairman, Chief Executive
/s/ THOMAS P. DUNNE Officer and President
- ------------------------------ (Principle Executive March 17, 1998
Thomas P. Dunne Officer)

Executive Vice President,
/s/ JOHN D. VAZZANA Chief Financial Officer and
- ------------------------------ Director (Principal March 17, 1998
John D. Vazzana Financial and Accounting
Officer)

/s/ CLAUDIA N. DUNNE Vice President and Director
- ------------------------------ March 17, 1998
Claudia N. Dunne

/s/ VADM E.A. BURKHALTER, JR., Director
USN (RET.)
- ------------------------------ March 17, 1998
VADM E.A. Burkhalter, Jr., USN
(Ret.)

/s/ DANIEL SINNOTT Director
- ------------------------------ March 17, 1998
Daniel Sinnott

II-7
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors

We have audited the consolidated financial statements of Dunn Computer
Corporation (a Delaware corporation) as of October 31, 1996 and 1997, and for
each of the three years in the period ended October 31, 1997 and have issued our
report thereon dated January 7, 1998, except for Notes 2 and 11 with respect to
the earnings per share calculation, as to which the date is March 5, 1998,
(included elsewhere in this Registration Statement). Our audits also included
the financial statement schedule listed in Item 21(b) of this Registration
Statement. The schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole
presents fairly, in all material respects, the information set forth therein.

/s/ Ernst & Young LLP

Vienna, Virginia
January 7, 1998, except for Notes 2 and 11
with respect to the earnings per
share calculations, as to which
the date is March 5, 1998

S-1
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYNG ACCOUNT AND RESERVE
DUNN COMPUTER CORPORATION

<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF BALANCE AT
CLASSIFICATION PERIOD ADDITIONS DEDUCTIONS END OF PERIOD
- ------------------------------------------------------------ ------------ ---------- --------------- -------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended October 31, 1995............................... $ -- -- -- $ --
Year ended October 31, 1996............................... $ -- 15,000 -- $ 15,000
Year ended October 31, 1997............................... $ 15,000 62,000* -- $ 77,000
Three months ended January 31, 1998 (unaudited)........... $ 77,000 -- -- $ 77,000

Inventory reserve:
Year ended October 31, 1995............................... $ -- -- -- $ --
Year ended October 31, 1996............................... $ -- 20,000 -- $ 20,000
Year ended October 31, 1997............................... $ 20,000 230,000* -- $ 250,000
Three months ended January 31, 1998 (unaudited)........... $ 250,000 -- -- $ 250,000
</TABLE>

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

* Additions represent purchase price adjustments relating to the acquisition
of STMS, Inc.

S-2
<PAGE>
REPORT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS

The Boards of Directors
International Data Products, Corp. and Puerto Rico Manufacturing Operations
Corp.:

Under date of November 7, 1997, we reported on the combined balance sheets
of International Data Products, Corp. and combined company as of September 30,
1996 and 1997, and the related statements of income, retained earnings, and cash
flows for each of the years in the three-year period ended September 30, 1997,
which are included in the prospectus. In connection with our audits of the
aforementioned combined financial statements, we also audited the related
combined financial statement schedule in the registration statement. This
financial statement schedule is the responsibility of the Companies' management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.

In our opinion, such financial statement schedule, when considered in
relation to the basic combined financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.

/s/ KPMG Peat Marwick LLP

McLean, Virginia
November 7, 1997

S-3
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYNG ACCOUNT AND RESERVE
INTERNATIONAL DATA PRODUCTS, CORP. AND COMBINED COMPANY

<TABLE>
<CAPTION>
BALANCE AT
BEGINNING OF BALANCE AT
CLASSIFICATION PERIOD ADDITIONS DEDUCTIONS END OF PERIOD
- ------------------------------------------------------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended September 30, 1995.............................. $ -- -- -- $ --
Year ended September 30, 1996.............................. $ -- 127,733 -- $ 127,733
Year ended September 30, 1997.............................. $ 127,733 4,088 -- $ 131,821

Inventory reserve:
Year ended September 30, 1995.............................. $ -- -- -- $ --
Year ended September 30, 1996.............................. $ -- -- -- $ --
Year ended September 30, 1997.............................. $ -- 796,404 -- $ 796,404
</TABLE>

S-4

<PAGE>
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Independent
Auditors" and "Experts" and to the use of our report on Dunn Computer
Corporation (a Delaware corporation) dated January 7, 1998, except for Notes 2
and 11, with respect to the earnings per share calculations, as to which the
date is March 5, 1998, in the Registration Statement (Form S-4 No. 333- ) and
related Proxy Statement/ Prospectus of Dunn Computer Corporation (a Virginia
corporation) for the registration of 5,150,000 shares of its Common Stock and
Dunn Computer Corporation (a Delaware corporation) for the solicitation of
proxies in connection with its annual meeting of stockholders.

/s/ Ernst & Young LLP

Vienna, Virginia
March 16, 1998

S-5
<PAGE>
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Independent
Auditors" and "Experts" and to the use of our report dated February 26, 1998 in
the Registration Statement (Form S-4 No. 333- ) and related Proxy
Statement/Prospectus of Dunn Computer Corporation (a Virginia corporation) for
the registration of 5,150,000 shares of its Common Stock and Dunn Computer
Corporation (a Delaware corporation) for the solicitation of proxies in
connection with its annual meeting of stockholders.

/s/ Ernst & Young LLP

Vienna, Virginia
March 17, 1998

S-6

<PAGE>
EXHIBIT 23.2

CONSENT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS

The Boards of Directors
International Data Products, Inc. and
Puerto Rico Industrial Manufacturing Operations Corp.:

We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the Prospectus.

/s/ KPMG Peat Marwick LLP

McLean, Virginia
March 17, 1998

S-7

<PAGE>
EXHIBIT 23.3

CONSENT OF DAVIS, SITA & COMPANY, P.A., INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated August 25, 1997, except for Note 9, as to which the
date is September 12, 1997, in the Registration Statement (Form S-4 No.
333- ) and related Proxy Statement/Prospectus of Dunn Computer Corporation (a
Virginia corporation) for the registration of 5,150,000 shares of Dunn Computer
Corporation's Common Stock and Dunn Computer Corporation (a Delaware
corporation) for the solicitation of proxies in connection with its annual
meeting of stockholders.

/s/ Davis, Sita & Company, P.A.

Greenbelt, Maryland
March 16, 1998

S-8

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) DUNN
COMPUTER CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
(B) FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED OCTOBER 31, 1997 & 1996.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> OCT-31-1997 JAN-31-1998
<PERIOD-START> NOV-01-1996 NOV-01-1997
<PERIOD-END> OCT-31-1997 JAN-31-1998
<CASH> 341,966 162,359
<SECURITIES> 275,000 275,000
<RECEIVABLES> 9,789,010 8,450,355
<ALLOWANCES> 77,000 327,000
<INVENTORY> 4,487,301 3,132,118
<CURRENT-ASSETS> 14,628,734 11,537,807
<PP&E> 802,382 815,045
<DEPRECIATION> 168,954 216,788
<TOTAL-ASSETS> 18,703,077 15,518,536
<CURRENT-LIABILITIES> 10,289,508 6,422,117
<BONDS> 0 0
0 0
0 0
<COMMON> 5,150 5,150
<OTHER-SE> 8,233,005 8,921,711
<TOTAL-LIABILITY-AND-EQUITY> 18,703,077 15,518,536
<SALES> 21,766,465 10,429,168
<TOTAL-REVENUES> 21,766,465 10,429,168
<CGS> 17,549,655 7,989,879
<TOTAL-COSTS> 17,549,655 7,989,879
<OTHER-EXPENSES> 0 5,132
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 11,813 37,618
<INCOME-PRETAX> 2,117,170 1,106,368
<INCOME-TAX> 794,870 417,662
<INCOME-CONTINUING> 1,322,300 688,706
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,322,300 688,706
<EPS-PRIMARY> 0.29 0.13
<EPS-DILUTED> 0.28 0.12

</TABLE>

<PAGE>
DUNN COMPUTER CORPORATION
ANNUAL MEETING OF STOCKHOLDERS--APRIL 30, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints John D. Vazzana and Claudia N. Dunne and
each of them as Proxies and authorizes them to represent and vote all the shares
of common stock of Dunn Computer Corporation, a Delaware corporation, that the
undersigned may be entitled to vote at the Annual Meeting of Stockholders to be
held on April 30, 1998 and at any adjournment thereof, as designated for the
items set forth on the reverse side hereof and in the Notice of Annual Meeting
of Stockholders and the Proxy Statement/Prospectus dated , 1998.

IF PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE
SIDE HEREOF OR, IF NOT SPECIFIED, WILL BE VOTED FOR THE PROPOSALS IN ITEMS 1 AND
3 WHICH ARE DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AND FOR THE
ELECTION AS DIRECTOR OF THE NOMINEES NAMED IN ITEM 2. IN THEIR DISCRETION, THE
PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF. AT THIS TIME, MANAGEMENT KNOWS OF
NO SUCH OTHER BUSINESS.

The Board of Directors recommends a vote FOR the election of the Directors
set forth below and FOR the proposals in Items 1 and 3.

1. Proposal to approve the Merger Agreement

/ / FOR / / AGAINST / / ABSTAIN

2. Election of Directors

/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for all
nominees listed below

Nominees: Thomas P. Dunne, John D. Vazzana, Claudia N. Dunne, VADM E.A.
Burkhalter, Jr. USN (Ret.) and Daniel Sinnott

Instruction: To withhold authority to vote for any individual nominee, write the
nominee's name in the space provided below:

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

(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)

3. Proposal to amend Dunn's 1997 Stock Option Plan and to adopt the Stock
Option Plan that will, in the Merger, be the successor to Dunn's 1997 Stock
Option Plan

/ / FOR / / AGAINST / / ABSTAIN
Dated: ______________________, 1998
___________________________________
Signature
___________________________________
Signature (if held jointly)

IMPORTANT: Please date and sign
exactly as the name appears herein
and return this proxy in the
enclosed envelope. Persons signing
as executors, administrators,
trustees, etc. should so indicate.
If shares are held jointly, each
joint owner should sign. In the
case of a corporation or
partnership, the full name of the
organization should be used and the
signature should be that of a duly
authorized officer or partner.

PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.