PEC SOLUTIONS INC, S-1, 2000-01-25

PEC SOLUTIONS INC
S-1, 2000-01-25

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25, 2000

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PEC SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)

12750 FAIR LAKES CIRCLE

FAIRFAX, VIRGINIA 22033
703-679-4900
(Address of principal executive offices)
------------------------------

<TABLE>
<S> <C> <C>
DELAWARE 7379 54-1339972
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
</TABLE>

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

DAVID C. KARLGAARD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PEC SOLUTIONS, INC.
12750 FAIR LAKES CIRCLE
FAIRFAX, VIRGINIA 22033
703-679-4900
(Name, address, including zip code and telephone number, including area code of
agent for service)
------------------------------

COPIES TO:

<TABLE>
<S> <C>
NANCY A. SPANGLER DOUGLAS R. NEWKIRK
PIPER MARBURY RUDNICK & WOLFE LLP SACHNOFF & WEAVER, LTD.
1850 CENTENNIAL PARK DRIVE, SUITE 610 30 S. WACKER DRIVE, SUITE 2900
RESTON, VA 20191-1517 CHICAGO, IL 60606
(703) 391-7100 (312) 207-1000
</TABLE>

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

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

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") 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(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If 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. / /

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

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Shares of Common Stock, par value $.01 $75,000,000 $19,800
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.
------------------------

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

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY THE US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE>
SUBJECT TO COMPLETION--JANUARY 25, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PROSPECTUS
, 2000

[LOGO OF PEC SOLUTIONS, INC.]

SHARES OF COMMON STOCK
----------------------------------------------------------------------

PEC SOLUTIONS, INC.:

- - We provide professional services that enable government entities to harness
the power of the Internet and other advanced technologies to enhance
productivity and provide better public service.

- - 12750 Fair Lakes Circle, Fairfax, Virginia 22033

PROPOSED SYMBOL & MARKET:

- - PECS/Nasdaq National Market

THE OFFERING:

- - We are offering shares of our common stock.

- - This is our initial public offering and no public market currently exists for
our shares.

- - We anticipate that the initial public offering price will be between $ and
$ per share.

- - The selling stockholders that we identify in this prospectus are offering an
additional shares. PEC Solutions will not receive any proceeds from
the sale of the selling stockholders' shares.

- - The underwriters have an option to purchase an additional shares from
the selling stockholders to cover over-allotments.

- - We plan to use the proceeds from the offering for general corporate purposes.

- - Closing: , 2000.

<TABLE>
- ----------------------------------------------------------------------------------------------------
PER SHARE TOTAL
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
Public Offering Price: $ $
Underwriting Fees:
Proceeds to PEC Solutions, Inc.:
Proceeds to the Selling Stockholders:
- ----------------------------------------------------------------------------------------------------
</TABLE>

THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
- --------------------------------------------------------------------------------

NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------

DONALDSON, LUFKIN & JENRETTE

CHASE H&Q

LEGG MASON WOOD WALKER

INCORPORATED

DLJDIRECT INC.
<PAGE>
DESCRIPTION OF ARTWORK

Inside Front Cover

A photograph of large columns in front of a government building with an
individual walking past in the background.

The text across the middle of the picture reads: "Behind the walls of
government, a new American Revolution has begun." Below this text is additional
text that reads "PEC Solutions Web Enabling Government."
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 5
Special Note Regarding
Forward-Looking Statements......... 11
Where You Can Find More Information.. 11
Corporate Information................ 12
Use of Proceeds...................... 13
Dividend Policy...................... 13
Capitalization....................... 14
Dilution............................. 15
Selected Historical Financial Data... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 17
</TABLE>

<TABLE>
<CAPTION>
Page
<S> <C>
Business............................. 23
Management........................... 34
Related Party Transactions........... 42
Principal and Selling Stockholders... 43
Description of Our Capital Stock..... 44
Shares Eligible for Future Sale...... 47
Underwriting......................... 49
Legal Matters........................ 51
Experts.............................. 51
Index to Financial Statements........ F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY

THIS SUMMARY IS QUALIFIED BY MORE DETAILED INFORMATION APPEARING IN OTHER
SECTIONS OF THIS PROSPECTUS. THE OTHER INFORMATION IS IMPORTANT, SO PLEASE READ
THIS ENTIRE PROSPECTUS CAREFULLY.

PEC SOLUTIONS

PEC Solutions provides professional technology services that enable
government entities to harness the power of the Internet and other advanced
technologies to enhance productivity and improve services to the public. We
migrate legacy computer systems and paper-intensive processes to integrated
electronic government solutions, which are referred to as eGovernment solutions.
We web-enable government by designing, building and managing Internet-based
solutions. Our solutions provide users with rapid and easy access to large
amounts of data and result in improved information flows among government
workers as well as between government entities and their constituents.

We are a TOTAL solutions provider of eGovernment services addressing the
full technology lifecycle. We formulate technology strategies with our clients,
we create fully integrated technology solutions and we manage and enhance these
solutions over time. The substantial experience we have gained in the government
marketplace allows us to design and implement complex mission-critical solutions
that meet the unique challenges presented by our clients. Our eGovernment
solutions include:

- designing and developing technology strategies and web-enabled enterprise
system architectures;

- building and engineering complex intranets, extranets and other high
performance infrastructures;

- integrating legacy systems with web-based mission applications and
architectures;

- applying leading authentication and encryption security technologies; and

- deploying and operating automated enterprise management systems.

We serve clients at all levels of government. Since inception, we have
worked with organizations representing every cabinet-level department of the
Federal government. Our largest clients include Federal organizations such as:
the Bureau of Alcohol, Tobacco and Firearms; the Drug Enforcement
Administration; the Immigration and Naturalization Service; the Internal Revenue
Service; the intelligence community; and the Veterans Benefits Administration.
In addition to the Federal government, we have provided services to various
state and local government entities as well as private sector organizations. We
have provided more than $145 million worth of services in the government market
over the last five years and have increased our revenues at approximately a 48%
compound annual growth rate.

OUR MARKET OPPORTUNITY

The emergence of the Internet as a means of collecting, transmitting and
managing information presents numerous opportunities for government to improve
the way it communicates internally and with its constituents. In many areas,
however, government lags behind the private sector in adopting Internet and
other advanced technologies and is generally unable to adequately recruit and
retain sufficient technology service professionals to implement eGovernment
strategies. Procurement reform has paved the way for government organizations to
obtain outsourced technology services faster and easier than before to meet this
growing demand. According to International Data Corporation, overall government
spending on information technology services is expected to increase from
$11.8 billion in 1997 to $17.3 billion in 2002. Government spending on Internet
services alone is expected to grow at approximately a 56% compound annual rate,
reaching $2.8 billion in 2003.

1
<PAGE>
We believe that the government market for technology services is unlike the
private sector market due to a combination of factors including:

- most agencies have made substantial investments in legacy systems and are
forced by budgetary constraints to update rather than replace these
systems;

- government systems must handle extremely large amounts of data;

- many agencies have large and widely dispersed workforces;

- government's need to protect sensitive and personal information requires
heightened security; and

- agencies must operate in a complex environment of strict government
regulations.

OUR ADVANTAGE

Our focus on eGovernment solutions enables us to address an organization's
most difficult technology challenges. From the executive management level to our
project leaders, we employ people who have substantial government knowledge and
experience. We use our broad technical skills and capabilities to design
solutions that interface with, and often salvage, the significant investments
that were made in aging legacy systems. For portions of our business, we develop
reusable solution sets, enhanced through numerous client engagements, that allow
us to deliver results to our clients faster, cheaper and with greater
reliability.

OUR STRATEGY

Our goal is to strengthen our position as a leading eGovernment solutions
provider. To achieve this goal, we plan to:

- maintain our leadership position in emerging technologies such as the
Internet and advanced security;

- increase Federal government market penetration through new and existing
clients;

- enhance our brand and culture to continue to attract and retain clients
and top quality professionals;

- expand into state and local government and selected highly-regulated
commercial markets where we can capitalize on our government domain
expertise; and

- undertake a disciplined acquisition program to broaden our client base,
service offerings and geographic presence.

2
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common stock offered:
By PEC Solutions......................... shares
By the selling stockholders.............. shares (a)
Total.................................. shares

Common stock to be outstanding after the
offering................................. shares (b)

Use of proceeds.............................. The net proceeds to us from the offering are
estimated to be $ million. We will
use the net proceeds for general corporate
purposes, including working capital and
potential acquisitions. See "Use of
Proceeds."

Proposed Nasdaq National Market symbol....... PECS
</TABLE>

UNLESS STATED OTHERWISE, THE INFORMATION IN THIS PROSPECTUS:

- ASSUMES OUR COMMON STOCK WILL BE SOLD AT $ PER SHARE, WHICH IS THE
MID-POINT OF THE RANGE SET FORTH ON THE COVER OF THIS PROSPECTUS;

- ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED; AND

- GIVES EFFECT TO OUR THREE-FOR-ONE STOCK SPLIT UPON OUR REINCORPORATION IN
DELAWARE ON JANUARY 1, 2000.

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

(a) If the underwriters fully exercise their over-allotment option, the selling
stockholders will sell additional shares of common stock through
the offering.

(b) The number of shares of common stock to be outstanding after the offering
excludes (1) options to purchase 2,834,445 shares of common stock
outstanding at December 31, 1999, at a weighted average exercise price of
$3.52 per share, and (2) 750,000 shares of common stock reserved for
issuance upon exercise of options that may be granted during 2000 under the
2000 stock incentive plan.

3
<PAGE>
SUMMARY FINANCIAL DATA
(In thousands, except per share data)

The following table presents summary historical financial data for our
business. You should read the following summary financial data together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and related notes included elsewhere in
this prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- -------------------
1995 1996 1997 1998 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................. $11,146 $16,216 $24,630 $41,457 $29,042 $38,593
Gross profit (a)...................... 4,970 6,907 10,754 17,942 12,712 16,524
Operating income...................... 1,555 2,203 3,615 6,891 5,246 6,272
Net income............................ 1,093 1,452 2,305 4,455 3,378 3,976
Earnings per share:
Basic............................. $ 0.13 $ 0.16 $ 0.26 $ 0.52 $ 0.39 $ 0.47
Diluted........................... 0.11 0.14 0.21 0.40 0.30 0.34
</TABLE>

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

(a) Gross profit represents revenues less direct costs, which consist primarily
of project personnel salaries and benefits and direct expenses incurred to
complete projects.

The following table presents summary balance sheet data as of September 30,
1999. The as adjusted information illustrates the impact of the offering.

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
--------------------------
ACTUAL AS ADJUSTED
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 7,993
Working capital............................................. 12,138
Total assets................................................ 22,732
Long-term debt.............................................. --
Total stockholders' equity.................................. 13,562
</TABLE>

4
<PAGE>
RISK FACTORS

BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD UNDERSTAND THAT SUCH AN
INVESTMENT INVOLVES RISK. YOU SHOULD CAREFULLY CONSIDER THESE RISK FACTORS AS
WELL AS ALL OF THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE YOU
DECIDE TO PURCHASE SHARES OF OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS
ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS COULD BE
ADVERSELY AFFECTED. IN SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE AND YOU MIGHT LOSE ALL OR PART OF YOUR INVESTMENT.

RISKS RELATED TO OUR BUSINESS

SUBSTANTIALLY ALL OF OUR REVENUES ARE DERIVED FROM ENGAGEMENTS WITH AGENCIES
OF THE FEDERAL GOVERNMENT

Our largest clients are agencies of the Federal government. If the Federal
government in general, or any significant government agency, uses less of our
services or terminates its relationship with us, our revenues could decline
substantially, and our business could be seriously harmed. For the nine months
ended September 30, 1999, contracts with the Federal government and contracts
with prime contractors of the Federal government accounted for approximately 95%
of our revenues. During that same period, our ten largest clients, all agencies
of the Federal government, generated approximately 60% of our revenues, with the
top five clients accounting for 40% of our revenues. We believe that Federal
government contracts are likely to continue to account for a significant portion
of our revenues for the foreseeable future. The volume of work that we perform
for a specific client, however, is likely to vary from year to year, and a
significant client in one year may not use our services as extensively, or at
all, in a subsequent year.

OUR GOVERNMENT CONTRACTS MAY BE TERMINATED PRIOR TO THEIR COMPLETION, AND IF
WE DO NOT REPLACE THEM, OUR OPERATING RESULTS MAY BE HARMED

We derive substantially all of our revenues from government contracts that
typically are awarded through competitive processes and span a one year base
period and one or more option years. The unexpected termination or nonrenewal of
one or more of our significant contracts could result in significant revenue
shortfalls. Our clients generally have the right not to exercise the option
periods. In addition, our contracts typically contain provisions permitting an
agency to terminate the contract on short notice, with or without cause.

Following termination, if the client requires further services of the type
provided in the contract, there is frequently a competitive rebidding process.
We may not win any particular rebid or be able to successfully bid on new
contracts to replace those that have been terminated. Even if we do win the
rebid, we may experience revenue shortfalls in periods where we anticipated
revenues from the contract rather than its termination and subsequent rebidding.
These revenue shortfalls could harm operating results for those periods.

OUR LACK OF LONG-TERM CONTRACTS WITH CLIENTS REDUCES THE PREDICTABILITY OF OUR
REVENUES

Our clients retain us on an engagement-by-engagement basis, rather than
under long-term contracts. We incur costs based on our expectations of future
revenues. Our operating expenses are relatively fixed and cannot be reduced on
short notice to compensate for unanticipated variations in the number or size of
engagements in progress. These factors make it difficult for us to predict our
revenues and operating results. If we fail to predict our revenues accurately,
it may seriously harm our financial condition and results of operation.

5
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A REDUCTION IN OR THE TERMINATION OF OUR SERVICES COULD LEAD TO
UNDERUTILIZATION OF OUR EMPLOYEES AND COULD HARM OUR OPERATING RESULTS

Our employee compensation expenses are relatively fixed. Therefore, if a
client defers, modifies or cancels an engagement or chooses not to retain us for
additional phases of a project, our operating results will be harmed unless we
can rapidly redeploy our employees to other engagements in order to minimize
underutilization.

FAILING TO MAINTAIN STRONG RELATIONSHIPS WITH PRIME CONTRACTORS COULD RESULT
IN A DECLINE IN OUR REVENUES

We derived approximately 42% of our revenues for the nine months ended
September 30, 1999 through our relationships with prime contractors, which, in
turn, have contractual relationships with end-clients. We expect to continue to
depend on these relationships for a material portion of our revenues in the
foreseeable future. If any of these prime contractors eliminate or reduce their
engagements with us, or have their engagements eliminated or reduced by their
end-clients, we will lose a source of revenues, which, if not replaced, will
adversely affect our operating results. One of our prime contractors, Unisys,
accounted for more than 10% of our revenues for the nine months ended
September 30, 1999.

WE MUST RECRUIT AND RETAIN QUALIFIED PROFESSIONALS TO SUCCEED IN OUR
LABOR-INTENSIVE BUSINESS

Our future success depends in large part on our ability to recruit and
retain qualified professionals. Such personnel are in great demand and are
likely to remain a limited resource in the foreseeable future. Competition for
qualified professionals is intense. Any inability to recruit and retain a
sufficient number of these professionals could hinder the growth of our
business.

WE MAY LOSE MONEY ON FIXED-PRICE CONTRACTS IF WE MISCALCULATE THE RESOURCES WE
NEED TO COMPLETE THE CONTRACT

We derived approximately 25% of our revenues in the nine months ended
September 30, 1999 from fixed-price contracts. We anticipate a material portion
of our future engagements will continue to be contracted at a fixed price. If we
miscalculate the resources we need to complete fixed-price engagements, our
operating results could be seriously harmed. The risk that we may miscalculate
the resources we need is higher because we work with complex technologies in
compressed time frames.

WE COULD LOSE REVENUES AND CLIENTS AND EXPOSE OUR COMPANY TO LIABILITY IF WE
FAIL TO MEET CLIENT EXPECTATIONS

We create, implement and maintain technology solutions that are often
critical to our clients' operations. If our technology solutions or other
applications have significant defects or errors or fail to meet our clients'
expectations, we may:

- lose revenues due to adverse client reaction;

- be required to provide additional remediation services to a client at no
charge;

- receive negative publicity, which could damage our reputation and
adversely affect our ability to attract or retain clients; and

- suffer claims for substantial damages against us, regardless of our
responsibility for the failure.

While many of our contracts limit our liability for damages that may arise
from negligent acts, errors, mistakes or omissions in rendering services to our
clients, we cannot be sure that these contractual provisions will protect us
from liability for damages if we are sued. Furthermore, our general liability
insurance coverage may not continue to be available on reasonable terms or in
sufficient amounts to cover one or more large claims, or the insurer may
disclaim coverage as to any future claim. The successful assertion of any large
claim against us could seriously harm our business. Even if not successful, such
claims could result in significant legal and other costs and may be a
distraction to management.

6
<PAGE>
SECURITY BREACHES IN SENSITIVE GOVERNMENT SYSTEMS COULD RESULT IN THE LOSS OF
CLIENTS AND NEGATIVE PUBLICITY

Many of the systems we develop involve managing and protecting information
involved in law enforcement and other sensitive government functions. A security
breach in one of these systems could cause serious harm to our business, could
result in negative publicity and could prevent us from having further access to
such critically sensitive systems or other similarly sensitive areas for other
governmental clients.

IF WE CANNOT OBTAIN THE NECESSARY SECURITY CLEARANCES, WE MAY NOT BE ABLE TO
PERFORM CLASSIFIED WORK FOR THE GOVERNMENT AND OUR REVENUES MAY SUFFER

Government contracts require us, and some of our employees, to maintain
security clearances. If we lose or are unable to obtain security clearances, the
client can terminate the contract or decide not to renew it upon its expiration.
As a result, to the extent we cannot obtain the required security clearances for
our employees working on a particular engagement, we may not derive the revenue
anticipated from the engagement, which, if not replaced with revenue from other
engagements, could seriously harm our operating results.

WE DEPEND ON OUR SENIOR MANAGEMENT TEAM, AND THE LOSS OF ANY MEMBER MAY
ADVERSELY AFFECT OUR ABILITY TO OBTAIN AND MAINTAIN CLIENTS

We believe that our success will depend on the continued employment of our
senior management team, including David Karlgaard, our Chief Executive Officer,
Paul Rice, our Chief Operating Officer and Alan Harbitter, our Chief Technology
Officer. This dependence is particularly important to our business because
personal relationships are a critical element of obtaining and maintaining
client engagements. If one or more members of our senior management team was
unable or unwilling to continue in their present positions, such persons would
be difficult to replace and our business could be seriously harmed. Furthermore,
clients or other companies seeking to develop in-house capabilities may hire
away some of our key employees. Employee defections to clients or competitors
would not only result in the loss of key employees but could also result in the
loss of a client relationship or a new business opportunity. Any losses of
client relationships could seriously harm our business.

WE MAY NOT BE ABLE TO SUCCESSFULLY IDENTIFY, MANAGE AND INTEGRATE FUTURE
ACQUISITIONS, WHICH MAY HARM OUR OPERATING RESULTS

We may use a portion of the proceeds from this offering to acquire companies
or businesses that are complementary to ours. However, we have no immediate
plans or current agreements to acquire any additional companies or businesses,
and we cannot assure you that we will identify appropriate acquisition
candidates. If we do identify an appropriate acquisition candidate, we cannot
assure you that we would be able to successfully negotiate the terms of an
acquisition, finance the acquisition or integrate the acquired business into our
existing business. Negotiations of potential acquisitions and the integration of
an acquired business could disrupt our business by diverting management away
from day-to-day operations. Further, failure to successfully integrate any
acquisition may cause significant operating inefficiencies and adversely affect
our profitability.

AUDITS OF OUR GOVERNMENT CONTRACTS MAY RESULT IN A REDUCTION IN REVENUES WE
RECEIVE FROM THOSE CONTRACTS

Federal government agencies routinely audit government contracts. These
agencies review a contractor's performance on its contract, pricing practices,
cost structure and compliance with applicable laws, regulations and standards.
An audit could result in a substantial adjustment to our revenues because any
costs found to be improperly allocated to a specific contract will not be
reimbursed, while improper costs already reimbursed must be refunded. If a
government audit uncovers improper or illegal activities, we may be subject to
civil and criminal penalties and administrative sanctions, including termination
of contracts, forfeiture of profits, suspension of payments, fines and

7
<PAGE>
suspension or debarment from doing business with Federal government agencies. In
addition, we could suffer serious reputational harm if allegations of
impropriety were made against us.

WE MAY BE LIABLE FOR PENALTIES UNDER A VARIETY OF PROCUREMENT RULES AND
REGULATIONS, AND CHANGES IN GOVERNMENT REGULATIONS COULD SLOW OUR GROWTH OR
REDUCE OUR PROFITABILITY

We must comply with and are affected by Federal government regulations
relating to the formation, administration and performance of government
contracts. These regulations affect how we do business with our clients and may
impose added costs on our business. Any failure to comply with applicable laws
and regulations could result in contract termination, price or fee reductions or
suspension or debarment from contracting with the Federal government. Further,
the Federal government may reform its procurement practices or adopt new
contracting methods relating to the GSA schedule or other government-wide
contract vehicles. If we are unable to successfully adapt to those changes, our
business could be seriously harmed.

OUR FAILURE TO ADEQUATELY PROTECT OUR CONFIDENTIAL INFORMATION AND PROPRIETARY
RIGHTS MAY HARM OUR COMPETITIVE POSITION

While our employees execute confidentiality agreements, we cannot guarantee
that this will be adequate to deter misappropriation of our confidential
information. In addition, we may not be able to detect unauthorized use of our
intellectual property in order to take appropriate steps to enforce our rights.
If third parties infringe or misappropriate our copyrights, trademarks or other
proprietary information, our competitive position could be seriously harmed. In
addition, other parties may assert infringement claims against us or claim that
we have violated their intellectual property rights. Such claims, even if not
true, could result in significant legal and other costs and may be a distraction
to management. While we have applied for trademarks for PEC.com, PEC, PEC
Solutions, Web-enabling Government and the related symbols and designs, we
cannot assure you that these trademarks will be granted.

RISKS RELATED TO THE EGOVERNMENT SOLUTIONS MARKET

COMPETITION COULD RESULT IN PRICE REDUCTIONS, REDUCED PROFITABILITY AND LOSS
OF MARKET SHARE

Competition in the market for eGovernment solutions is intense. If we are
unable to differentiate our services from those of our competitors, our revenue
growth and operating margins may decline. Many of our competitors are larger and
have greater financial, technical, marketing and public relations resources,
larger client bases and greater brand or name recognition than us. Our larger
competitors may be able to provide clients with additional benefits, including
reduced prices. We may be unable to meet those prices, which may cause us to
lose business and market share. Alternatively, we could decide to meet the lower
prices, which could harm our profitability. If we fail to compete successfully,
our business could be seriously harmed.

Our current competitors include, and may in the future include, the
following:

- information technology services providers and large government contractors
such as American Management Systems, Andersen Consulting, Booz-Allen &
Hamilton, Computer Sciences Corporation, Electronic Data Systems, KPMG,
PricewaterhouseCoopers, Science Applications International Corporation and
Unisys; and

- Internet professional services providers.

Current and potential competitors also have established or may establish
cooperative relationships among themselves or with third parties to increase
their ability to address client needs. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. In addition, some of our competitors may develop
services that are superior to, or have greater market acceptance than, the
services that we offer.

8
<PAGE>
OUR BUSINESS WILL BE HARMED IF GOVERNMENT AGENCIES ARE UNWILLING TO REPLACE OR
SUPPLEMENT EXPENSIVE LEGACY SYSTEMS

Government agencies have spent substantial resources over an extended period
of time to develop computer systems and to train their personnel to use them.
These agencies may be reluctant to abandon or supplement these legacy systems
with Internet and other advanced technology systems because of the cost of
developing them or the additional cost of re-training their personnel. Such
reluctance would make it more difficult to acquire new engagements which would
harm our business prospects.

OUR BUSINESS WILL BE HARMED IF THE ACCEPTANCE AND ADOPTION OF EGOVERNMENT
SOLUTIONS DOES NOT CONTINUE TO GROW

If the acceptance and adoption of Internet and other advanced technology
solutions for government applications does not continue to grow, or grows more
slowly than expected, our growth would decline and our business would be harmed.
The widespread acceptance and adoption of these solutions for conducting
government business is likely only in the event that they provide governmental
entities with greater efficiencies and operating improvements.

OUR GROWTH WILL BE HARMED IF A VIABLE MARKET FOR EGOVERNMENT SERVICES IS NOT
SUSTAINED

We cannot be certain that a viable government market for Internet and other
advanced technology services will be sustainable. If this market is not
sustained and we are unable to refocus our services on the private sector market
or other in-demand technologies, our growth would be negatively affected.
Although government agencies have recently increased focus on and funding for
technology initiatives, we cannot be certain that these initiatives will
continue in the future. Budget cutbacks or political changes could result in a
change of focus or reductions in funding for technology initiatives, which, in
turn, could seriously harm our revenues.

UNDISCOVERED YEAR 2000 PROBLEMS COULD NEGATIVELY AFFECT OUR CLIENTS' SYSTEMS,
WHICH COULD HARM OUR REVENUES AND OUR REPUTATION

Although we have not experienced any significant failures or problems in
connection with the Year 2000 date change in either our software or the systems
we have developed for our clients, our clients may still experience significant
problems that may require them to divert significant resources to remediation
instead of to eGovernment solutions. This could delay our ability to generate
new business and additional revenues.

Furthermore, undiscovered Year 2000 problems may also affect software or
code that we develop or third-party software products that are incorporated into
the information systems solutions we create for our clients. Our clients license
software directly from third parties, and we do not guarantee that the software
licensed from these suppliers is Year 2000 compliant. However, any failure on
our part to provide Year 2000 compliant information systems solutions to our
clients could result in financial loss, harm to our reputation and liability to
others and could seriously harm our business, financial condition and operating
results.

RISKS RELATED TO THE OWNERSHIP OF OUR COMMON STOCK

OUR QUARTERLY REVENUES AND OPERATING RESULTS COULD BE VOLATILE AND MAY CAUSE
OUR STOCK PRICE TO FLUCTUATE

Our quarterly revenues and operating results may fluctuate significantly in
the future. In particular, if the Federal government does not adopt a budget for
its fiscal year beginning on October 1, Federal agencies may be forced to
suspend our contracts due to a lack of funding. Consequently, we may realize
lower revenues in the quarter ending December 31. Further, the rate at which the
Federal government procures technology may be negatively affected following
changes in Presidential

9
<PAGE>
administrations and in senior government officials. As a result, our operating
results could be volatile and difficult to predict and period-to-period
comparisons of our operating results may not be a good indication of our future
performance.

A significant portion of our operating expenses, such as personnel and
facilities costs, are fixed in the short term. Therefore, any failure to
generate revenues according to our expectations in a particular quarter could
result in reduced income in the quarter. In addition, our quarterly operating
results may not meet the expectations of securities analysts or investors, which
in turn may have an adverse effect on the market price of our common stock.

OUR OFFICERS AND DIRECTORS WILL OWN % OF OUR STOCK AND COULD CONTROL MATTERS
SUBMITTED TO STOCKHOLDERS FOR THEIR APPROVAL

Upon completion of this offering, our directors and executive officers will
beneficially own, in the aggregate, % of our outstanding common stock, or
% if the underwriters exercise their over-allotment option. As a result,
these stockholders will be able to exercise control over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing a change in control of PEC Solutions.

WE HAVE VARIOUS MECHANISMS IN PLACE THAT MAY PREVENT A CHANGE IN CONTROL THAT
STOCKHOLDERS MAY CONSIDER FAVORABLE

Our certificate of incorporation and bylaws may discourage, delay or prevent
a change in control of PEC Solutions that stockholders may consider favorable.
Our certificate of incorporation and bylaws:

- authorize the issuance of blank check capital stock that could be issued
by our board of directors to thwart a takeover attempt;

- classify the board of directors into staggered, three-year terms, which
may lengthen the time required to gain control of our board of directors;

- prohibit cumulative voting in the election of directors, which would
otherwise allow holders of less than a majority of the stock to elect some
directors;

- require super-majority voting to effect amendments to provisions of our
bylaws concerning the number of directors;

- limit who may call special meetings of stockholders;

- prohibit stockholder action by written consent, requiring all actions to
be taken at a meeting of the stockholders;

- establish advance notice requirements for nominating candidates for
election to the board of directors or for proposing matters that can be
acted upon by stockholders at stockholder meetings; and

- require that vacancies on the board of directors, including newly-created
directorships, be filled only by a majority vote of directors then in
office.

In addition, Section 203 of the Delaware General Corporation Law may
discourage, delay or prevent a change in control by prohibiting PEC Solutions
from engaging in a business combination with an interested stockholder for a
period of three years after the person becomes an interested stockholder. See
"Description of Our Capital Stock--Anti-Takeover Effects of Our Certificate of
Incorporation and Bylaws and Delaware General Corporation Law."

10
<PAGE>
PURCHASERS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE DILUTION AS THE NET
TANGIBLE BOOK VALUE OF THE SHARES OF COMMON STOCK WILL BE SUBSTANTIALLY
LOWER THAN THE OFFERING PRICE

The initial public offering price of the shares of common stock is
substantially higher than the net tangible book value per share of the
outstanding common stock. As a result, if we were liquidated for book value
immediately following this offering, each stockholder purchasing in this
offering would experience immediate dilution of $ per share of common
stock. Dilution is the difference between the offering price per share and the
net tangible book value per share of our common stock. See "Dilution" for a
discussion about how net tangible book value is calculated.

EXISTING STOCKHOLDERS CAN SELL A SUBSTANTIAL AMOUNT OF THEIR SHARES IN THE
PUBLIC MARKET AFTER THIS OFFERING, WHICH COULD DEPRESS OUR STOCK PRICE AND
MAKE IT MORE DIFFICULT FOR US TO RAISE CAPITAL

Sales of a substantial number of shares of our common stock, including
shares issued upon the exercise of outstanding options, in the public market
after this offering could cause the market price of our common stock to fall. A
decline in our stock price could impair our ability to raise capital through the
sale of additional equity securities. For a description of the shares of our
common stock that are available for future sale, see "Shares Eligible for Future
Sale."

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. Forward-looking statements relate to future events
or our future financial performance. All projections contained in this
prospectus are forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause our or our
industry's actual results, levels of activity, performance or achievements to be
materially different from any results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

In some cases, you can identify forward-looking statements by terminology
like "may," "will," "should," "expects," "plans," "projects," "anticipates,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of these terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially. In evaluating these
statements, you should specifically consider various factors, including the
risks outlined under "Risk Factors."

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreoever, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform these statements to actual results
and do not intend to do so.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the common stock being sold in this
offering. This prospectus constitutes a part of that registration statement.
This prospectus does not contain all the information set forth in the
registration statement and the exhibits and schedules to the registration
statement, because some parts have been omitted in accordance with the rules and
regulations of the Commission. For further information with respect to us and
our common stock being sold in this offering, you should refer to the
registration statement and the exhibits and schedules filed as part of the
registration statement. Statements contained in this prospectus regarding the
contents of any agreement, contract or other document referred to are not
necessarily complete; reference is made in each instance to the copy of the
contract or document filed as an exhibit to the registration statement. Each
statement is qualified by reference

11
<PAGE>
to the exhibit. You may inspect a copy of the registration statement without
charge at the Commission's principal office in Washington, D.C. Copies of all or
any part of the registration statement may be obtained after payment of fees
prescribed by the Commission from:

- the Commission's Public Reference Room at the Commission's principal
office, 450 Fifth Street, N.W., Washington, D.C. 20549;

- the Commission's regional offices in:

- New York, located at 7 World Trade Center, Suite 1300, New York, New York
10048; or

- Chicago, located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.

You may obtain information regarding the operation of the Public Reference
Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an
Internet site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The Commission's World Wide Web address is www.sec.gov.

We intend to furnish holders of our common stock with annual reports
containing, among other information, audited financial statements certified by
an independent public accounting firm and quarterly reports containing unaudited
condensed financial information for the first three quarters of each fiscal
year. We intend to furnish such other reports as we may determine or as may be
required by law.

CORPORATE INFORMATION

We are a Delaware corporation that was originally incorporated in Virginia
in 1985 as Performance Engineering Corporation. On January 1, 2000, we
reincorporated into Delaware by merging the Virginia corporation into a
wholly-owned Delaware subsidiary, PEC Solutions, Inc. Concurrently with the
reincorporation, we effected a three-for-one stock split. Our principal offices
are located at 12750 Fair Lakes Circle, Fairfax, Virginia 22033 and our
telephone number is (703) 679-4900. Our Internet web site is at www.pec.com. The
information on our web site does not constitute a part of this prospectus.

We have applied for trademarks for the following: PEC.com, PEC, PEC
Solutions, Web-enabling Government and the related symbols and designs. This
prospectus also contains trademarks and trade names of other companies.

12
<PAGE>
USE OF PROCEEDS

The net proceeds from the sale of the shares of common stock
offered by us will be approximately $ million, based on an assumed initial
public offering price of $ per share and after deducting the underwriting
discounts and commissions and estimated offering expenses. We will not receive
any proceeds from the sale of the shares to be sold by the selling
stockholders or the shares to be sold by the selling stockholders if
the underwriters exercise their over-allotment option.

The primary purposes of this offering are to create a public market for our
common stock, to improve the incentive mechanism for our professionals through
stock options, to obtain additional equity capital and to facilitate future
access to public markets. We expect to use the net proceeds from this offering
for general corporate purposes, including working capital. Management will have
broad discretion in the allocation of the net proceeds. We may also use a
portion of the net proceeds to acquire businesses that are complementary to
ours. We have no current plans, agreements or commitments for, and are not
currently engaged in any negotiations with respect to, any such transaction.
Pending their use, the proceeds of this offering will be invested in short-term,
investment grade, interest-bearing securities.

DIVIDEND POLICY

Prior to this offering, we have declared and paid annual cash dividends on
our capital stock. In January 1999 and January 2000, we paid dividends of $0.04
and $0.047 per share, respectively. After this offering, we expect to retain
future earnings, if any, for use in the operation and expansion of our business
and do not anticipate paying any further cash dividends in the foreseeable
future. Our board of directors will determine whether to pay dividends in the
future based on conditions then existing, including our earnings, financial
conditions and capital requirements, as well as economic and other conditions as
the board of directors may deem relevant.

13
<PAGE>
CAPITALIZATION

The following table sets forth our cash position and capitalization as of
September 30, 1999:

- on an actual basis; and

- on an as adjusted basis to give effect to the sale of shares
of common stock offered by us at an assumed initial public offering price
of $ per share in this offering, after deducting underwriting
discounts and commissions and estimated offering expenses.

You should read this information in conjunction with our financial
statements and the related notes beginning on page F-1 of this prospectus.

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
--------------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C>
(UNAUDITED)
Cash and cash equivalents................................... $ 7,993
===========
Long-term obligations:
Long-term debt............................................ $ --
Deferred compensation..................................... 232
-----------
Total long-term obligations............................. 232
-----------
Stockholders' equity:
Undesignated capital stock, $0.01 par value per share,
10,000,000 shares authorized............................ --
Common stock, $0.01 par value per share, 75,000,000 shares
authorized; 8,546,526 shares issued and outstanding
(actual); shares issued and outstanding (as
adjusted)............................................... 85
Additional paid-in capital................................ 683
Retained earnings......................................... 12,794
-----------
Total stockholders' equity.............................. 13,562
-----------
Total capitalization.................................. $ 13,794
===========
</TABLE>

14
<PAGE>
DILUTION

Our net tangible book value as of September 30, 1999 was $ or
$ per share. Net tangible book value is the amount of total tangible assets
less total liabilities. Net tangible book value per share is net tangible book
value divided by the number of shares of common stock outstanding.

Dilution to new investors represents the difference between the amount per
share paid by purchasers of common stock in this offering and the net tangible
book value per share of common stock immediately after completion of this
offering. Following the sale of common stock in this offering at an assumed
initial public offering price of $ per share, our net tangible book value
as of September 30, 1999 would have been $ , or $ per share. This
represents an immediate increase in net tangible book value of $ per share
to our existing stockholders, and an immediate dilution in net tangible book
value of $ per share to purchasers of common stock in this offering. The
following table illustrates this per share dilution.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
-------
Net tangible book value per share as of September 30,
1999.................................................... $
Increase per share attributable to new investors..........
-------
Net tangible book value per share after this offering.......
-------
Dilution per share to new investors......................... $
=======
</TABLE>

The following table summarizes as of September 30, 1999, the difference
between the number of shares of common stock purchased from us, the total
consideration paid to us and the average price paid by existing stockholders and
by the new investors purchasing shares of common stock in this offering, before
deduction of underwriting discounts and commissions and estimated offering
expenses payable by us:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders.................... 8,546,526 % $768,254 % $0.09
New stockholders......................... $
---------- ----- -------- -----
Total.................................. 100.0% $ 100.0%
========== ===== ======== =====
</TABLE>

The foregoing table excludes:

- options to purchase 3,144,930 shares of common stock were outstanding as
of September 30, 1999 at a weighted average exercise price of $3.32 per
share; if all outstanding options were exercised, dilution to new
investors would equal $ per share; and

- shares of common stock reserved as of September 30, 1999 for
issuance upon exercise of options that may be granted in the future under
our stock plans.

15
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA

You should read the following selected financial data in conjunction with
our financial statements, the related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," included elsewhere
in this prospectus. The selected financial data as of December 31, 1997 and
1998, and for each of the three years in the period ended December 31, 1998,
have been derived from our audited financial statements included elsewhere in
this prospectus. The selected financial data as of December 31, 1995 and 1996,
and for the year ended December 31, 1995, have been derived from audited
financial statements not included in this prospectus. The selected financial
data for the nine month periods ended September 30, 1998 and 1999, and as of
September 30, 1999, are derived from our unaudited financial statements included
elsewhere in this prospectus. We have prepared this unaudited information on the
same basis as the audited financial statements and have included all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary for a fair presentation of our financial position and operating
results for such periods. Historical results are not necessarily indicative of
future results and operating results for the nine month period ended
September 30, 1999, are not necessarily indicative of the results that may be
expected for the entire year ended December 31, 1999.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- -----------------------
1995 1996 1997 1998 1998 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................... $ 11,146 $ 16,216 $ 24,630 $ 41,457 $ 29,042 $ 38,593
Direct costs....................................... 6,176 9,309 13,876 23,515 16,331 22,069
---------- ---------- ---------- ---------- ---------- ----------
Gross profit (a)................................... 4,970 6,907 10,754 17,942 12,712 16,524
---------- ---------- ---------- ---------- ---------- ----------
Operating costs and expenses:
General and administrative expenses.............. 2,639 3,943 6,117 9,826 6,556 8,797
Sales and marketing expenses..................... 776 761 1,022 1,226 910 1,456
---------- ---------- ---------- ---------- ---------- ----------
Total operating costs and expenses........... 3,415 4,704 7,139 11,052 7,466 10,253
---------- ---------- ---------- ---------- ---------- ----------
Operating income................................... 1,555 2,203 3,615 6,891 5,246 6,272
Other income, net.................................. 155 125 135 199 128 141
---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes......................... 1,710 2,327 3,750 7,089 5,374 6,413
Provision for income taxes......................... 617 876 1,445 2,634 1,997 2,437
---------- ---------- ---------- ---------- ---------- ----------
Net income......................................... $ 1,093 $ 1,452 $ 2,305 $ 4,455 $ 3,378 $ 3,976
========== ========== ========== ========== ========== ==========
Net income per share, basic........................ $ 0.13 $ 0.16 $ 0.26 $ 0.52 $ 0.39 $ 0.47
Net income per share, diluted...................... $ 0.11 $ 0.14 $ 0.21 $ 0.40 $ 0.30 $ 0.34
Number of shares used in computing net income per
share, basic..................................... 8,646,468 8,868,020 8,917,732 8,602,176 8,605,247 8,528,322
Number of shares used in computing net income per
share, diluted................................... 9,702,626 10,323,860 11,007,907 11,153,022 11,107,573 11,742,168
</TABLE>

- ------------------------------
(a) Gross profit represents revenues less direct costs, which consist primarily
of project personnel salaries and benefits and direct expenses incurred to
complete projects.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
----------------------------------------- SEPTEMBER 30,
1995 1996 1997 1998 1999
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 1,432 $ 1,708 $ 4,520 $ 5,367 $ 7,993
Working capital.......................................... 2,998 4,504 6,762 9,309 12,138
Total assets............................................. 4,896 7,743 13,931 18,535 22,732
Long-term debt........................................... -- -- -- -- --
Total long-term liabilities.............................. -- -- -- 105 232
Stockholders' equity..................................... 4,942 6,011 7,962 10,677 13,562
</TABLE>

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING SECTION SHOULD BE READ IN CONJUNCTION WITH THE "SELECTED
HISTORICAL FINANCIAL DATA" AND OUR FINANCIAL STATEMENTS AND THE NOTES THERETO
INCLUDED ELSEWHERE IN THIS PROSPECTUS. IN ADDITION TO HISTORICAL INFORMATION,
THIS DISCUSSION AND ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS, UNCERTAINTIES AND ASSUMPTIONS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM MANAGEMENT'S EXPECTATIONS. FACTORS THAT COULD CAUSE SUCH
DIFFERENCES INCLUDE THOSE DISCUSSED IN "RISK FACTORS."

OVERVIEW

PEC Solutions is a professional services firm specializing in high-end
solutions that help government organizations capitalize on the Internet and
other advanced technologies. We migrate paper-intensive procedures to
web-enabled processes using eGovernment solutions that help our clients enhance
their productivity and improve the services they offer to the public. As a total
solutions provider, we address the full technology lifecycle, including
formulating technology strategies creating business solutions, performing
long-term operational management and continuing enhancement of the solution.

We derive substantially all of our revenues from fees for consulting
services. We generate these fees from contracts with various payment
arrangements, including time and materials contracts, fixed-price contracts and
cost-reimbursable contracts. For the nine months ended September 30, 1999,
revenues from these contract types were approximately 59%, 25% and 16%,
respectively, of total revenues. We typically issue invoices monthly to manage
outstanding accounts receivable balances. We recognize revenues on time and
materials contracts as the services are provided. We recognize revenues on
fixed-price contracts using the percentage of completion method as services are
performed over the life of the contract, based on the costs we incur in relation
to the total estimated costs. We recognize and make provisions for any
anticipated contract losses at the time we know and can estimate them.
Fixed-price contracts are attractive to clients, and while subject to increased
risks, provide opportunities for increased margins. We recognize revenues on
cost-reimbursable contracts as services are provided. These revenues are equal
to the costs incurred in providing these services plus a proportionate amount of
the fee earned. We have historically recovered all of our costs on
cost-reimbursable contracts, which means we have lower risk and our margins are
lower on these contracts.

Our historical revenue growth is attributable to various factors, including
an increase in the size and number of projects for existing and new clients.
Existing clients from the previous fiscal year generated approximately 89% of
our revenues in 1999 and approximately 90% of our revenues in 1998. We have also
expanded our geographic presence by opening offices in Baltimore, Maryland and
Denver, Colorado. As of December 31, 1999, we had 429 employees.

In 1999, we derived approximately 42% of our revenues through relationships
with prime contractors, who contract directly with the end-client and
subcontract with us. In most of these engagements, we retain full responsibility
for the end-client relationship and direct and manage the activities of our
contract staff.

Our most significant expense is direct costs, which consist primarily of
project personnel salaries and benefits, and direct expenses incurred to
complete projects. Our direct costs as a percentage of revenues are also related
to our consultant utilization. We manage utilization by frequently monitoring
project requirements and timetables. The number of consultants assigned to a
project will vary according to the size, complexity, duration and demands of the
project.

General and administrative expenses consist primarily of costs associated
with our executive management, finance and administrative groups, human
resources, unassigned consultants, employee

17
<PAGE>
training, occupancy costs, depreciation and amortization, travel, and all other
branch and corporate costs.

Sales and marketing expenses include the costs of sales and marketing
personnel and costs associated with marketing and bidding on future projects.

RESULTS OF OPERATIONS

The following table sets forth certain financial data as a percentage of
revenues for the periods indicated.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ ----------------------
1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Direct costs.......................................... 57.4 56.3 56.7 56.2 57.2
----- ----- ----- ----- -----
Gross profit (a)...................................... 42.6 43.7 43.3 43.8 42.8
----- ----- ----- ----- -----
Operating costs and expenses:
General and administrative expenses................. 24.3 24.8 23.7 22.6 22.8
Sales and marketing expenses........................ 4.7 4.1 3.0 3.1 3.8
----- ----- ----- ----- -----
Total operating costs and expenses................ 29.0 29.0 26.7 25.7 26.6
----- ----- ----- ----- -----
Operating income...................................... 13.6 14.7 16.6 18.1 16.3
Other income, net..................................... 0.8 0.5 0.5 0.4 0.4
----- ----- ----- ----- -----
Income before income taxes............................ 14.4 15.2 17.1 18.5 16.6
Provision for income taxes............................ 5.4 5.9 6.4 6.9 6.3
----- ----- ----- ----- -----
Net income............................................ 9.0% 9.4% 10.7% 11.6% 10.3%
===== ===== ===== ===== =====
</TABLE>

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

(a) Gross profit represents revenues less direct costs, which consist primarily
of project personnel salaries and benefits and direct expenses incurred to
complete projects.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1998

REVENUES. Revenues increased 32.9% to $38.6 million for the nine months
ended September 30, 1999 from $29.0 million for the nine months ended
September 30, 1998. The increase in revenues primarily reflects increases in the
volume of services to existing and new clients.

DIRECT COSTS. Direct costs increased 35.1% to $22.1 million for the nine
months ended September 30, 1999 from $16.3 million for the nine months ended
September 30, 1998. The increase was due primarily to an increase in project
personnel to 344 as of September 30, 1999 as compared to 273 as of
September 30, 1998. Direct costs increased as a percentage of revenues to 57.2%
for the nine months ended September 30, 1999, from 56.2% for the nine months
ended September 30, 1998. This increase was principally related to normal
fluctuations in labor and other direct costs.

GROSS PROFIT. Gross profit increased 30.0% to $16.5 million for the nine
months ended September 30, 1999 from $12.7 million for the nine months ended
September 30, 1998. Gross profit as a percentage of revenues decreased to 42.8%
for the nine months ended September 30, 1999 from 43.8% for the nine months
ended September 30, 1998 because direct costs grew at a faster rate than
revenues. Direct costs grew at a faster rate than revenues due to normal
fluctuations in labor and other direct costs.

18
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 34.2% to $8.8 million for the nine months ended September 30, 1999
from $6.6 million for the nine months ended September 30, 1998. These expenses
grew at a rate less than the growth rate in revenues and direct costs. These
costs, such as rent and other facility costs, recruiting expenses and
depreciation of equipment purchased, were related to the increase in project
personnel. Our total general and administrative headcount increased to 44
employees as of September 30, 1999 compared to 36 employees as of September 30,
1998. Facilities costs also increased for the nine months ended September 30,
1999 due to new offices opened in Fairfax County, Virginia and Baltimore,
Maryland.

SALES AND MARKETING. Sales and marketing expenses increased 60.0% to
$1.5 million for the nine months ended September 30, 1999 from $0.9 million for
the nine months ended September 30, 1998. This increase was due to an increase
in our marketing staff and our marketing efforts.

OPERATING INCOME. Operating income increased 19.6% to $6.3 million for the
nine months ended September 30, 1999 from $5.2 million for the nine months ended
September 30, 1998.

YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997

REVENUES. Revenues increased 68.3% to $41.5 million in 1998 from
$24.6 million in 1997. The increase in revenues primarily reflects increases in
the volume of services to existing and new clients.

DIRECT COSTS. Direct costs increased 69.5% to $23.5 million in 1998 from
$13.9 million in 1997. The increase was due primarily to an increase in project
personnel to 312 as of December 31, 1998 as compared to 188 as of December 31,
1997. Direct costs increased as a percentage of revenues to 56.7% in 1998 from
56.3% in 1997 due to normal fluctuations in labor and other direct costs.

GROSS PROFIT. Gross profit increased 66.8% to $17.9 million in 1998 from
$10.8 million in 1997. Gross profit as a percentage of revenues decreased to
43.3% in 1998 from 43.7% in 1997 as direct costs grew at a faster rate than
revenues due to an increase in personnel costs.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 60.6% to $9.8 million in 1998 from $6.1 million in 1997. These
expenses grew at a rate less than the growth rate in revenues and direct costs.
These costs, such as rent and other facility costs, recruiting expenses and
depreciation of equipment purchased, were related to the increase in project
personnel. Additionally, our total general and administrative headcount
increased to 34 employees as of December 31, 1998 compared to 26 employees as of
December 31, 1997.

SALES AND MARKETING. Sales and marketing expenses increased 20.0% to
$1.2 million in 1998 from $1.0 million in 1997. This increase was due to an
increase in our marketing efforts.

OPERATING INCOME. Operating income increased 90.6% to $6.9 million in 1998
from $3.6 million in 1997. This increase was due primarily to increased revenues
and decreased costs as a percent of revenues.

YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996

REVENUES. Revenues increased 51.9% to $24.6 million in 1997 from
$16.2 million in 1996. The increase in revenues primarily reflects increases in
the volume of services to existing and new clients.

DIRECT COSTS. Direct costs increased 49.1% to $13.9 million in 1997 from
$9.3 million in 1996. The increase was due primarily to an increase in project
personnel to 188 as of December 31, 1997 as compared to 144 as of December 31,
1996. Direct costs decreased as a percentage of revenues to 56.3% in 1997 from
57.4% in 1996. This decrease was primarily related to normal fluctuations in
labor and other direct costs.

19
<PAGE>
GROSS PROFIT. Gross profit increased 55.7% to $10.8 million for the year
ended December 31, 1997 from $6.9 million for the year ended December 31, 1996.
Gross profit as a percentage of revenues increased to 43.7% for the year ended
December 31, 1997 from 42.6% for the year ended December 31, 1996 as revenues
grew at a faster rate than direct costs.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased 55.1% to $6.1 million in 1997 from $3.9 million in 1996. These
expenses grew at a rate less than the growth rate in revenues and direct costs.
These costs, such as rent and other facility costs, recruiting expenses and
depreciation of equipment purchased, were related to the increase in project
personnel. Our total general and administrative headcount increased to 26
employees as of December 31, 1997 compared to 17 employees as of December 31,
1996. Facilities costs also increased in 1997 due to new offices opened in
Fairfax County, Virginia.

SALES AND MARKETING. Sales and marketing expenses increased 34.3% to
$1.0 million in 1997 from $0.8 million in 1996. This increase was due to an
increase in our marketing efforts.

OPERATING INCOME. Operating income increased 64.1% to $3.6 million in 1997
from $2.2 million in 1996. This increase was due primarily to increased revenues
and decreased costs as a percent of revenues.

20
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1998 1998 1998 1998 1999 1999 1999
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................... $8,036 $9,895 $11,111 $12,415 $11,813 $13,386 $13,394
Direct costs....................................... 4,645 5,268 6,418 7,184 6,989 7,462 7,618
------ ------ ------- ------- ------- ------- -------
Gross profit (a)................................... 3,391 4,627 4,693 5,231 4,824 5,924 5,776
------ ------ ------- ------- ------- ------- -------
Operating costs and expenses:
General and administrative expenses.............. 1,851 2,342 2,363 3,270 2,895 3,143 2,759
Sales and marketing expenses..................... 200 290 420 316 475 432 549
------ ------ ------- ------- ------- ------- -------
Total operating costs and expenses............. 2,051 2,632 2,783 3,586 3,370 3,575 3,308
------ ------ ------- ------- ------- ------- -------
Operating income................................... 1,341 1,995 1,910 1,645 1,455 2,349 2,468
Other income, net.................................. 41 32 55 71 47 31 63
------ ------ ------- ------- ------- ------- -------
Income before income taxes......................... 1,382 2,027 1,965 1,715 1,502 2,380 2,531
Provision for income taxes......................... 514 753 730 637 570 905 962
------ ------ ------- ------- ------- ------- -------
Net income......................................... $ 869 $1,274 $ 1,235 $ 1,077 $ 932 $ 1,475 $ 1,569
====== ====== ======= ======= ======= ======= =======
AS A PERCENTAGE OF REVENUES:
Revenues........................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Direct costs....................................... 57.8 53.2 57.8 57.9 59.2 55.7 56.9
------ ------ ------- ------- ------- ------- -------
Gross profit (a)................................... 42.2 46.8 42.2 42.1 40.8 44.3 43.1
------ ------ ------- ------- ------- ------- -------
Operating costs and expenses:
General and administrative expenses.............. 23.0 23.7 21.3 26.3 24.5 23.5 20.6
Sales and marketing expenses..................... 2.5 2.9 3.8 2.5 4.0 3.2 4.1
------ ------ ------- ------- ------- ------- -------
Total operating costs and expenses............. 25.5 26.6 25.0 28.9 28.5 26.7 24.7
------ ------ ------- ------- ------- ------- -------
Operating income................................... 16.7 20.2 17.2 13.3 12.3 17.5 18.4
Other income, net.................................. 0.5 0.3 0.5 0.6 0.4 0.2 0.5
------ ------ ------- ------- ------- ------- -------
Income before income taxes......................... 17.2 20.5 17.7 13.8 12.7 17.8 18.9
Provision for income taxes......................... 6.4 7.6 6.6 5.1 4.8 6.8 7.2
------ ------ ------- ------- ------- ------- -------
Net income......................................... 10.8% 12.9% 11.1% 8.7% 7.9% 11.0% 11.7%
====== ====== ======= ======= ======= ======= =======
</TABLE>

- ------------------------
(a) Gross profit represents revenues less direct costs, which consist primarily
of project personnel salaries and benefits and direct expenses incurred to
complete projects.

Our revenues and operating results may be subject to significant variation
from quarter to quarter depending on a number of factors, including the progress
of contracts, revenues earned on contracts, the commencement and completion of
contracts during any particular quarter, the schedule of the government agencies
for awarding contracts, the term of each contract that we have been awarded and
general economic conditions. Because a significant portion of our expenses, such
as personnel and facilities costs, are fixed in the short term, successful
contract performance and variation in the volume of activity as well as in the
number of contracts commenced or completed during any quarter may cause
significant variations in operating results from quarter to quarter.

The Federal government's fiscal year ends September 30. If a budget for the
next fiscal year has not been approved by that date, our clients may have to
suspend engagements that we are working on until a budget has been approved.
Such suspensions may cause us to realize lower revenues in the fourth quarter of
the year. Further, a change in Presidential administrations and in senior
government officials may negatively affect the rate at which the Federal
government purchases technology.

21
<PAGE>
As a result of the factors above, period to period comparisons of our
revenues and operating results may not be meaningful. You should not rely on
these comparisons as indicators of future performance as no assurances can be
given that quarterly results will not fluctuate, causing a material adverse
effect on our operating results and financial condition.

LIQUIDITY AND CAPITAL RESOURCES

We have primarily funded our operations from cash flow generated from
operations. In addition, we maintain a line of credit providing for borrowings
of up to $2.7 million with Bank of America, which bears interest at the bank's
prime rate and expires on April 30, 2001. We expect to renew our line of credit
when it expires. As of September 30, 1999, we had no borrowings outstanding
under the line of credit. We did have outstanding $0.7 million in letters of
credit in lieu of rent deposits. Capital expenditures of approximately
$0.5 million for the nine months ended September 30, 1999 and approximately
$0.9 million, $0.7 million and $0.3 million for 1998, 1997 and 1996,
respectively, consisted primarily of computers, office equipment and leasehold
improvements related to our growth. Inflation did not have a material impact on
our revenues or income from operations in 1998, 1997 and 1996, or the nine
months ended September 30, 1999. As of September 30, 1999, we had cash of
$8.0 million, and we believe that the net proceeds from the sale of the common
stock offered hereby, together with cash provided from operations, borrowings
available under the lines of credit and existing cash will be sufficient to meet
working capital and capital expenditure requirements for at least the next
24 months.

YEAR 2000 COMPLIANCE

Although we have not experienced any significant failures or problems in
connection with the Year 2000 date change in either our software or the systems
we have developed for our clients, our clients may still experience significant
problems that may require them to divert significant resources to remediation
instead of to new eGovernment solutions. This could delay our ability to
generate new business and additional revenues.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS 133, as
amended, is effective for quarters beginning after June 15, 2000. Currently, we
do not use derivative financial instruments. As a result, we do not expect
SFAS 133 to have a material impact on our results of operations or financial
position.

22
<PAGE>
BUSINESS

OVERVIEW

PEC Solutions is a professional services firm specializing in high-end
solutions that help government organizations capitalize on the Internet and
other advanced technologies. We migrate paper-intensive procedures to
web-enabled processes using eGovernment solutions that help our clients enhance
their productivity and improve the services they offer to the public. As a total
solutions provider, we address the full technology lifecycle, including
formulating technology strategies, creating business solutions, performing
long-term operational management and continuing enhancement of the solution.

Our clients have included every cabinet-level department of the Federal
government as well as numerous additional entities at the Federal, state and
local levels. This group includes a cross-section of civil, law enforcement,
intelligence and judicial government organizations. Our largest clients include
the Drug Enforcement Administration, the Immigration and Naturalization Service,
the Veterans Benefits Administration, the Internal Revenue Service, the Bureau
of Alcohol, Tobacco and Firearms and the intelligence community. Since 1995, we
have provided more than $145 million of services in the government market and
have increased revenues at approximately a 48% compound annual growth rate.

INDUSTRY BACKGROUND

The emergence and adoption of the Internet as a means of gathering,
communicating and managing information continues to open up new possibilities
for businesses and organizations to dramatically improve productivity and
effectiveness. Government has emerged in recent years as one of the leading
purchasers of Internet and other advanced technology solutions. According to
Federal Sources, Inc., the Federal government is the world's largest single
buyer of technology services and products. With respect to technology services,
International Data Corporation estimates that government spending will increase
from $11.8 billion in 1997 to $17.3 billion in 2002. Government spending on
Internet professional technology services alone is expected to grow at
approximately a 56% compound annual growth rate, reaching $2.8 billion in 2003.

GOVERNMENT REFORM IS DRIVING GROWTH IN ADVANCED TECHNOLOGY SPENDING

We believe that political pressures and budgetary constraints are forcing
government agencies at all levels to improve their processes and services and to
operate more like commercial enterprises. Organizations throughout the Federal,
state and local governments are investing heavily in information technology to
improve effectiveness, enhance productivity and extend new services in order to
deliver increasingly responsive and cost-effective public services. We believe
that Internet technologies provide an ideal solution to meet government's needs.

Recent Federal government procurement reform has streamlined the
government's buying practices, resulting in a more commercial approach to the
procurement and management of technologies and services. As a result,
procurement lead times have decreased and government buyers now have greater
flexibility to purchase services on the basis of distinguishing corporate
capabilities and successful past performance. Federal government entities now
are able to award contracts based on factors other than price alone, if they
judge that the government would receive a greater value. In addition, the
General Services Administration's extension of basic government-wide contract
vehicles for procuring technology components and services, the GSA Schedules,
makes purchasing technology services easier and faster. Federal government
buyers can now order services directly from pre-approved providers instead of
using a time-consuming bid solicitation process.

23
<PAGE>
GOVERNMENT'S NEED TO OUTSOURCE TECHNOLOGY PROGRAMS

Government organizations rely heavily on outside contractors to provide
skilled resources to accomplish technology programs. In 1999 alone, according to
Electronics Industry Association estimates, the Federal government outsourced
$26 billion of its $30 billion information technology budget. We believe that
this reliance will continue to intensify due to political and budgetary
pressures in many government agencies and due to the difficulties government
faces in recruiting and retaining highly skilled technology professionals in a
competitive labor market. In concert with its transition to more commercial
practices, government is increasingly outsourcing technology programs as a means
of simplifying the implementation and management of the technology, so that
government workers can focus on their mission.

TECHNOLOGY SERVICES PROVIDERS IN THE GOVERNMENT SECTOR

Engagements in the government market can be broadly classified into four
categories based on the type of services provided. Many companies provide a mix
of services across these categories.

First, at the low end, providing information technology staff augmentation
at low hourly rates typically involves placing staff in client facilities. These
engagements typically exhibit low operating margins and slow growth.

Second, large-scale systems integration and outsourcing engagements
typically involve assuming responsibility for acquiring, assembling and
operating large inventories of equipment and software. Major portions of these
engagements involve reselling commodity technologies at highly competitive fixed
unit prices. These engagements typically exhibit moderate growth, but low
operating margins.

Third, large-scale systems development engagements involve providing
full-service solutions that combine hardware, software development, system
engineering and operations. These engagements typically exhibit moderate growth
and operating margins.

Fourth, at the high end, engagements involving high-value management
consulting and development and integration of complex systems in core mission
areas use specialized or emerging technologies such as the Internet and advanced
security. These engagements typically exhibit strong growth and operating
margins.

CHALLENGES IN THE GOVERNMENT TECHNOLOGY SERVICES SECTOR

Technology services providers face a unique combination of challenges when
providing services to the government. These include:

- substantial government investments in legacy systems that are not readily
adaptable to evolving technologies;

- extremely large volumes of data collected and retained in government
databases;

- large and widely dispersed workforces, often consisting of tens of
thousands of knowledge workers located in hundreds of sites throughout the
United States and the world;

- heightened security concerns due to the need to protect individual privacy
and extraordinarily sensitive information; and

- complex management needs that require a combination of strategic planning
capabilities, government domain expertise, public sector procurement savvy
and cutting-edge technology skills.

24
<PAGE>
OUR SOLUTION

We are a high-end technology solutions provider that addresses the needs and
particular challenges of the evolving government market by combining the
following key elements in our eGovernment solutions:

TOTAL SOLUTIONS PROVIDER CAPABILITIES

As a total solutions provider, we address the full technology lifecycle
through our deep technical capabilities and extensive government domain
knowledge. We possess a wide range of the specialized skills needed for
eGovernment engagements including: strategic technology consulting; program
management; system architectural design; network engineering; applications
development; and systems integration, deployment and operational support. We
relieve our clients of the details of the application and management of
technologies so they can focus on their core competencies and mission. Our
mission-critical solutions integrate an organization's back-office processes and
legacy systems with customized applications, and enhance the interoperability
and accessibility of critical enterprise data.

EXTENSIVE GOVERNMENT DOMAIN EXPERIENCE

Our founders, who have worked together for more than 20 years in the
government marketplace, have substantial technical and management backgrounds.
Our management maintains close working relationships with our clients and an
active role in our projects, resulting in consistent contract performance and
broad recognition of our managers. Our consulting staff is knowledgeable in the
government sector application of technology management policy formulation,
acquisition strategy, business process re-engineering and best-value procurement
methods.

DEEP TECHNOLOGY EXPERTISE

We have expertise in the critical underlying infrastructure technologies
necessary to support fully web-based enterprises, including security, intranets,
applications development and enterprise management. We have direct experience
with the legacy automation architectures found in government agencies, allowing
us to craft solutions that take advantage of the substantial investments our
clients have in legacy systems. Our employees have experience in emerging
technologies and web-enabling tools from vendors such as Microsoft, Netscape,
Oracle, Cisco, IBM/Lotus, IBM/Tivoli and Entrust.

REUSABLE SOLUTION SETS

For portions of our business, we develop reusable solution sets that can be
reapplied to requirements commonly encountered in our markets. We develop the
software code and components comprising these reusable solution sets based on
our government domain expertise. These solutions enable us to give our clients
the benefit of our knowledge and experience in addressing complex mission
challenges and to develop and implement eGovernment solutions more quickly and
efficiently. We focus our efforts on customizing solutions to meet our clients'
specific needs and to deliver reliable solutions based on components that have
been tested and perfected through repeated use.

THE PEC PHILOSOPHY--FLEXIBILITY AND OBJECTIVITY

We retain the maximum possible flexibility in the systems and components
that we use in our solutions by maintaining both strong established product
credentials and substantial hands-on experience with emerging products. We focus
on providing strategic and high-end technical service contributions to large
programs, while assisting our clients to assemble, contract with and manage the
vendors of commodity program elements. By remaining independent of specific
vendors, we are able to work with providers that best serve the interests of our
clients.

25
<PAGE>
OUR STRATEGY

Our strategy is to continue to grow by capitalizing on our leadership
position in the eGovernment solutions market. Our strategies for obtaining this
objective include:

MAINTAINING OUR TECHNOLOGY LEADERSHIP POSITION

We will continue to focus on high-end engagements that require specialized
knowledge of emerging technologies. We intend to maintain our technology
leadership by recruiting employees who will add to our inventory of technology
skills and by refining the skills and capabilities of our existing staff through
training, certification and hands-on laboratory experimentation. We also intend
to work closely with our technology partners to share expertise and innovations
and to stay well ahead of competitors in the practical aspects of applying and
integrating emerging technologies.

INCREASING FEDERAL GOVERNMENT MARKET PENETRATION

We intend to capitalize on our long-term relationships with government
clients and our reputation within the government market to cross-sell our full
range of services to our existing client base and to expand into organizations
in the Federal government for which we have not already performed services. We
intend to pursue these opportunities through a continued active sales and
marketing effort and by continuing to promote the success stories stemming from
our aggressive application of eGovernment solutions. We also intend to leverage
our relationships with our technology providers and their sales resources to
obtain new Federal government clients.

ENHANCING THE PEC SOLUTIONS BRAND AND CULTURE

We are implementing an aggressive program to build the identity and
awareness of the PEC Solutions brand in order to improve our visibility in the
marketplace and to attract the best and brightest employees. We intend to hire
and retain outstanding professionals, provide incentives to achieve corporate
goals and maintain a culture that fosters innovation. We will continue to
emphasize professional development and training of our employees. We will
maintain an active internal communications program to promote a team culture and
foster high employee morale. We will also continue to emphasize our corporate
technology infrastructure to facilitate the sharing of knowledge among our
employees.

EXPANDING OUR PRESENCE IN STATE AND LOCAL GOVERNMENT AND SELECTED COMMERCIAL
MARKETS

We intend to leverage our domain expertise and deep technology skills for
providing services to state and local governments. We also intend to expand our
business of web-enabling private sector organizations that operate in highly
regulated industries and that have significant interactions with the government
agencies with which we work. We believe our existing solution sets, such as case
management systems, criminal suspect booking stations, and land and financial
records automation, are applicable to projects at the state and local level, as
well as at private sector organizations.

UNDERTAKING A DISCIPLINED ACQUISITION PROGRAM

We plan to broaden our capabilities and client base and extend our
geographic presence in state and local government markets by acquiring select
businesses. Acquired businesses will perform similar technical work for
organizations outside our current client base, will support solution sets that
are consistent with and extend our web-enabling strategy, or will be located in
geographic areas strategic to significant state and local governments and
programs.

26
<PAGE>
OUR SERVICES

As a provider of eGovernment solutions, we offer a variety of services
across the full technology lifecycle. These services include:

STRATEGY AND DESIGN

We help clients develop the operational vision for integrated mission
solutions, and formulate the business and execution plans for realizing
imaginative, integrated and aggressive technology solutions. We develop
sophisticated enterprise architectures--the technology blueprints and systematic
guidance that allow enterprises to incrementally develop, migrate to and operate
large-scale systems. By re-engineering government processes, we move
organizations to an eGovernment environment. We perform economic analyses to
weigh the costs of technology investment against the operational benefits
expected from such technology implementation. We provide support to
organizations that are executing programs to privatize large-scale information
systems operations, or are undertaking far-reaching changes in their business
models, such as migrating from appropriated to fee-for-service financial models.

SOLUTIONS DEVELOPMENT AND IMPLEMENTATION

We develop, engineer and integrate computer hardware, commercial software,
reusable solution sets, custom-built applications and networks to create
integrated business solutions for our clients. Our emphasis on Internet
technology allows us to combine leading-edge technologies with disciplined and
effective system development methodologies. Our methods are designed to ensure
that the technology fits with business processes and that users realize process
improvement. We distinguish ourselves by addressing the core technical and
business challenges in migrating large government enterprises to integrated
eGovernment solutions. We build:

- INTEGRATED MISSION APPLICATIONS. We integrate complex back-office
business applications and legacy systems with customized mission
applications using the information-sharing capabilities of open
architectures. We also design, develop and install complex custom
application systems that implement knowledge management repositories and
tera-byte data warehousing systems allowing government agencies to mine
the vast storehouses of records that they collect and maintain.

- LARGE-SCALE INTRANET INFRASTRUCTURES. We deploy and manage complex
international network infrastructures: intranets and extranets that
deliver the performance, reliability and flexibility needed to support the
diverse needs of web-enabled organizations with thousands of widely-
dispersed knowledge workers.

- LEADING-EDGE AUTHENTICATION AND ENCRYPTION SECURITY APPLICATIONS. We
apply advanced security technologies such as: public key infrastructure to
manage data encryption systems; biometric authentication to identify
individuals by their physical characteristics; and strong encryption to
protect sensitive information in highly decentralized systems against
unauthorized access and compromised integrity.

- AUTOMATED ENTERPRISE MANAGEMENT SYSTEMS. We develop and deploy processes
and automated tools for our clients to centrally manage and operate
complex national networks of workstations and servers at reduced cost.

ONGOING SYSTEMS MANAGEMENT AND ENHANCEMENT

We provide long-term, ongoing support for our solutions including the
operation, management and enhancement actions necessary to keep solutions
up-to-date with evolving business processes and technologies. We use
sophisticated tools to reduce the burden and costs of maintaining large complex
intranets, and to enhance whole systems without the need to deploy engineers and
field service

27
<PAGE>
technicians to the operating locations of an enterprise. We operate highly
automated enterprise technology management processes that support integration,
configuration management, software distribution and user support, and allow
clients to outsource the responsibilities for maintaining their technology
infrastructures and applications. The results are reduced operating costs for
our clients and improved performance and reliability.

OUR CLIENTS

We generated significant revenue from each of the following departments or
agencies, either directly or through subcontracting relationships, during the
nine months ended September 30, 1999:

<TABLE>
<S> <C>
Bureau of Alcohol, Tobacco & Firearms Drug Enforcement Administration (DEA)
Census Bureau Fairfax County, Virginia
Defense Medical Service Federal Judiciary
Department of Agriculture Health Care Financing Administration
Department of Interior Immigration & Naturalization Service
Department of Transportation Internal Revenue Service
Department of Veterans Affairs Justice Management Division
</TABLE>

We consider each office or division within an agency or department which
directly, or through a prime contractor, engages us as a separate client.
Although contained within a larger organization, each of these clients has
decision-making and contracting authority independent of the larger organization
and its other offices or divisions.

In the nine months ended September 30, 1999, our top five clients
represented 40% of our revenue and our top ten clients represented 60% of
revenues. Our work for the DEA Special Projects Division accounted for more than
10% of our revenues for the nine months ended September 30, 1999.

In the nine months ended September 30, 1999, we derived approximately 42% of
our revenues through relationships with prime contractors, who contract directly
with the end-client and subcontract with us. In most of these engagements, we
retain full responsibility for the end-client relationship with respect to the
portions of the engagement subcontracted to us and direct and manage the
activities of our staff. Of our prime contractors, only Unisys accounted for
more than 10% of our revenues for the nine months ended September 30, 1999.

28
<PAGE>
REPRESENTATIVE CLIENT SOLUTIONS

The following are representative case studies of our eGovernment solutions:

<TABLE>
<S> <C>
A MAJOR FEDERAL LAW ENFORCEMENT AGENCY

Challenge: Securely collect and provide access to investigative
information for law enforcement agents worldwide.

Solution: Design, implement, support and continually enhance an
encrypted, international law enforcement intranet that
stores and protects digital intelligence files for
government agents.

Features and Benefits: This intranet provides integrated administrative,
intelligence and case management applications for more than
11,000 agents and administrative staff around the world. Law
enforcement agents, using intranet services, spend less time
on administrative chores and have more time for
investigative and "on-the-street" activities. Preliminary
studies show a 31-day reduction in the time taken to
formally register an investigative report. We have
incorporated technology into this intranet well beyond that
employed on the public Internet. For example, by using
advanced enterprise management tools, our engineers in
Virginia install and troubleshoot software on personal
computers as far away as California. Using this technology,
we monitor and manage over 230 intranet servers and 7,800
personal computers at over 150 sites with a small team of
engineers in our Virginia offices. In addition, we have
integrated hardware encryption, public key encryption and
digital signature technologies to safeguard critical
investigative information on this intranet.

INTERNAL REVENUE SERVICE ("IRS")

Challenge: Enforce complex tax laws and identify tax return fraud.

Solution: Design, implement, and support a large-scale electronic
fraud detection system to automatically identify patterns of
illegal taxpayer behavior over multiple years.

Features and Benefits: Manual review can detect only a small percentage of
fraudulent returns. The IRS asked us to build what has
become one of the most successful processing systems of the
Tax System Modernization program. The Electronic Fraud
Detection System (EFDS) uses decision support software that
we developed in conjunction with Los Alamos National
Laboratories to process and review every electronic return
(approaching 32 million returns annually) and an increasing
number of manually-filed returns each year. EFDS supports
over 700 tax examiners nationwide. With three full years of
tax return data, comprising over 3.5 terabytes online, EFDS
is among the largest Oracle database systems. The EFDS is an
important part of the IRS plan to achieve the
Congressionally-mandated goal of processing 80% of tax
returns electronically by 2007.
</TABLE>

29
<PAGE>
<TABLE>
<S> <C>
IMMIGRATION AND NATURALIZATION SERVICE ("INS")

Challenge: Provide INS case examiners with an integrated picture of the
refugee, naturalization, criminal and asylum history for
immigrants and aliens, based on information stored in
independent legacy databases.

Solution: Design and build a system that connects an integrated web
browser front end to five legacy INS databases and presents
a complete immigrant/alien profile.

Features and Benefits: We designed and implemented a web-based system that queries
multiple INS mainframe databases and automatically provides
consolidated reports to the INS. INS caseworkers will use
their desktop browsers to connect to a web server that we
developed. Based on requests from the user, the server
automatically queries five different INS databases with
records on over 45 million immigrants and aliens.
Accordingly, INS caseworkers will get a more complete
picture of an immigrant's or alien's history and can gather
data and generate reports much more quickly. Our preliminary
tests indicate that this new system will reduce the time to
respond to a query by over 80%. The INS can realize savings
in user training and employee productivity without having to
abandon its large investment in legacy databases.

BUREAU OF ALCOHOL, TOBACCO AND FIREARMS ("ATF")

Challenge: Provide ATF agents and law enforcement officials across the
country with rapid access to a large repository of
information regarding firearms, arson and explosives, and
other valuable criminal investigative case records,
previously contained in paper files.

Solution: Design, develop, deploy and continue to enhance an
integrated case information and management system that
enables agents to access ATF data stores within the bureau
and enables the ATF to publish crime statistics on the web.

Features and Benefits: ATF agents access and generate large amounts of valuable
intelligence information on firearms, arson, and explosives
in the process of conducting investigations. Prior to our
involvement, many ATF records were paper-based. ATF's
largely manual systems made it difficult and time consuming
to collect, record and correlate data while investigating a
crime. We designed and implemented an integrated knowledge
management system that provides access to seven different
case data repositories under a common framework. By using
our system, ATF agents need to enter case information only
once. The system categorizes the investigative information
and makes it accessible to 2,000 users in over 193 ATF
offices across the nation. Crime statistics derived from
this data are available to the public and local law
enforcement organizations through the ATF web site.
</TABLE>

30
<PAGE>
<TABLE>
<S> <C>
THE CIRCUIT COURT OF FAIRFAX COUNTY, VIRGINIA

Challenge: Preserve and improve public access to over two centuries of
land and legal records for one of the largest local
governments (by revenue) in the United States.

Solution: Design and implement an e-commerce solution using a
web-enabled repository of county public records and
documents.

Features and Benefits: Fairfax County needed a way to preserve aging land records
dating back to 1742, to manage the rapidly increasing volume
of documents and to improve service to the County's
residents and businesses. The web-based land record system
that we designed puts the County's archive--over 14 million
images including deeds, plats, wills and financial
documents--on the Internet. The system has the capacity to
support 20,000 image retrievals per hour. Rather than
waiting in long lines, customers can access these public
documents electronically at a public retrieval station in
the County courthouse. Real estate attorneys and other
businesses that wish to gain access from their offices over
the Internet can do so by paying a subscription fee to the
County.

DRUG ENFORCEMENT ADMINISTRATION ("DEA"), OFFICE OF DIVERSION CONTROL

Challenge: Ensure that the rapid industry movement toward electronic
prescription processing does not result in an increase in
the amount of drugs diverted from legitimate use to the
black market.

Solution: Develop a strategy that employs encryption and digital
signature technology to safeguard prescription fulfillment
and develop a regulatory reporting process that integrates
with the business-to-business transactions between
pharmacies, distributors and drug manufacturers.

Features and Benefits: Three business interfaces are involved in the prescription
fulfillment process: physician-to-pharmacy,
pharmacy-to-distributor and distributor-to-manufacturer. The
pharmacies, distributors and manufacturers already use
electronic data interchange (EDI) technology to process drug
orders. The DEA has hired us to design processes that
integrate with the industry's electronic processes and guard
against diversion but that do not impede the efficiencies
gained by e-commerce. In contrast, physicians are only
beginning to send electronic prescriptions to pharmacies. In
this case, we will design processes using Internet security
technologies that increase the efficiency of prescription
fulfillment, prevent diversion and reduce the chance of
medical error. The DEA is using our skills and experience
with security technologies, including public key
infrastructure and digital signature, to help in this
effort. The conceptual design for this program must
accommodate one million physicians, pharmacies, drug
manufacturers and distributors. The Department of Veterans
Affairs (VA), which employs 4,000 pharmacists nationwide who
fill 68 million prescriptions a year, will conduct the pilot
program. We will work with the VA, our long-time client, to
test the automation and digital protection of prescription
flow and diversion prevention.
</TABLE>

31
<PAGE>
SALES AND MARKETING

Our marketing efforts are focused on creating awareness of opportunities in
eGovernment innovation, establishing PEC Solutions as a leader in this new
category and building the PEC brand.

We market and sell our services through multiple channels by using our
business development staff, leveraging existing client relationships,
capitalizing on our task order contracts, responding to competitive
solicitations, attending marketing events and engaging in other public relations
activities. We employ marketing research services to identify and track
potential contract opportunities. We also cultivate relationships with
leading-edge technology vendors, such as Entrust Technologies and IBM, and prime
contractors, such as Unisys, to identify and obtain project leads consistent
with our capabilities.

We employ a team selling approach, whereby our business developers
collaborate with our service delivery professionals and management to identify
prospects, conduct sales and manage client relationships. Our Vice President of
Strategic Programs coordinates the activities of our business development staff.
We allocate business developers to each of our business units who pursue new
clients and programs across their market segments. Each current client is
assigned to a relationship manager who is responsible for ensuring client
satisfaction and successful project performance, and identifying new business
opportunities with the client.

CULTURE, PEOPLE AND RECRUITING

We have developed a corporate culture that promotes excellence in job
performance, respect for the ideas and judgment of our colleagues and
recognition of the value of the unique skills and capabilities of our
professional staff. We seek to attract highly qualified and ambitious staff. We
strive to establish an environment in which all employees can make their best
personal contribution and have the satisfaction of being part of a unique team.
We believe that we have successfully attracted and retained highly skilled
employees because of the quality of our work environment, the professional
challenge of our assignments, and the financial and career advancement
opportunities we make available to our staff.

We occupy state-of-the art facilities that are conducive to highly technical
and collaborative work, while providing individual privacy. In our solutions
centers, we configure large networks of leading-edge equipment and software, and
provide our engineers and developers with advanced tools to evaluate and apply
new technologies. We believe that the location, environment and amenities
provided by our new Fair Lakes campus facility will contribute to our ability to
attract and retain highly skilled employees.

As of December 31, 1999, we had 429 employees. Of our employees, 382 were
consulting and service delivery professionals, and 47 were management and
administrative personnel performing corporate marketing, human resources,
finance, accounting, legal, internal information systems and administrative
functions. None of our employees is represented by a collective bargaining unit.

In addition to standard company benefits, we provide:

- tuition reimbursement for employees pursuing advanced academic degrees;

- professional training programs;

- financial incentives for employees obtaining product competency
certifications;

- a bonus program;

- spot cash awards to reward specific employee accomplishments; and

- stock option grants based on job performance.

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<PAGE>
We invest heavily in technical staff recruiting resources and hiring
programs. Each of our business units is staffed with a dedicated recruiter, and
we aggressively use a variety of recruiting methods, including advertising, job
fairs, open houses and Internet-based career placement services. We also offer
substantial awards and recognition to our current employees for referrals, which
has been particularly effective in identifying and recruiting talented staff.

We have developed an active and effective college recruiting program that
draws on management staff and recent college hires from across the company to
attract graduating students with strong academic backgrounds in our core
disciplines. We currently target colleges and universities in Washington, D.C.,
Maryland, and Virginia with this program, and perform on-campus recruiting
during the spring and fall recruiting seasons at five universities.

COMPETITION

Our current competitors include, and may in the future include, the
following:

- information technology services providers and large government contractors
such as American Management Systems, Andersen Consulting, Booz, Allen &
Hamilton, Computer Sciences Corporation, Electronic Data Systems, KPMG,
PricewaterhouseCoopers, Science Applications International Corporation and
Unisys; and

- Internet professional services providers.

Many of our competitors have long operating histories and strong client
relationships, greater financial, technical, marketing and public relations
resources, larger client bases and greater brand or name recognition than we
have.

We believe that the major competitive factors in our market relate to a
company's distinctive technical capabilities, successful past contract
performance, reputation for quality and key management and marketing staff.
Under best-value procurement methods, price is an important, but secondary,
factor in the selection of a technology service provider.

FACILITIES

In January 2000, we moved our headquarters to a new 96,000 square foot
building in Fairfax, Virginia. We have a 14-year lease on this new facility with
two five-year options to extend. This building will be part of a corporate
campus facility being constructed on our behalf.

We have additional operating facilities throughout the metropolitan
Washington, D.C. area and the nation. In addition to our facilities in Fairfax
County, Virginia, we lease operating facilities in Baltimore, Maryland and
Denver, Colorado. We also have employees working at client sites throughout the
United States.

LEGAL PROCEEDINGS

Although we are not involved in any material legal proceedings, from time to
time we become a party to legal proceedings arising in the ordinary course of
business. Any such proceeding, even if the claims are without merit, could
result in us spending significant financial and managerial resources.

33
<PAGE>
MANAGEMENT

OUR DIRECTORS AND EXECUTIVE OFFICERS

The following table shows information about our directors, executive
officers and certain key employees:

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
David C. Karlgaard, Ph.D.................... 53 Chief Executive Officer, President and
Chairman of the Board of Directors
Paul G. Rice................................ 46 Chief Operating Officer and Director
Alan H. Harbitter........................... 42 Chief Technology Officer and Director
Stuart R. Lloyd............................. 56 Chief Financial Officer, Senior Vice President
and Director
Christos Bratiotis.......................... 56 Senior Vice President
Charles E. Owlett........................... 46 Senior Vice President
William J. Scharf........................... 53 Senior Vice President
Sharon M. Owlett............................ 49 Director
Jesse Brown (a)(b).......................... 55 Director
Alvin E. Nashman, Ph.D. (a)(b).............. 73 Director
</TABLE>

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

(a) Member of the Compensation Committee.

(b) Member of the Audit Committee.

DAVID C. KARLGAARD, PH.D. has been our Chief Executive Officer, President
and Chairman of the Board of Directors since October 1985 when he and
Messrs. Rice and Harbitter founded the company. From 1975 to 1984, he held
various management positions with Computer Sciences Corporation, where he worked
with Messrs. Rice and Harbitter. Dr. Karlgaard received his doctorate degree in
electrical engineering and computer science from The George Washington
University and an M.B.A. from the Wharton Business School. Dr. Karlgaard has
also lectured as a professor at The George Washington University School of
Business and Public Management since 1994.

PAUL G. RICE has been our Chief Operating Officer since January 1996 and a
Director since October 1985. From October 1985 until December 1995, he was our
Vice President and then Senior Vice President, Operations. Prior to the founding
of the company, Mr. Rice served in various technical management positions at
Computer Sciences Corporation from June 1975 to September 1985. Mr. Rice
received his B.S. in electrical engineering from the University of Virginia.

ALAN H. HARBITTER has been our Chief Technology Officer since May 1996 and a
Director since October 1985. He was our Senior Vice President, Engineering from
January 1991 until April 1996 and the Vice President, Engineering from
October 1985 to January 1991. From July 1978 to September 1985, Mr. Harbitter
served in various technical management positions at Computer Sciences
Corporation. Mr. Harbitter received his B.S. in electrical engineering from
Cornell University, an M.S. in computer science from the University of Maryland
and is currently pursuing a doctorate in information technology at George Mason
University.

STUART R. LLOYD has been our Senior Vice President and Chief Financial
Officer since December 1998 and a Director since May 1999. Mr. Lloyd was a
partner at Gelman, Rosenberg & Freedman, a certified public accounting firm,
from February 1993 until December 1998. From September 1981 until
February 1993, he was the principal at his own certified public accounting firm.
Mr. Lloyd is a certified public accountant and received his B.S. in business
administration from The American University.

CHRISTOS BRATIOTIS has been our Senior Vice President, Engineering
Operations since April 1999. Mr. Bratiotis was our Vice President, Engineering
Division from April 1996 to April 1999. Prior to that, he served as Vice
President, Information Systems for Synetics, a federal information technology

34
<PAGE>
company, from January 1992 until April 1996. Mr. Bratiotis received a B.A. in
mathematics from Clark University and an M.B.A. from the University of Utah.

CHARLES E. OWLETT has served as our Senior Vice President, Development
Operations since April 1999. Mr. Owlett was our Vice President, Systems
Integration Division from January 1996 until March 1999 and our Vice President,
Systems Development Division from January 1990 until December 1995. Prior to
joining us, he served in various technical and management positions with
Computer Sciences Corporation from 1975 to 1988. He received his B.S. in
electrical engineering from the Florida Institute of Technology. Mr. Owlett is
the husband of Sharon Owlett.

WILLIAM J. SCHARF has been our Senior Vice President, Enterprise Resource
Operations since April 1999. Mr. Scharf was our Vice President, Information
Technology Management Division from January 1996 until March 1999 and our Vice
President, Applied Systems Division from January 1990 until December 1995. Prior
to joining us, he served as a program director with CACI International, a
technology consulting services company, from 1985 to 1987. Mr. Scharf received
his B.A. in mathematics from the University of Dayton and his M.S. in applied
statistics from Villanova University.

SHARON M. OWLETT has been a Director since January 1990. Since
December 1998, Ms. Owlett has served as a senior consultant. Prior to this
position, she was our Vice President, Corporate Affairs and General Counsel from
January 1994 until November 1998. Between 1988 and 1994, Ms. Owlett served as
our director of business and legal affairs and as our director of finance and
administration. She has a B.A. in political science from The American University
and a J.D. from the University of Virginia. Ms. Owlett is the wife of Charles
Owlett.

JESSE BROWN has been a Director since July 1998. Mr. Brown was Secretary of
the Department of Veterans Affairs from January 1993 until July 1997, and since
July 1997, has been Chief Executive Officer of Brown & Associates, a consulting
firm. Mr. Brown presently serves on the board of directors of Roy F.
Weston, Inc. and MAXIMUS, Inc.

ALVIN E. NASHMAN, PH.D. has been a Director since July 1998. Dr. Nashman
retired from Computer Sciences Corporation as President of the Systems Group in
1991 and served as member of Computer Science Corporation's board of directors
until 1996. He currently serves as a consultant for Trawick Associates and
Unitech Inc., both of which are technology consulting services companies.
Dr. Nashman also is a member of the board of directors of Halifax Corporation
and Micros to Mainframes, Inc.

CLASSIFIED BOARD OF DIRECTORS

Our certificate of incorporation and bylaws provide for a classified board
of directors consisting of three classes of directors, each serving staggered
three-year terms. As a result, a portion of our board of directors will be
elected each year. To implement the classified structure, prior to consummation
of the offering, two members of the board will be elected to one-year terms, two
will be elected to two-year terms and three will be elected to three-year terms.
Thereafter, directors will be elected for three-year terms. Messrs. Karlgaard
and Nashman will be Class I directors with terms expiring at the 2000 annual
meeting of stockholders, Messrs. Rice and Brown will be Class II directors, with
terms expiring at the 2001 annual meeting of stockholders, and
Messrs. Harbitter and Lloyd and Ms. Owlett will be Class III directors, with
terms expiring at the 2002 annual meeting of stockholders.

BOARD COMMITTEES

Our by-laws provide that our board of directors may designate one or more
board committees. We currently have an audit committee and a compensation
committee.

Our audit committee, currently comprised of Mr. Brown and Dr. Nashman,
recommends to our board of directors the independent auditors to conduct the
annual audit of our books and records; reviews the proposed scope and results of
the audit; approves the audit fees to be paid; reviews accounting and financial
controls with the independent public accountants and our financial and

35
<PAGE>
accounting staff; and reviews and approves transactions between us and our
directors, officers and affiliates.

Our compensation committee, currently comprised of Mr. Brown and
Dr. Nashman, reviews and recommends the compensation arrangements for
management, including the compensation for our President and Chief Executive
Officer; establishes and reviews general compensation policies with the
objective to attract and retain superior talent, to reward individual
performance and to achieve our financial goals; and administers our stock option
plans.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 1999, members of our compensation committee were Dr. Karlgaard and
Messrs. Rice and Harbitter. None of our executive officers served as a member of
the board of directors or compensation committee of any other entity that had
one or more executive officers serving as a member of our board of directors or
compensation committee. Dr. Karlgaard is our President and Chief Executive
Officer, Mr. Rice is our Chief Operating Officer and Mr. Harbitter is our Chief
Technology Officer.

COMPENSATION OF DIRECTORS

Our non-employee directors receive $1,000 for each board or committee
meeting attended. We also reimburse them for reasonable expenses they incur to
attend board and committee meetings. Our non-employee directors are eligible to
receive grants of options to acquire our common stock pursuant to our
nonqualified stock option plan. In addition, Ms. Owlett receives wages on an
hourly basis for part-time services she provides to us.

EXECUTIVE COMPENSATION

The following table summarizes the compensation paid to our Chief Executive
Officer and the other four most highly paid executive officers for the year
ended December 31, 1999, whom we refer to as our named executive officers:

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION (A)
<S> <C> <C> <C> <C>
David C. Karlgaard......................... $261,019 $77,217 180,000 $36,799
Chief Executive Officer, President and
Chairman of the Board of Directors
Paul G. Rice............................... 191,610 77,217 180,000 36,820
Chief Operating Officer and Director
Alan H. Harbitter.......................... 167,378 77,217 90,000 36,166
Chief Technology Officer and Director
William J. Scharf.......................... 143,021 42,000 24,000 23,176
Senior Vice President
Stuart R. Lloyd............................ 140,005 40,051 15,000 18,357
Chief Financial Officer, Senior Vice
President and Director
</TABLE>

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

(a) Represents (i) dollar value of life and health insurance premiums we paid of
$1,626 for Dr. Karlgaard, $1,647 for Mr. Rice, $993 for Mr. Harbitter,
$1,152 for Mr. Scharf and $1,800 for Mr. Lloyd; (ii) contributions we made
to the executive supplemental retirement plan in the amount of $23,723 for
each of Dr. Karlgaard and Messrs. Rice and Harbitter, $10,574 for
Mr. Scharf and $5,107 for Mr. Lloyd; and (iii) contributions we made under
our 401(k) plan for each named executive officer in the amount of $11,450.

36
<PAGE>
OPTIONS GRANTS IN 1999

The following table sets forth information regarding options granted to the
named executive officers.

We recommend caution in interpreting the financial significance of the
figures representing the potential realizable value of the stock options. They
are calculated by multiplying the number of shares underlying the options
granted by the difference between a future hypothetical stock price and the
option exercise price and are shown pursuant to rules of the SEC. They assume
the market price of common stock appreciates 5% or 10% each year, compounded
annually, for the applicable term of the option. They are not intended to
forecast possible future appreciation, if any, of our stock price or to
establish a present value of options. Also, if appreciation does occur at the 5%
or 10% per year rate, the amounts shown would not be realized by the recipients
until the year 2003 or 2008. Depending on inflation rates, these amounts may be
worth significantly less in those years, in real terms, than their value today.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM
----------------------------------------------------- -----------------------------------
PERCENT OF
NUMBER OF TOTAL BASED
SECURITIES OPTIONS ON
UNDERLYING GRANTED TO INITIAL
OPTIONS EMPLOYEES EXERCISE EXPIRATION OFFERING
NAME GRANTED (A) IN 1999 (B) PRICE (C) DATE 5% 10% PRICE
<S> <C> <C> <C> <C> <C> <C> <C>
David C. Karlgaard.... 180,000 23.8% $6.24 (d) $669,948 $1,687,989
Paul G. Rice.......... 180,000 23.8 6.24 (d) 669,948 1,687,989
Alan H. Harbitter..... 90,000 11.9 6.24 (d) 317,935 796,371
William J. Scharf..... 12/31/03 14,099 31,154
9,000 15,000 1.2 2.0 5.67 6.09 (e) 40,205 97,496
Stuart R. Lloyd....... 15,000 2.0 6.09 4/20/04 25,240 55,769
</TABLE>

- ------------------------
(a) All options were granted under our stock option agreement and nonqualified
stock option plan. Options granted under the stock option agreement vest
two years from the date of grant. Options granted under the nonqualified
stock option plan vest on the date of grant.

(b) Based on options to purchase 755,775 shares of our common stock granted to
employees in 1999.

(c) The options were granted at an exercise price equal to the fair market value
of the underlying common stock on the respective dates of grant.

(d) Options to purchase 16,023 shares expire on December 31, 2003. Options to
purchase the remaining shares expire on December 31, 2008.

(e) Options to purchase 8,031 shares expire on April 20, 2004. Options to
purchase 6,969 shares expire on April 20, 2009.

37
<PAGE>
OPTION EXERCISES AND YEAR-END OPTION VALUES

The value of unexercised options at December 31, 1999, is calculated on the
basis of the initial public offering price of our common stock, less the
exercise price payable for those shares, multiplied by the number of shares
underlying the option.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED IN-
UNEXERCISED OPTIONS AT THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED (A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
David C. Karlgaard.... 79,575 775,602 43,023
Paul G. Rice.......... 79,575 775,602 43,023
Alan H. Harbitter..... 53,100 352,977 43,023
William J. Scharf..... 21,600 34,902 43,098
Stuart R. Lloyd....... 5,511 -- 39,489
</TABLE>

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

(a) Calculated on the basis of the initial public offering price of our common
stock, less the following exercise prices: $1.26 per share for
Dr. Karlgaard and Messrs. Rice and Harbitter; $1.14 per share with respect
to 6,000 shares, $1.56 per share with respect to 7,800 shares and $2.20 per
share with respect to 7,800 shares for Mr. Scharf; and $4.08 per share for
Mr. Lloyd; multiplied by the number of shares acquired.

NONQUALIFIED EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN

In December 1998, we entered into a nonqualified executive supplemental
retirement program agreement with each of the named executive officers. Under
this plan, each named executive officer may defer a percentage of his salary
each year, which, with the amount he defers under our 401(k) plan, may not
exceed 15%. In addition, each executive officer may elect to defer any bonuses
awarded to him. Any deferred salary and bonus amounts vest immediately. We also
may make voluntary contributions to each executive officer's account, which will
vest five years from the date we make the contribution. We will invest or use
deferred amounts as we deem appropriate.

Upon reaching the age of 65, the executive officer may elect to receive the
deferred amount as adjusted for investment gains and losses. Each executive
officer also may elect to begin receiving payment from his deferred account upon
reaching the age of 55, if he retires from our company and agrees not to compete
against us for a period of five years. Deferred amounts will be paid in three
equal annual payments.

EMPLOYMENT ARRANGEMENTS

We have entered into employment agreements with Dr. Karlgaard and
Messrs. Rice and Harbitter. The agreements have initial terms of two years and
are automatically extended for additional one year terms. If Dr. Karlgaard,
Mr. Rice or Mr. Harbitter is terminated for any reason other than for cause or
terminates his agreement for good reason, the employment agreements provide that
he is entitled to receive severance payments over a period equal to the greater
of the remaining term of his agreement or one year. The employment agreements
restrict Dr. Karlgaard and Messrs. Rice and Harbitter from competing with us for
a period of two years following termination of employment.

On December 31, 1998, we entered into an employment agreement with Stuart
Lloyd. The agreement has an initial term of five years and is automatically
extended for additional one year terms unless we, by providing one year's
notice, elect not to renew the agreement. Mr. Lloyd, by providing 90 days
notice, can terminate the agreement before the end of the current term. Under
this agreement, Mr. Lloyd receives an initial annual base salary that will be
increased at specified rates through 2001 and will be subject to adjustment by
our board of directors and our compensation committee thereafter. He also may
receive an annual cash bonus of up to 20% of his then current salary under

38
<PAGE>
our fall bonus plan, based upon performance objectives set by our senior
management, and another cash bonus under our spring bonus plan not to exceed our
net income margin as a percentage of his base salary. Mr. Lloyd, along with the
other named executive officers, also receives beneficial use of an automobile.

Upon signing his employment agreement, Mr. Lloyd was granted options to
purchase 30,000 shares of common stock at $4.08 per share. In the event that
Mr. Lloyd determines to exercise any of these options through the use of
proceeds borrowed from a third party lender, we have agreed that we will
guarantee the loan on the condition that we receive a collateral security
interest in the common stock acquired upon exercise. If, during the term of his
employment agreement, we terminate Mr. Lloyd's employment without cause, he will
be entitled to, in one lump sum, the base salary, bonus, all employee benefits
and stock options he would have received over the remainder of the term of the
agreement. In addition, if we terminate Mr. Lloyd's employment without good
reason following a change of control, he will be entitled to the compensation he
would have received had the agreement been fully performed. Mr. Lloyd has agreed
to a non-competition provision that will be in effect during the term of his
agreement and for two years after the agreement is terminated unless terminated
as a result of a breach by us of one of the agreement's provisions.

Each named executive officer has agreed to preserve the confidentiality and
the proprietary nature of all information relating to our business during and
after the term of his employment.

STOCK OPTION AGREEMENT AND NONQUALIFIED STOCK OPTION PLAN

We adopted our stock option agreement in February 1987 and our nonqualified
stock option plan in January 1995. The 1987 stock option agreement provides for
the grant of stock options to our employees, including executive officers, that
are intended to qualify as incentive stock options within the meaning of
Section 422 of the Internal Revenue Code. The 1995 nonqualified stock option
plan provides for the grant of stock options to employees and directors that are
not intended to qualify as incentive stock options. The exercisability of
options granted under the 1987 stock option agreement may in certain
circumstances be accelerated in connection with an acquisition event, as defined
in the agreement.

As of December 31, 1999, we had outstanding options to purchase an aggregate
of 2,838,180 shares of common stock under the 1987 stock option agreement and
the 1995 nonqualified stock option plan. Options granted under the 1987 stock
option agreement generally vest two years from the date of grant. Options
granted under the 1995 nonqualified stock option plan vest immediately. No
further options will be granted under the 1987 stock option agreement or the
1995 nonqualified stock option plan. Options granted under the 1987 stock option
agreement or the 1995 nonqualified stock option plan will remain outstanding
according to their terms.

2000 STOCK INCENTIVE PLAN

We adopted our 2000 stock incentive plan in January 2000. This plan
authorizes the grant of:

- stock options;

- stock appreciation rights;

- stock awards;

- phantom stock;

- performance awards; and

- other stock-based awards.

39
<PAGE>
The compensation committee of our board of directors administers our 2000
stock incentive plan. The committee has sole power and authority, consistent
with the provisions of this plan, to determine which eligible participants will
receive awards, the form of the awards and the number of shares of our common
stock covered by each award. The committee may impose terms, limits,
restrictions and conditions upon awards, and may modify, amend, extend or renew
awards, to accelerate or change the exercise timing of awards or to waive any
restrictions or conditions to an award.

The number of shares of common stock available for issuance under our 2000
stock incentive plan during 2000 is 750,000. Beginning in 2001, the number of
shares eligible for grant in each year will be equal to the sum of (i) 6.25% of
the number of outstanding shares on January 1 of that year plus (ii) the number
of shares eligible for grant in the prior year that were not granted. No more
than 7,500,000 shares may be issued pursuant to incentive stock options during
the 10-year term of the plan. As of January 20, 2000, we had not issued any
shares of common stock or options to purchase shares of common stock under this
plan.

STOCK OPTIONS. Our 2000 stock incentive plan permits the granting of
options to purchase shares of our common stock intended to qualify as incentive
stock options under the Internal Revenue Code and stock options that do not
qualify as incentive options. The option exercise price of each option will be
determined by the committee. The term of each option will be fixed by the
committee. The committee will determine at what time or times each option may be
exercised and, the period of time, if any, after retirement, death, disability
or termination of employment during which options may be exercised.

STOCK APPRECIATION RIGHTS. The committee may grant a right to receive a
number of shares or, in the discretion of the committee, an amount in cash or a
combination of shares and cash, based on the increase in the fair market value
of the shares underlying the right during a stated period specified by the
committee.

STOCK AWARDS. The committee may award shares of our common stock, cash, or
a combination of shares of common stock and cash, to participants at no cost or
for a purchase price. These stock awards may be subject to restrictions or may
be free from any restrictions under our 2000 stock incentive plan. The committee
shall determine the applicable restrictions. The purchase price of the shares of
our common stock will be determined by the committee.

PHANTOM STOCK. The committee may grant stock equivalent rights, or phantom
stock, which entitle the recipient to receive credits which are ultimately
payable in the form of cash, shares of our common stock or a combination of
both. Phantom stock does not entitle the holder to any rights as a stockholder.

PERFORMANCE AWARDS. The committee may grant performance awards to
participants entitling the participants to receive cash, shares of our common
stock, or a combination of both, upon the achievement of performance goals and
other conditions determined by the committee. The performance goals may be based
on our operating income, or on one or more other business criteria selected by
the committee.

OTHER STOCK-BASED AWARDS. The committee may grant other stock-based awards.
These stock-based awards may be denominated in cash, in common stock, or other
securities, in stock-equivalent units, in stock appreciation units, in
securities or debentures convertible into common stock, or in any combination of
the foregoing and may be paid in common stock or other securities, in cash, or
in a combination of common stock or other securities and cash, all as determined
in the sole discretion of the committee.

40
<PAGE>
2000 EMPLOYEE STOCK PURCHASE PLAN

Our employee stock purchase plan, which we adopted in January 2000, provides
for the issuance of up to 1,000,000 shares of common stock. This plan, which is
intended to qualify under Section 423 of the Internal Revenue Code, provides our
employees with an opportunity to purchase shares of our common stock through
payroll deductions.

All of our employees, including directors who are employees, are eligible to
participate in the purchase plan. Options to purchase our common stock will
initially be granted to each eligible employee on the first trading day on or
after the date of this offering. Thereafter, options will be granted on the
first trading day after January 1 of each year, or such other date as determined
by the administrator. Each option will terminate on the last trading day of a
period specified by the administrator and no option period will be longer than
27 months in duration. Subsequent option periods of equal duration will
consecutively follow, unless the administrator determines otherwise.

Each option represents a right to purchase shares of our common stock. The
administrator determines the purchase price of each share of common stock,
provided that the purchase price will never be less than the lesser of 85% of
the fair market value of the common stock on the first trading day of the option
period or the date the shares of common stock are purchased.

Any employee who immediately after a grant owns 5% or more of the total
combined voting power or value of our capital stock may not be granted an option
to purchase common stock under the purchase plan. Participation may also be
limited where rights to purchase stock under all other purchase plans accrue at
a rate which exceeds $25,000 of the fair market value of our common stock for
each calendar year.

401(K) PLAN

We maintain a retirement savings and investment plan, or 401(k) plan,
covering all employees. The 401(k) plan is intended to qualify under
Section 401(k) of the Internal Revenue Code of 1986, as amended, so that
contributions to the 401(k) plan by employees, and the investment earnings
thereon, are not taxable to employees until withdrawn from the 401(k) plan.
Under the 401(k) plan, employees may elect to reduce their current compensation
by up to the lesser of 15% of their annual compensation or the statutorily
prescribed annual limit ($10,500 in 2000) and to have the amount of the
reduction contributed to the 401(k) plan. We may make additional matching or
discretionary contributions, or both, to the 401(k) plan for the benefit of
participants in the plan. The participant's contribution is 100% vested
immediately upon contribution. Contributions made by us into the participant's
account vest 20% every year over a five year period beginning two years from the
initial date of employment with us.

41
<PAGE>
RELATED PARTY TRANSACTIONS

SALE OF STOCK

In September 1999, we issued 15,000 shares of common stock at a price of
$4.11 per share to Dr. Nashman upon the exercise of options held by him. See
also "Management--Option Exercises and Year-End Option Values" for option
exercises made by the named executive officers in 1999.

PURCHASES OF STOCK

In 1997, we repurchased from Mr. Rice 69,120 shares of common stock at
prices ranging from $1.83 to $3.33 per share. In 1998, we repurchased from
Dr. Karlgaard and Messrs. Harbitter and Rice 186,564, 186,564 and 93,282 shares
of common stock, respectively, at prices ranging from $3.33 to $5.43 per share.
We repurchased from Ms. Owlett 40,794 shares of common stock at a price of $5.67
per share in March 1999. In each case, the share repurchase price was the fair
market value of the shares of common stock as determined on a quarterly basis by
the board of directors.

GUARANTY OF LOANS

Under the terms of Mr. Lloyd's employment agreement, we may be required to
guarantee loans made to Mr. Lloyd by third party lenders, the proceeds of which
are used by Mr. Lloyd to exercise certain of his options. As of the date of this
prospectus, no such loans have been made. See "Management--Employment
Arrangements."

STOCK OPTION GRANTS

In 1997, we granted options to purchase 6,000, 7,800, and 9,000 shares of
common stock to Messrs. Bratiotis and Owlett and Ms. Owlett, respectively, at an
exercise price of $2.20 per share. In 1998, we granted options to purchase
9,000, 9,000 and 7,200 shares to Messrs. Bratiotis and Owlett and Ms. Owlett,
respectively, at an exercise price of $3.37 per share. We also granted options
to purchase 45,000 shares to each of these individuals at an exercise price of
$4.08 per share and options to purchase 15,000 shares to each of Mr. Brown and
Dr. Nashman at an exercise price of $4.11 per share. In 1999, we granted options
to purchase 9,000, 9,000 and 6,000 shares to Messrs. Bratiotis and Owlett and
Ms. Owlett, respectively, at an exercise price of $5.67 per share. We also
granted options to purchase 15,000 shares to each of Messrs. Bratiotis and
Owlett at an exercise price of $6.09 per share. See also "Management--Option
Grants in 1999" for option grants we made to the named executive officers in
1999.

42
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets certain information regarding beneficial ownership
of our common stock as of December 31, 1999 and as adjusted to reflect the sale
of the shares offered hereby, by:

- each person who we know beneficially owns more that 5% of our common
stock;

- each member of our board of directors;

- each of our named executive officers; and

- all directors and executive officers as a group.

The term "beneficial ownership" includes shares over which the indicated
beneficial owner exercises voting and/or investment power. The rules also deem
common stock subject to options currently exercisable, or exercisable within
60 days, to be outstanding for purposes of computing the percentage ownership of
the person holding the options, but they do not deem such stock to be
outstanding for purposes of computing the percentage ownership of any other
person. The applicable percentage ownership before the offering for each
stockholder is based on 8,853,186 shares of common stock outstanding as of
December 31, 1999, together with options for that stockholder exercisable within
60 days of December 31, 1999. For purposes of calculating the percentage
beneficially owned after the offering, the number of shares deemed outstanding
includes: (a) all shares deemed to be outstanding before the offering and
(b) shares being sold in this offering.

The address for each stockholder listed is c/o PEC Solutions, Inc. 12750
Fair Lakes Circle, Fairfax, Virginia 22033. Each of the persons named in this
table has sole voting and investment power with respect to all the shares
indicated. An asterisk indicates ownership of less than 1%.

<TABLE>
<CAPTION>
BEFORE OFFERING AFTER OFFERING
---------------------- ----------------------
SHARES SHARES
BENEFICIALLY SHARES TO BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED PERCENT BE SOLD OWNED PERCENT
<S> <C> <C> <C> <C> <C>

David C. Karlgaard (a)................ 3,903,387 40.4%
Paul G. Rice (b)...................... 3,974,283 41.2
Alan H. Harbitter (c)................. 2,015,445 21.8
William J. Scharf (d)................. 175,224 2.0
Stuart R. Lloyd....................... 5,511 *
Sharon M. Owlett (e).................. 175,320 2.0
Jesse Brown (f)....................... 15,000 *
Alvin E. Nashman...................... 15,000 *
All executive officers and directors
as a group (10 persons) (g)......... 10,448,340 95.2
</TABLE>

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

(a) Includes 802,602 shares underlying exercisable options and 648,000 shares
held in a trust for the benefit of Dr. Karlgaard. Does not include 167,520
shares held in an irrevocable trust for the benefit of Dr. Karlgaard over
which Dr. Karlgaard does not hold voting or investment power. See
note (5).

(b) Includes 802,602 shares underlying exercisable options and 432,000 shares
held in a trust for the benefit of Mr. Rice.

(d) Includes 43,902 shares underlying exercisable options.

(e) Includes 167,520 shares held in an irrevocable trust for the benefit of
Dr. Karlgaard for which Ms. Owlett is trustee. Ms. Owlett disclaims all
beneficial ownership of the shares held in the trust.

(f) Represents shares underlying exercisable options.

(g) Includes 2,124,918 shares underlying exercisable options.

43
<PAGE>
DESCRIPTION OF OUR CAPITAL STOCK

Our authorized capital stock consists of 75,000,000 shares of common stock,
with a par value of $0.01 per share, and 10,000,000 shares of undesignated
capital stock, with a par value of $0.01 per share. As of December 31, 1999,
there were 8,853,186 shares of our common stock outstanding, held of record by
71 stockholders. After this offering, we will have outstanding
shares of common stock. No other classes of stock have been designated or
issued.

The following is a description of our capital stock.

COMMON STOCK

Holders of common stock are entitled to one vote per share of record on all
matters to be voted upon by the stockholders. Subject to preferences of any
preferred stock that may be issued in the future, the holders of common stock
are entitled to receive any dividends that may be declared by the board of
directors. In the event of a liquidation, dissolution, or winding up of the
affairs of our company, the holders of common stock will be entitled to receive
pro rata all of our remaining assets available for distribution to stockholders.
Any pro rata distribution would be subject to the rights of the holders of any
outstanding shares of preferred stock. Our common stock has no preemptive,
redemption, conversion or subscription rights. Piper Marbury Rudnick & Wolfe
LLP, our counsel, will opine that the shares of common stock to be issued by us
in this offering, when issued and sold in the manner described in the prospectus
and in accordance with the resolutions adopted by the board of directors, will
be fully paid and non-assessable.

UNDESIGNATED CAPITAL STOCK

Our board has authority to designate and issue up to 10,000,000 shares of
capital stock, in one or more series. Our board can establish the preferences,
rights and privileges of each series, which may be superior to the rights of the
common stock.

ANTI-TAKEOVER EFFECTS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND
DELAWARE GENERAL CORPORATION LAW

OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE GENERAL CORPORATION
LAW. Certain provisions of Delaware law and our certificate of incorporation
and bylaws could make the following more difficult:

- the acquisition of us by means of a tender offer;

- the acquisition of us by means of a proxy contest or otherwise; or

- the removal of our incumbent officers and directors.

These provisions, summarized below, are expected to discourage certain types
of coercive takeover practices and inadequate takeover bids. These provisions
are also designed to encourage persons seeking to acquire control of us to first
negotiate with our board. We believe that the benefits of increased protection
of the potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure us outweigh the disadvantages of
discouraging such proposals because negotiation of such proposals could result
in an improvement of their terms.

ELECTION AND REMOVAL OF DIRECTORS. Our board of directors is classified
into three classes. The directors in each class serve for a three-year term, one
class being elected each year by our stockholders. This system of electing and
removing directors may tend to discourage a third party from making a tender
offer or otherwise attempting to obtain control of us because it generally makes
it more difficult for stockholders to replace a majority of the directors. In
addition, our by-laws provide that, except as otherwise provided by law or our
certificate of incorporation, newly created directorships

44
<PAGE>
resulting from an increase in the authorized number of directors or vacancies on
the board may be filled only by

- a majority of the directors then in office, though less than a quorum is
then in office; or

- by the sole remaining director.

STOCKHOLDER MEETINGS. Under our certificate of incorporation and bylaws,
only the chairman of the board, the president or a majority of the board of
directors may call special meetings of stockholders.

REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS AND
PROPOSALS. Our bylaws establish advance notice procedures with respect to
stockholder proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of the board of
directors or a committee of the board.

DELAWARE ANTI-TAKEOVER LAW. We are subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years following the date
the person became an interested stockholder, unless the "business combination"
or the transaction in which the person became an interested stockholder is
approved in a prescribed manner. Generally, a "business combination" includes a
merger, asset or stock sale, or other transaction resulting in a financial
benefit to the interested stockholder. Generally, an "interested stockholder" is
a person who, together with affiliates and associates, owns or within three
years prior to the determination of interested stockholder status, did own, 15%
or more of a corporation's voting stock. The existence of this provision may
have an anti-takeover effect with respect to transactions not approved in
advance by the board of directors, including discouraging attempts that might
result in a premium over the market price for the shares of common stock held by
stockholders.

ELIMINATION OF STOCKHOLDER ACTION BY WRITTEN CONSENT. Our certificate of
incorporation and bylaws eliminate the right of stockholders to act by written
consent without a meeting, unless the consent is unanimous.

NO CUMULATIVE VOTING. Our certificate of incorporation and bylaws do not
provide for cumulative voting in the election of directors. As a result, the
holders of a majority of the shares of common stock can elect all of the members
of the board of directors.

UNDESIGNATED CAPITAL STOCK. The authorization of undesignated capital stock
will make it possible for our board of directors to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of PEC Solutions.

LIMITATION OF LIABILITY AND INDEMNIFICATION PROVISIONS

As permitted by the Delaware General Corporation Law, our certificate of
incorporation provides that our directors shall not be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:

- for any breach of the director's duty of loyalty to us or our
stockholders;

- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

- under Section 174 of the Delaware General Corporation Law, relating to
unlawful payment of dividends or unlawful stock purchase or redemption of
stock; or

- for any transaction from which the director derives an improper personal
benefit.

45
<PAGE>
As a result of this provision, we and our stockholders may be unable to obtain
monetary damages from a director for breach of his or her duty of care.

Our certificate of incorporation and bylaws provide for the indemnification
of our directors and officers to the fullest extent authorized by the Delaware
General Corporation Law. The indemnification provided under our certificate of
incorporation and bylaws includes the right to be paid expenses in advance of
any proceeding for which indemnification may be had, provided that the payment
of these expenses incurred by a director or officer in advance of the final
disposition of a proceeding may be made only upon delivery to us of an
undertaking by or on behalf of the director or officer to repay all amounts so
paid in advance if it is ultimately determined that the director or officer is
not entitled to be indemnified. If we do not pay a claim for indemnification
within 60 days after we have received a written claim, the claimant may at any
time thereafter bring an action to recover the unpaid amount of the claim and,
if successful, the director or officer will be entitled to be paid the expense
of prosecuting the action to recover these unpaid amounts.

Under our bylaws, we have the power to purchase and maintain insurance on
behalf of any person who is or was one of our directors, officers, employees or
agents, or is or was serving at our request as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against the person or incurred by the
person in any of these capacities, or arising out of the person's fulfilling one
of these capacities, and related expenses, whether or not we would have the
power to indemnify the person against the claim under the provisions of the
Delaware General Corporation Law. We intend to purchase director and officer
liability insurance on behalf of our directors and officers.

STOCK TRANSFER AGENT

The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.

46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

After this offering, we will have shares of common stock
outstanding. All of the shares we sell in this offering will be freely tradable
without restriction or further registration under the Securities Act, except
that any shares purchased by our affiliates, as that term is defined in
Rule 144, may generally only be sold in compliance with the limitations of
Rule 144, which is summarized below.

The remaining shares, representing % of the common stock to be
outstanding after this offering, will be restricted shares under the terms of
the Securities Act. Restricted shares may be sold in the public market only if
registered or if they qualify for an exemption from registration under
Rules 144, 144(k) or 701 or other applicable exemption promulgated under the
Securities Act, which rules are summarized below. Giving effect to the lock-up
agreements described below, these restricted shares will be available for resale
in the public market as follows:

<TABLE>
<CAPTION>
NUMBER OF
SHARES DATE OF FIRST AVAILABILITY FOR RESALE
<C> <S>
90,714 Immediately after the date of this prospectus

118,281 90 days after the date of this prospectus

After 180 days from the date of the prospectus subject, in
some cases, to volume
limitations
</TABLE>

Before this offering, there has been no public market for our common stock,
and we cannot predict what effect, if any, that market sales of shares of our
common stock or the availability of shares of our common stock for sale will
have on the market price of our common stock prevailing from time to time. Sales
of substantial amounts of our common stock in the public market could adversely
affect prevailing market prices and could impair our future ability to raise
capital through the sale of our equity securities.

RULE 144

In general, under Rule 144, beginning 90 days after the effective date of
the offering, a stockholder who has owned restricted shares for at least one
year is entitled to sell, within any three-month period, a number of these
restricted shares that does not exceed the greater of:

- one percent of the then outstanding shares of our common stock, or
approximately shares immediately after this offering; or

- the average weekly trading volume in our common stock on the Nasdaq
National Market during the four calendar weeks preceding the sale.

In addition, our affiliates must comply with the restrictions and requirements
of Rule 144, other than the one-year holding period requirement, to sell shares
of common stock that are not restricted securities.

Under Rule 144(k), a stockholder who is not currently, and who has not been
for at least three months before the sale, an affiliate of ours who owns
restricted shares that have been outstanding for at least two years may resell
these restricted shares without compliance with the above requirements. The one-
and two-year holding periods described above do not begin to run until the full
purchase price is paid by the person acquiring the restricted shares from us or
an affiliate of ours.

47
<PAGE>
RULE 701

In general, under Rule 701 of the Securities Act as currently in effect, any
of our employees, consultants or advisors who purchase shares from us in
connection with a written compensatory stock or option plan is eligible to
resell such shares 90 days after the effective date of this offering in reliance
on Rule 144 but without compliance with some restrictions, including the holding
period, contained in Rule 144.

STOCK OPTIONS

We intend to file one or more registration statements under the Securities
Act 180 days after this offering to register up to shares of our
common stock underlying outstanding stock options or reserved for issuance under
our 2000 stock incentive plan and our 2000 employee stock purchase plan. We
expect these registration statements will become effective upon filing, and
shares covered by these registration statements will be eligible for sale in the
public market immediately after the effective dates of these registration
statements, subject to the lock-up agreements described below.

LOCK-UP AGREEMENTS

Our officers and directors and certain other stockholders, who together will
hold shares representing % of our outstanding capital stock after
this offering, have agreed that they will not, without the prior written consent
of Donaldson, Lufkin & Jenrette Securities Corporation, offer, sell, pledge or
otherwise dispose of any shares of our capital stock or any rights to acquire or
purchase, any of our capital stock or publicly announce an intention to effect
any of these transactions, for a period of 180 days from the date of this
prospectus.

Donaldson, Lufkin & Jenrette Securities Corporation currently has no plans
to release any portion of the securities subject to lock-up agreements. When
determining whether or not to release any portion of the securities subject to
lock-up agreements, Donaldson, Lufkin & Jenrette Securities Corporation will
consider, among other factors, the stockholder's reasons for requesting the
release, the number of shares for which the release is being requested and
market conditions at the time.

48
<PAGE>
UNDERWRITING

Subject to the terms and conditions contained in an underwriting agreement,
dated , 2000, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Hambrecht & Quist LLC, Legg
Mason Wood Walker, Incorporated and DLJDIRECT Inc., have severally agreed to
purchase from us and the selling stockholders the number of shares of common
stock set forth opposite their names below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS: SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.......
Hambrecht & Quist LLC.....................................
Legg Mason Wood Walker, Incorporated......................
DLJDIRECT Inc.............................................
-------
Total...................................................
=======
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock
offered by this prospectus are subject to approval by their counsel of certain
legal matters and to certain other conditions. The underwriters are obligated to
purchase and accept delivery of all the shares of common stock offered by this
prospectus, other than those shares covered by the over-allotment option
described below, if any are purchased.

The underwriters initially propose to offer the shares of our common stock
in part directly to the public at the initial public offering price set forth on
the cover page of this prospectus and in part to dealers at the initial public
offering price less a concession not in excess of $ per share. The
underwriters may allow, and those dealers may re-allow, a concession not in
excess of $ per share on sales to other dealers. After the initial offering
of the common stock to the public, the representatives may change the public
offering price and concessions. The underwriters do not intend to confirm sales
to any accounts over which they exercise discretionary authority.

The following table shows the underwriting fees to be paid by us in
connection with this offering:

<S> <C> <C>
Per share............................................ $
Total................................................ $
</TABLE>

We will pay the offering expenses, estimated to be approximately $
million. We will pay to the underwriters underwriting discounts and commissions
in an amount equal to the public offering price per share of common stock less
the amount the underwriters pay to us for each share of common stock.

An electronic prospectus is available on the Web site maintained by
DLJDIRECT Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation and a representative of the underwriters. Other than the prospectus
in electronic format, the information on this Web site relating to the offering
is not part of this prospectus and has not been approved or endorsed by us or
the underwriters, and should not be relied on by prospective investors.

David C. Karlgaard, Paul G. Rice and Alan H. Harbitter have granted to the
underwriters an option, exercisable for 30 days after the date of this
prospectus, to purchase up to additional shares of common stock at the
initial public offering price less the underwriting discounts and commissions.
The underwriters may exercise this option solely to cover over-allotments, if
any, made in connection with this offering. To the extent the underwriters
exercise this option, each underwriter will

49
<PAGE>
be obligated, upon satisfaction of certain conditions, to purchase a number of
additional shares approximately proportionate to that underwriter's initial
purchase commitments.

We, together with David C. Karlgaard, Paul G. Rice and Alan H. Harbitter,
have agreed to indemnify the underwriters against liabilities, including
liabilities under the Securities Act, or to contribute to payments that the
underwriters may be required to make for these liabilities.

For a period ending 180 days from the date of this prospectus, we, our
executive officers and directors and certain other stockholders have agreed that
we and they will not, without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation:

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock; or

- enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock.

Either of the foregoing transfer restrictions will apply regardless of
whether any such transaction described above is to be settled by delivery of
common stock or other securities, in cash, or otherwise. In addition, during
such lock-up period, we have also agreed not to file any registration statement
relating to, and each of our executive officers, directors and stockholders has
agreed not to make any demand for, or exercise any right relating to, the
registration of any shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock without the prior written consent
of Donaldson, Lufkin & Jenrette Securities Corporation.

Prior to this offering, no public market has existed for our common stock.
We will negotiate the initial public offering price for our common stock with
the representatives, but the price may not reflect the market price for our
common stock after this offering. The factors considered in determining the
initial public offering price include:

- the history of and prospects for our industry in which we compete;

- our past and present operations;

- our historical results of operations;

- our prospects for future operational results;

- the recent market prices of securities of generally comparable companies;
and

- the general conditions of the securities market at the time of this
offering.

We have applied to have our common stock quoted on the Nasdaq National
Market under the symbol "PECS."

Other than in the United States, no action has been taken by us, the selling
stockholders or the underwriters that would permit a public offering of the
shares of common stock included in this offering in any jurisdiction where
action for that purpose is required. The shares included in this offering may
not be offered or sold, directly or indirectly, nor may this prospectus or any
other offering material or advertisements in connection with the offer and sale
of any shares of common stock be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with the applicable
rules and regulations of such jurisdiction. We advise persons who receive this
prospectus to inform themselves about and to observe any restrictions relating
to this offering and the distribution of this prospectus. This prospectus is not
an offer to sell or a solicitation of an offer to buy any shares of common stock
in any jurisdiction where that would not be permitted or legal.

50
<PAGE>
In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot this offering,
creating a syndicate short position. The underwriters may bid for and purchase
our shares of common stock in the open market to cover such syndicate short
positions or to stabilize the price of our common stock. In addition, the
underwriting syndicate may reclaim selling concessions from syndicate members
and selected dealers if they repurchase previously distributed common stock in
syndicate covering transactions, in stabilizing transactions or otherwise, or if
Donaldson, Lufkin & Jenrette Securities Corporation receives a report which
indicates that the clients of such syndicate members have "flipped" our common
stock. These activities may stabilize or maintain the market price of the common
stock above independent market levels. The underwriters are not required to
engage in these activities and may end any of these activities at any time.

At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 5% of the shares of common stock offered by this
prospectus for sale to our officers, directors, employees and their family
members and to business associates of PEC Solutions, Inc., including clients,
consultants and other friends. These persons must commit to purchase after the
registration statement has become effective but before the open of business on
the following business day. The number of shares available for sale to the
general public will be reduced to the extent these persons purchase the reserved
shares.

LEGAL MATTERS

Piper Marbury Rudnick & Wolfe LLP, Reston, Virginia, will pass upon the
validity of the shares of common stock on our behalf. Sachnoff & Weaver, Ltd.,
Chicago, Illinois, will pass upon legal matters for the underwriters.

EXPERTS

Our financial statements as of December 31, 1997 and 1998 and for each of
the three years in the period ended December 31, 1998, included in this
prospectus, have been included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority of
said firm as experts in accounting and auditing.

51
<PAGE>
PEC SOLUTIONS, INC
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants........................... F-2

Balance Sheets.............................................. F-3

Statements of Income........................................ F-4

Statements of Stockholders' Equity.......................... F-5

Statements of Cash Flows.................................... F-6

Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion, the accompanying balance sheets and the related statements of
income, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of PEC Solutions, Inc. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years ended December 31, 1998, 1997 and 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP

McLean, VA
January 10, 2000

F-2
<PAGE>
PEC SOLUTIONS, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------- AS OF SEPTEMBER 30,
1997 1998 1999
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 4,519,636 $ 5,366,651 $ 7,993,310
Short-term investments.......................... 459,593 -- --
Accounts receivable, net........................ 7,062,727 11,116,204 12,456,724
Other current assets............................ 689,743 579,110 625,275
----------- ----------- -----------
Total current assets.......................... 12,731,699 17,061,965 21,075,309
Property and equipment, net....................... 960,686 1,177,662 1,171,971
Other assets...................................... 238,879 295,235 484,614
----------- ----------- -----------
Total assets.................................. $13,931,264 $18,534,862 $22,731,894
=========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 790,380 $ 1,559,574 $ 1,618,938
Advance payments on contracts................... 1,852,921 824,839 2,920,323
Dividends payable............................... 299,965 347,924 --
Retirement plan contribution payable............ 583,030 1,224,673 492,203
Accrued payroll................................. 1,910,504 2,757,890 2,500,630
Accrued vacation................................ 477,854 715,081 917,219
Other current liabilities....................... 54,978 322,715 487,938
----------- ----------- -----------
Total current liabilities..................... 5,969,632 7,752,696 8,937,251
Supplemental retirement program liability......... -- 105,446 232,195
----------- ----------- -----------
Total liabilities............................. 5,969,632 7,858,142 9,169,446
----------- ----------- -----------
Commitments and contingencies

Stockholders' equity:
Undesignated capital stock, $0.01 par value per
share, 10,000,000 shares authorized........... -- -- --
Common stock, $0.01 par value per share,
75,000,000 shares authorized, 8,995,959,
8,698,095, and 8,546,526 shares issued and
outstanding, respectively..................... 89,960 86,981 85,465
Additional paid-in capital...................... 459,552 703,893 682,789
Retained earnings............................... 7,412,120 9,885,846 12,794,194
----------- ----------- -----------
Total stockholders' equity.................... 7,961,632 10,676,720 13,562,448
----------- ----------- -----------
Total liabilities and stockholders' equity.... $13,931,264 $18,534,862 $22,731,894
=========== =========== ===========
</TABLE>

See notes to financial statements.

F-3
<PAGE>
PEC SOLUTIONS, INC.

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues...................... $16,215,627 $24,629,706 $41,456,862 $29,042,340 $38,593,092
----------- ----------- ----------- ----------- -----------
Operating costs and expenses:
Direct costs................ 9,309,116 13,876,126 23,514,605 16,330,753 22,068,818
General and administrative
expenses.................. 3,943,113 6,117,034 9,825,976 6,555,569 8,796,501
Sales and marketing
expenses.................. 760,717 1,021,659 1,225,629 910,228 1,456,208
----------- ----------- ----------- ----------- -----------
Total operating costs and
expenses................ 14,012,946 21,014,819 34,566,210 23,796,550 32,321,527
----------- ----------- ----------- ----------- -----------
Operating income.............. 2,202,681 3,614,887 6,890,652 5,245,790 6,271,565
Other income, net............. 124,721 135,195 198,829 128,429 141,098
----------- ----------- ----------- ----------- -----------
Income before income taxes.... 2,327,402 3,750,082 7,089,481 5,374,219 6,412,663
Provision for income taxes.... 875,899 1,444,725 2,633,995 1,996,714 2,437,000
----------- ----------- ----------- ----------- -----------
Net income.................... $ 1,451,503 $ 2,305,357 $ 4,455,486 $ 3,377,505 $ 3,975,663
=========== =========== =========== =========== ===========
Earnings per share:
Basic....................... $ 0.16 $ 0.26 $ 0.52 $ 0.39 $ 0.47
=========== =========== =========== =========== ===========
Diluted..................... $ 0.14 $ 0.21 $ 0.40 $ 0.30 $ 0.34
=========== =========== =========== =========== ===========
</TABLE>

See notes to financial statements.

F-4
<PAGE>
PEC SOLUTIONS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
-------------------- ADDITIONAL
PAR PAID-IN RETAINED
SHARES VALUE CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1995...... 8,885,136 $88,851 $ 233,292 $ 4,619,399 $ 4,941,542
Issuance of common stock........... 159,000 1,590 70,349 -- 71,939
Common stock repurchased and
retired.......................... (103,596) (1,036) (7,936) (177,267) (186,239)
Dividend declared ($.03 per
share)........................... -- -- -- (268,216) (268,216)
Net income......................... -- -- -- 1,451,503 1,451,503
--------- ------- --------- ----------- -----------
Balance as of December 31, 1996...... 8,940,540 89,405 295,705 5,625,419 6,010,529
Issuance of common stock........... 142,770 1,428 167,038 -- 168,466
Common stock repurchased and
retired.......................... (87,351) (873) (3,191) (218,691) (222,755)
Dividend declared ($.033 per
share)........................... -- -- -- (299,965) (299,965)
Net income......................... -- -- -- 2,305,357 2,305,357
--------- ------- --------- ----------- -----------
Balance as of December 31, 1997...... 8,995,959 89,960 459,552 7,412,120 7,961,632
Issuance of common stock........... 185,610 1,856 260,997 -- 262,853
Common stock repurchased and
retired.......................... (483,474) (4,835) (16,656) (1,633,836) (1,655,327)
Dividend declared ($.04 per
share)........................... -- -- -- (347,924) (347,924)
Net income......................... -- -- -- 4,455,486 4,455,486
--------- ------- --------- ----------- -----------
Balance as of December 31, 1998...... 8,698,095 86,981 703,893 9,885,846 10,676,720
Issuance of common stock........... 89,790 898 200,562 -- 201,460
Common stock repurchased and
retired.......................... (241,359) (2,414) (221,666) (1,067,315) (1,291,395)
Net income......................... -- -- -- 3,975,663 3,975,663
--------- ------- --------- ----------- -----------
Balance as of September 30, 1999
(unaudited)........................ 8,546,526 $85,465 $ 682,789 $12,794,194 $13,562,448
========= ======= ========= =========== ===========
</TABLE>

See notes to financial statements.

F-5
<PAGE>
PEC SOLUTIONS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................... $1,451,503 $2,305,357 $4,455,486 $3,377,505 $3,975,663
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation........................... 296,053 352,284 663,307 470,948 475,132
Amortization of bond premium........... 15,012 12,643 5,593 5,593 --
Deferred income taxes.................. (17,900) (76,860) (251,570) (131,033) (387,974)
Realized loss on sale of investments
and other assets..................... 4,621 4,756 1,883 342 --
Changes in operating assets and
liabilities:
Accounts receivable, net............. (2,696,547) (1,581,775) (4,053,477) (2,440,000) (1,340,520)
Other current assets................. (46,353) (531,085) 232,521 439,638 345,620
Accounts payable..................... 357,846 231,237 769,194 549,980 (59,364)
Advance payments on contracts........ 410,997 1,441,924 (1,028,082) (1,081,233) 2,095,484
Retirement plan contribution
payable............................ 126,262 177,320 641,643 214,257 (732,470)
Accrued payroll...................... 345,904 618,228 847,386 179,903 (257,260)
Accrued vacation..................... 48,753 188,742 237,227 226,473 202,138
Other current liabilities............ 5,735 41,141 267,737 599,086 165,223
Supplemental retirement program
liability.......................... -- -- 105,446 -- 126,749
---------- ---------- ---------- ---------- ----------
Net cash provided by operating
activities....................... 301,886 3,183,912 2,894,294 2,411,459 4,608,421
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Purchases of property and equipment...... (309,718) (719,160) (882,107) (573,370) (543,903)
Purchase of investments.................. -- (35,000) -- -- --
Proceeds from sale of investments........ 620,000 704,653 527,267 414,300 --
---------- ---------- ---------- ---------- ----------
Net cash (used in) provided by
investing activities............. 310,282 (49,507) (354,840) (159,070) (543,903)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Dividends paid........................... (222,128) (268,216) (299,965) (299,965) (347,924)
Proceeds from the issuance of common
stock.................................. 71,939 168,466 262,853 121,591 201,460
Repurchase of common stock............... (186,239) (222,755) (1,655,327) (1,557,478) (1,291,395)
---------- ---------- ---------- ---------- ----------
Net cash used in financing
activities....................... (336,428) (322,505) (1,692,439) (1,735,852) (1,437,859)
---------- ---------- ---------- ---------- ----------
Net increase in cash....................... 275,740 2,811,900 847,015 516,537 2,626,659
Cash and cash equivalents at beginning of
period................................... 1,431,996 1,707,736 4,519,636 4,519,636 5,366,651
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of
period................................... $1,707,736 $4,519,636 $5,366,651 $5,036,173 $7,993,310
========== ========== ========== ========== ==========

Income taxes paid.......................... $ 887,610 $1,525,822 $2,923,178 $1,400,011 $2,488,535
========== ========== ========== ========== ==========
Interest paid.............................. $ -- $ 1,273 $ -- $ -- $ 33,136
========== ========== ========== ========== ==========
</TABLE>

See notes to financial statements.

F-6
<PAGE>
PEC SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

COMPANY

Performance Engineering Corporation ("PEC") was incorporated June 25, 1985,
under the laws of the Commonwealth of Virginia. On January 1, 2000, PEC was
reincorporated, under the laws of the state of Delaware, as PEC Solutions, Inc.
("PEC Solutions" or the "Company"). The Company provides professional technology
services that enable government entities to use the Internet and other advanced
technologies to enhance productivity and improve services to the public. The
Company's primary clients are executive agencies and departments of the Federal
government, the Federal Judiciary and prime contractors to the United States
Government. Contracts and subcontracts with these clients for 1996 were time and
materials contracts (61%), fixed-price contracts (25%) and cost-reimbursable
contracts (14%). For 1997, these contracts and subcontracts were time and
materials contracts (47%), fixed-price contracts (31%) and cost-reimbursable
contracts (22%). For 1998, these contracts and subcontracts were time and
materials contracts (66%), fixed-price contracts (19%) and cost-reimbursable
contracts (15%).

INTERIM RESULTS

The accompanying balance sheets as of September 30, 1998 and 1999, the
statements of income and of cash flows for the nine months ended September 30,
1998 and 1999 and the statement of stockholders' equity for the nine months
ended September 30, 1999 are unaudited. In the opinion of management, these
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting of only normal recurring
adjustments, necessary for the fair statement of the results of the interim
periods. The data disclosed in the notes to the financial statements for these
periods are unaudited. The results of operations for such periods are not
necessarily indicative of the results expected for the full fiscal year or for
any future period.

REVENUE RECOGNITION

The Company's revenues are derived primarily from contracts with the Federal
government. Revenues on time and materials contracts are recognized based on
actual hours delivered at the contracted billable hourly rate plus the cost of
materials incurred. Revenues on fixed-price contracts are recognized using the
percentage-of-completion method based on costs incurred in relation to total
estimated costs. Revenues on cost-type contracts are recognized to the extent of
costs incurred in providing services plus a proportionate amount of the fee
earned. The fees under certain government contracts may be increased or
decreased in accordance with cost or performance incentive provisions that
measure actual performance against established targets or other criteria. Such
incentive fee awards or penalties are included in revenues at the time the
amounts can be reasonably determined. Provisions for anticipated contract losses
are recognized at the time they become known and estimable.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand and in banks. The Company
also considers all highly liquid investments with a maturity of three months or
less when purchased to be cash equivalents. As of December 31, 1997 and 1998,
cash equivalents included money market funds of approximately $4,452,309 and
$5,009,662, respectively.

F-7
<PAGE>
PEC SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -(Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES -(CONTINUED)

CONCENTRATION OF CREDIT RISK

At times during the year, the Company maintains cash balances at financial
institutions in excess of Federal Deposit Insurance Corporation (FDIC) limits.
Management believes the risk in these situations to be minimal. In addition, the
Company had cash balances of $5,009,662 held in money market funds at local
financial institutions as of December 31, 1998. These funds are not insured by
the FDIC.

MARKETABLE SECURITIES

The Company determines the appropriate classification of marketable
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. The Company's marketable securities are categorized as
available-for-sale and held-to-maturity. Available-for-sale securities are
stated at the lower of cost or market.

Short-term investments consist of obligations of individual states and
political subdivisions. These obligations are classified as held-to-maturity
securities and are reported at cost, adjusted for premiums and discounts that
are recognized in interest income using the interest method over the period to
maturity.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on property and equipment using the double declining
balance method over the estimated useful lives of the assets, generally 3 to
5 years. Depreciation is computed on leasehold improvements using the
straight-line method over the shorter of the lease term or the useful life of
the respective assets.

LONG-LIVED ASSETS

The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121, "ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF," (SFAS No. 121). SFAS No. 121 requires recognition of impairment of
long-lived assets in the event the net book value of such assets exceeds the
future undiscounted cash flows attributable to such assets. Based on its most
recent analysis, the Company believes that there was no impairment of its
property and equipment as of December 31, 1998.

CONTRACT ADVANCE PAYMENTS

The Company invoices the Federal government for some of its contracts based
on provisional indirect cost rates. These invoiced amounts are adjusted when the
actual rates have been determined by audit. Other Federal government contracts
are billed periodically independent of the percentage of the contract actually
completed which, in some situations, results in funds being advanced to the
Company in excess of amounts earned.

COMMON STOCK SPLITS

Effective December 22, 1997, the Company's common stock was split 2-for-1.
Effective January 1, 2000, in connection with its reincorporation, the Company's
common stock was split 3-for-1. All prior

F-8
<PAGE>
PEC SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -(Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES -(CONTINUED)

share and per share information in the financial statements has been restated to
give effect to these stock splits.

STOCK-BASED COMPENSATION

The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES," (APB No. 25) and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123,
"ACCOUNTING FOR STOCK-BASED COMPENSATION," (SFAS No. 123).

INCOME TAXES

The Company accounts for deferred income taxes using the liability method,
under which the expected future tax consequences of timing differences between
the book and tax basis of assets and liabilities are recognized as deferred tax
assets and liabilities.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.

SEGMENT REPORTING

The Company operates as a single segment and will evaluate additional
disclosure requirements as it expands its operations.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS 133, as
amended, is effective for quarters beginning after June 15, 2000. Currently, the
Company does not use derivative financial instruments, therefore the adoption of
SFAS 133 is not expected to have a material impact on the Company's results of
operations or financial position.

2. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following as of:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ SEPTEMBER 30,
1997 1998 1999
(UNAUDITED)
<S> <C> <C> <C>
Billed accounts receivable............. $5,472,802 $ 9,685,535 $10,198,720
Unbilled accounts receivable........... 1,659,321 1,505,136 2,332,471
---------- ----------- -----------
7,132,123 11,190,671 12,531,191
Allowance for doubtful accounts........ (69,396) (74,467) (74,467)
---------- ----------- -----------
Accounts receivable, net............... $7,062,727 $11,116,204 $12,456,724
========== =========== ===========
</TABLE>

F-9
<PAGE>
PEC SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -(Continued)

2. ACCOUNTS RECEIVABLE -(CONTINUED)

Unbilled accounts receivable consist of recognized recoverable costs and
accrued profits on contracts for which billings had not been presented to
clients as of the balance sheet date. Payments to the Company on contracts with
agencies and departments of the Federal government are subject to adjustment
upon audit by the Federal government. The years 1996, 1997 and 1998 are the only
years subject to an outstanding Federal government audit. Management believes
the effect of audit adjustments, if any, on periods not yet audited, will not
have a material effect on the financial statements.

3. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- SEPTEMBER 30,
1997 1998 1999
(UNAUDITED)
<S> <C> <C> <C>
Leasehold improvements................... $ 291,063 $ 358,944 $ 369,284
Property and equipment................... 2,128,670 2,861,622 2,944,057
Software................................. 188,847 265,044 286,547
---------- ---------- ----------
2,608,580 3,485,610 3,599,888
Less: accumulated depreciation........... (1,647,894) (2,307,948) (2,427,917)
---------- ---------- ----------
$ 960,686 $1,177,662 $1,171,971
========== ========== ==========
</TABLE>

Depreciation expenses were $296,053, $352,284, $663,307, $470,948
(unaudited) and $475,132 (unaudited) for the years ended December 31, 1996,
1997, 1998, the nine months ended September 30, 1998 and 1999, respectively.

4. NOTE PAYABLE

The Company has a loan agreement with Bank of America which provides for a
line of credit with a limit of $2,700,000 at the prime rate charged by the bank
(8.5% as of December 31, 1997 and 1998). The note is collateralized by the
accounts receivable of the Company. As of December 31, 1997 and 1998 the balance
due on the note was zero. The agreement expires April 30, 2001.

5. STOCK OPTION PLANS

On February 1, 1987, the Company established an incentive stock option
agreement (the "agreement") and on January 1, 1995 the Company established a
nonqualified stock option plan (the "plan", collectively "the plans") to
attract, retain and reward key employees. The plans are administered by the
Board of Directors, which has the authority to determine which officers and key
employees are awarded options pursuant to the plans and the related terms and
option prices. The number of options available for grant under the plans is
limited to the number of Company common shares authorized and available.

Each stock option granted pursuant to the plans has an exercise price equal
to the fair market value of the underlying common stock at the date of grant.
Each stock option granted under the agreement has a five-year term and a
two-year vesting period. Each stock option granted pursuant to the plan has a
ten-year term and no vesting period.

F-10
<PAGE>
PEC SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -(Continued)

5. STOCK OPTION PLANS -(CONTINUED)

The following table summarizes the Company's activity for all of its stock
option awards granted under the plans:

<TABLE>
<CAPTION>
NUMBER RANGE OF EXERCISE WEIGHTED-AVERAGE
OF OPTIONS PRICES EXERCISE PRICE
<S> <C> <C> <C>
Balance, December 31, 1995.......................... 786,870 $0.42-$1.49 $1.08
Granted........................................... 686,160 1.56-1.72 1.68
Exercised......................................... (159,000) 0.42-1.35 0.45
Canceled.......................................... (23,280) 1.14-1.56 1.40
--------- ------------------- -----
Balance, December 31, 1996.......................... 1,290,750 0.46-1.72 1.47
Granted........................................... 815,460 2.20-2.42 2.36
Exercised......................................... (142,770) 0.46-1.35 1.18
Canceled.......................................... (16,995) 1.14-2.20 2.06
--------- ------------------- -----
Balance, December 31, 1997.......................... 1,946,445 1.12-2.42 1.86
Granted........................................... 874,080 3.37-4.11 3.76
Exercised......................................... (185,610) 1.14-1.56 1.42
Canceled.......................................... (13,935) 1.14-3.37 2.74
--------- ------------------- -----
Balance, December 31, 1998.......................... 2,620,980 1.12-4.11 2.52
Granted........................................... 755,775 5.67-6.35 6.06
Exercised......................................... (89,790) 1.12-4.11 2.24
Canceled.......................................... (142,035) 1.14-5.67 3.70
--------- ------------------- -----
Balance, September 30, 1999 (unaudited)............. 3,144,930 $1.12-$6.35 $3.32
========= =================== =====
</TABLE>

Options to purchase 282,900, 494,760, 972,540 and 1,043,454 (unaudited)
shares of the Company's common stock were exercisable as of December 31, 1996,
1997, 1998 and September 30 1999, respectively, at weighted-average per share
exercise prices of $1.29, $1.28, $1.54 and $2.03 (unaudited), respectively.

The following table summarizes additional information about stock options
outstanding as of December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------ ----------------------------
WEIGHTED-
AVERAGE WEIGHTED-
REMAINING AVERAGE WEIGHTED-
NUMBER OF CONTRACTUAL EXERCISE NUMBER AVERAGE
RANGE OF EXERCISE PRICES OPTIONS LIFE (YEARS) PRICE EXERCISABLE EXERCISE PRICE
<S> <C> <C> <C> <C> <C>
$1.12 to $1.35......................... 325,140 2.43 $ 1.24 325,140 $1.24
$1.49 to $2.42......................... 1,429,200 4.19 2.06 647,400 1.69
$3.37 to $4.11......................... 866,640 4.62 3.76 -- --
--------- ----- ------- ------- -----
2,620,980 4.25 $ 2.52 972,540 $1.54
========= ===== ======= ======= =====
</TABLE>

The Company adopted the disclosure requirements of SFAS No. 123, "Accounting
for Stock-Based Compensation," effective for the Company's December 31, 1998
financial statements. The Company applies APB Opinion No. 25 and related
interpretations in accounting for its plan. Accordingly, compensation cost has
been recognized for its stock plans based on the intrinsic value of the stock

F-11
<PAGE>
PEC SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -(Continued)

5. STOCK OPTION PLANS -(CONTINUED)

option at date of grant (i.e., the difference between the exercise price and the
fair value of the Company's common stock).

Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under the plans
in 1996, 1997, 1998, and for the nine months ended September 30, 1999 and
consistent with the method of SFAS No.123, the Company's net income and net
income per share would have been reduced to the pro forma amounts indicated
below.

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
------------------------------------ SEPTEMBER 30,
1996 1997 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income, as reported...................... $1,451,503 $2,305,357 $4,455,486 $3,975,663
Pro forma compensation expense............... (142,834) (291,103) (411,899) (322,081)
---------- ---------- ---------- ----------
Pro forma net income......................... $1,308,669 $2,014,254 $4,043,587 $3,653,582
========== ========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED
------------------------------------ SEPTEMBER 30,
1996 1997 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income per common share--basic:
As reported........................................... $0.16 $0.26 $0.52 $0.47
Pro forma............................................. 0.15 0.23 0.47 0.43
Net income per common share--diluted:
As reported........................................... $0.14 $0.21 $0.40 $0.34
Pro forma............................................. 0.13 0.18 0.36 0.31
</TABLE>

The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model. The following table shows the assumptions
used for the grants that occurred in each fiscal year.

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS
DECEMBER 31, ENDED
------------------------------ SEPTEMBER 30,
1996 1997 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C>
Expected volatility......................................... 0.0% 0.0% 0.0% 0.0%
Risk free interest rates.................................... 5.6% 6.2% 5.4% 6.0%
Dividend yield.............................................. 4.6% 3.9% 3.6% 3.2%
Expected lives (years)...................................... 5 5 5 5
</TABLE>

The weighted average fair value per share for stock option grants that were
awarded in fiscal years 1996, 1997, 1998, and for the nine months ended
September 30, 1999 was $0.88, $1.40, $2.21, and $3.67 (unaudited), respectively.

6. BASIC EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE

Basic earnings per common share is computed on the basis of the
weighted-average number of common shares outstanding for the periods. Diluted
earnings per common share includes the weighted-

F-12
<PAGE>
PEC SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -(Continued)

6. BASIC EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE -(CONTINUED)

average effect of dilutive options outstanding during the periods. The weighted
average number of shares issuable upon the exercise of outstanding stock option
assumes that the applicable proceeds from such exercise are used to acquire
treasury shares at the average price during the periods.

Basic and diluted earnings per share for 1996, 1997, 1998, and the nine
month periods ended September 30, 1998 and 1999, were determined as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------
NET INCOME SHARES PER SHARE
<S> <C> <C> <C>
Basic EPS................................................... $1,451,503 8,868,020 $0.16
Effect of dilutive options.................................. -- 1,455,840 (0.02)
---------- ---------- -----
Diluted EPS................................................. $1,451,503 10,323,860 $0.14
========== ========== =====
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------
NET INCOME SHARES PER SHARE
Basic EPS. $2,305,357 8,917,732 $ 0.26
<S> <C> <C> <C>
Effect of dilutive options.................................. -- 2,090,175 (0.05)
---------- ---------- -----
Diluted EPS................................................. $2,305,357 11,007,907 $0.21
========== ========== =====
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-----------------------------------
NET INCOME SHARES PER SHARE
Basic EPS. $4,455,486 8,602,176 $ 0.52
<S> <C> <C> <C>
Effect of dilutive options.................................. -- 2,550,846 (0.12)
---------- ---------- -----
Diluted EPS................................................. $4,455,486 11,153,022 $0.40
========== ========== =====
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
--------------------------------------
NET INCOME SHARES PER SHARE
Basic EPS. $ 3,377,505 8,605,247 $ 0.39
<S> <C> <C> <C>
Effect of dilutive options.................................. -- 2,502,326 (0.09)
---------- ---------- -----
Diluted EPS................................................. $3,377,505 11,107,573 $0.30
========== ========== =====
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
--------------------------------------
NET INCOME SHARES PER SHARE
Basic EPS. $ 3,975,663 8,528,322 $ 0.47
<S> <C> <C> <C>
Effect of dilutive options.................................. -- 3,213,846 (0.13)
---------- ---------- -----
Diluted EPS................................................. $3,975,663 11,742,168 $0.34
========== ========== =====
</TABLE>

7. EMPLOYEE BENEFIT PLAN

During 1985, the Company established a qualified profit sharing plan in
accordance with Section 401(k) of the Internal Revenue Service Code. Under the
plan, the Company makes contributions out of profits of the Company based on an
amount determined at the discretion of the Board of Directors of the Company.
All full-time employees and part-time employees working at least

F-13
<PAGE>
PEC SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -(Continued)

7. EMPLOYEE BENEFIT PLAN -(CONTINUED)

20 hours a week are eligible to participate in the plan. Eligibility is
restricted for new employees, whom are not permitted to participate until the
first day of the first quarter following date of hire. The Company contributed
$405,248, $583,030 and $1,224,673 for 1996, 1997 and 1998, respectively.

8. SUPPLEMENTAL RETIREMENT PROGRAM

In December 1998, the Company adopted a funded Executive Supplemental
Retirement Program for a select group of management or highly compensated
employees. The Program allows these employees to defer a portion of their salary
and bonus. The Company has the option of adding additional amounts of deferred
compensation at its sole discretion. The Company contributions are vested after
five years. No employee deferrals were made in 1998. The Company contributed
$105,446 to the Program in 1998, which is reflected as a liability as of
December 31, 1998.

9. DIVIDENDS

Common stock dividends of $0.04 per share were paid on January 14, 1999, to
stockholders of record on December 31, 1998.

10. INCOME TAXES

The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1997 1998
<S> <C> <C> <C>
Current:
Federal.................................................. $752,542 $1,281,147 $2,429,361
State.................................................... 141,257 240,438 456,204
-------- ---------- ----------
Total current.............................................. 893,799 1,521,585 2,885,565
-------- ---------- ----------
Deferred:
Federal.................................................. (15,050) (64,710) (211,684)
State.................................................... (2,850) (12,150) (39,886)
-------- ---------- ----------
Total deferred............................................. (17,900) (76,860) (251,570)
-------- ---------- ----------
Provision for income tax................................... $875,899 $1,444,725 $2,633,995
======== ========== ==========
</TABLE>

F-14
<PAGE>
PEC SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -(Continued)

10. INCOME TAXES -(CONTINUED)

Deferred tax assets were comprised of the following:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------
1996 1997 1998
<S> <C> <C> <C>
Deferred tax assets:
Accrued vacation.......................................... $58,068 $ 86,164 $217,974
Allowance for doubtful accounts........................... -- 27,398 25,079
Property and equipment.................................... 5,653 5,653 82,488
Intangibles............................................... -- 13,810 16,246
Capital loss carry forward................................ -- 7,556 8,734
Deferred compensation..................................... -- -- 41,630
------- -------- --------
Total deferred tax assets............................... $63,721 $140,581 $392,151
======= ======== ========
</TABLE>

A reconciliation between the Company's statutory tax rate and the effective
tax rate is as follows:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------------
1996 1997 1998
<S> <C> <C> <C>
Statutory federal rate...................................... 34.0% 34.0% 34.0%
State income taxes, net of federal benefits................. 4.0 4.0 3.0
---- ---- ----
Effective tax rate.......................................... 38.0% 38.0% 37.0%
==== ==== ====
</TABLE>

11. COMMITMENTS AND CONTINGENCIES

The Company leases office facilities and equipment under noncancelable
operating lease agreements which expire in various years through 2003.
Management expects that in the normal course of business these leases will be
renewed or replaced by other leases. Future minimum lease payments under
operating leases that have noncancelable lease terms in excess of one year as of
December 31, 1998 are as follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
<S> <C>
1999........................................................ $2,032,420
2000........................................................ 1,186,741
2001........................................................ 1,178,361
2002........................................................ 1,064,286
2003........................................................ 39,540
----------
$5,501,348
==========
</TABLE>

The total rental expense under operating leases was $600,333, $938,947 and
$1,333,455 for the years ended December 31, 1996, 1997 and 1998, respectively.

F-15
<PAGE>
PEC SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS -(Continued)

11. COMMITMENTS AND CONTINGENCIES -(CONTINUED)

During 1998, the Company entered into a lease to move its corporate offices
and Virginia operations to a new location. If the lease commences as planned in
early 2000, the additional aggregate minimum lease payments will be as follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
<S> <C>
2000........................................................ $ 1,488,467
2001........................................................ 1,540,626
2002........................................................ 1,594,717
2003........................................................ 1,650,740
2004........................................................ 1,707,729
Thereafter.................................................. 18,333,938
-----------
$26,316,217
===========
</TABLE>

In the ordinary course of business, the Company may be party to various
legal proceedings. In the opinion of management, the Company's liability, if
any, in all pending litigation or other legal proceedings will not have a
material effect upon the financial condition, results of operations or liquidity
of the Company.

F-16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

, 2000

PEC SOLUTIONS, INC.

SHARES OF COMMON STOCK
--------------

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

DONALDSON, LUFKIN & JENRETTE

CHASE H&Q

LEGG MASON WOOD WALKER
INCORPORATED

DLJDIRECT INC.

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

WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU
WRITTEN INFORMATION OTHER THAN THIS PROSPECTUS OR TO MAKE REPRESENTATIONS AS TO
MATTERS NOT STATED IN THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY SECURITIES IN ANY JURISDICTION WHERE THAT
WOULD NOT BE PERMITTED OR LEGAL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER AFTER THE DATE OF THIS PROSPECTUS SHALL CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THE AFFAIRS OF PEC
SOLUTIONS, INC. HAVE NOT CHANGED SINCE THE DATE HEREOF.

UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT
EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND
WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses payable by us in
connection with the sale and distribution of the securities offered hereby,
other than underwriting discounts and commissions. All of the amounts shown are
estimated except the Securities and Exchange Commission registration fee, the
National Association Securities Dealers, Inc. filing fee and the Nasdaq National
Market listing fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $19,800
National Association of Securities Dealers, Inc. filing
fee.......................................................
Nasdaq National Market listing fee..........................
Transfer agent's and registrar's fees....................... *
Printing expenses........................................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky filing fees and expenses........................... *
Miscellaneous expenses...................................... *
-------
Total $ *
=======
</TABLE>

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

* To be filed by amendment.

14. INDEMNIFICATION OF OFFICERS AND DIRECTORS

Section 145 of the Delaware General Corporation Law ("Section 145") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to certain limitations. Our
bylaws include provisions to require us to indemnify our directors and officers
to the fullest extent permitted by Section 145, including circumstances in which
indemnification is otherwise discretionary. Section 145 also empowers us to
purchase and maintain insurance that protects our officers, directors, employees
and agents against any liabilities incurred in connection with their service in
such positions.

At present, there is no pending litigation or proceeding involving any of
our directors or officers as to which indemnification is being sought nor are we
aware of any threatened litigation that may result in claims for indemnification
by any officer or director.

The form of Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification of our directors and officers by the
Underwriters, for certain liabilities arising under the Securities Act.

15. RECENT SALES OF UNREGISTERED SECURITIES

During the last three years, we have issued unregistered securities in the
transactions described below. These securities were offered and sold by us in
reliance upon the exemption provided for in Rule 701 of the Securities Act on
the basis that these options were offered and sold pursuant to a written
compensatory benefit plan. The sales were made without the use of an underwriter
and the certificates representing the securities sold contain a restrictive
legend that prohibits transfer without registration or an applicable exemption.

(1) Between January 1997 and January 2000, we have issued options to
our employees and directors exercisable for an aggregate of 2,445,315 shares
of common stock at exercise prices

II-1
<PAGE>
ranging from $2.20 to $6.35 per share pursuant to our stock option agreement
and our nonqualified stock option plan.

(2) Between January 1997 and January 2000, we sold an aggregate of
724,200 shares of common stock at purchase prices ranging from $0.46 to
$6.09 per share, for an aggregate consideration of $1,095,428 upon exercise
of stock options granted under our stock option agreement and our
nonqualified stock option plan.

16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Certificate of Incorporation
3.2 Bylaws
4.1* Specimen stock certificate for shares of common stock of the
Registrant
5.1* Opinion of Piper Marbury Rudnick & Wolfe LLP, regarding
legality of securities being registered
10.1 Office Lease Agreement between Building IV Associates L.P.
and the Registrant
10.2 Amendment No. 1 to Office Lease Agreement between
Building IV Associates L.P. and the Registrant
10.3 Office Lease Agreement between Building V Associates L.P.
and the Registrant
10.4 Employment Agreement between the Registrant and David C.
Karlgaard, dated January 1, 2000
10.5 Employment Agreement between the Registrant and Paul G.
Rice, dated January 1, 2000
10.6 Employment Agreement between the Registrant and Alan H.
Harbitter, dated January 1, 2000
10.7 Employment Agreement between the Registrant and Stuart R.
Lloyd, dated December 31, 1998
10.8 2000 Stock Incentive Plan
10.9 1995 Nonqualified Stock Option Plan
10.10 1987 Stock Option Agreement, as amended
10.11 Nonqualified Executive Supplemental Retirement Program
Agreement dated December 1998
10.12 2000 Employee Stock Purchase Plan
10.13 Amended and Restated Loan Agreement between the Registrant
and NationsBank, N.A., dated April 30, 1999
23.1 Consent of PricewaterhouseCoopers LLP
23.2* Consent of Piper Marbury Rudnick & Wolfe LLP (included as
part of Exhibit 5.1 hereto)
24.1 Power of Attorney (included in signature pages)
27 Financial Data Schedule
</TABLE>

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

* To be filed by amendment

II-2
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES:

17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions of its Certificate of Incorporation or
Bylaws or the Delaware General Corporation Law 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 being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes that:

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

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

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act, the Company has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Fairfax, Commonwealth
of Virginia, on the 25th day of January 2000.

<TABLE>
<S> <C> <C>
PEC SOLUTIONS, INC.

BY: /s/ DAVID C. KARLGAARD, PH.D.
--------------------------------------
DAVID C. KARLGAARD, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated. Each person whose signature appears below
in so signing also makes, constitutes and appointed David C. Karlgaard and Nancy
A. Spangler, and each of them acting alone, his true and lawful
attorney-in-fact, with full power of substitution, for him in any and all
capacities, to execute and cause to be filed with the Securities and Exchange
Commission any and all amendments and post-effective amendments to this
Registration Statement, with exhibits thereto and other documents in connection
therewith, and hereby ratifies and confirms all that said attorney-in-fact or
his or her substitute or substitutes may do or cause to be done by virtue
hereof.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DAVID C. KARLGAARD, PH.D. Chief Executive Officer, President
- -------------------------------------- and Chairman of the Board of
DAVID C. KARLGAARD, PH.D. Directors (Chief Executive
Officer) January 25, 2000

/s/ PAUL G. RICE Chief Operating Officer and
- -------------------------------------- Director
PAUL G. RICE January 25, 2000

/s/ ALAN H. HARBITTER Chief Technology Officer and
- -------------------------------------- Director
ALAN H. HARBITTER January 25, 2000

/s/ STUART R. LLOYD Chief Financial Officer, Senior
- -------------------------------------- Vice President and Director (Chief
STUART R. LLOYD Accounting and Financial Officer) January 25, 2000

/s/ JESSE BROWN Director
- --------------------------------------
JESSE BROWN January 25, 2000

/s/ ALVIN E. NASHMAN, PH.D. Director
- --------------------------------------
ALVIN E. NASHMAN, PH.D. January 25, 2000

/s/ SHARON M. OWLETT Director
- --------------------------------------
SHARON M. OWLETT January 25, 2000
</TABLE>

II-4
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- -----------
<C> <S>
1.1 * Form of Underwriting Agreement

3.1 Certificate of Incorporation

3.2 Bylaws

4.1 * Specimen stock certificate for shares of common stock of the
Registrant

5.1 * Opinion of Piper Marbury Rudnick & Wolfe LLP, regarding
legality of securities being registered

10.1 Office Lease Agreement between Building IV Associates L.P.
and the Registrant

10.2 Amendment No. 1 to Office Lease Agreement between Building
IV Associates L.P. and the Registrant

10.3 Office Lease Agreement between Building V Associates L.P.
and the Registrant

10.4 Employment Agreement between the Registrant and David C.
Karlgaard, dated January 1, 2000

10.5 Employment Agreement between the Registrant and Paul G.
Rice, dated January 1, 2000

10.6 Employment Agreement between the Registrant and Alan H.
Harbitter, dated January 1, 2000

10.7 Employment Agreement between the Registrant and Stuart R.
Lloyd, dated December 31, 1998

10.8 2000 Stock Incentive Plan

10.9 1995 Nonqualified Stock Option Plan

10.10 1987 Stock Option Agreement, as amended

10.11 Nonqualified Executive Supplemental Retirement Program
Agreement dated December 1998

10.12 2000 Employee Stock Purchase Plan

10.13 Amended and Restated Loan Agreement between the Registrant
and NationsBank, N.A., dated April 30, 1999

23.1 Consent of PricewaterhouseCoopers LLP

23.2 * Consent of Piper Marbury Rudnick & Wolfe LLP (included as
part of Exhibit 5.1 hereto)*

24.1 Power of Attorney (included in signature pages)

27 Financial Data Schedule
</TABLE>

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

* To be filed by amendment

<PAGE>

PEC SOLUTIONS, INC.
(A DELAWARE CORPORATION)

CERTIFICATE OF INCORPORATION

THE UNDERSIGNED, Bradley K. McConnell, whose mailing address c/o Piper
Marbury Rudnick & Wolfe LLP, 1200 19th Street, N.W., Washington, DC 20036, being
at least 18 years of age, acting as incorporator, does hereby form a corporation
under and by virtue of the General Corporation Law of Delaware.

FIRST: The name of the corporation (which is hereinafter called
the "Corporation") is:

PEC SOLUTIONS, INC.

SECOND: The registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent in the State of Delaware at such address is The Corporation Trust Company.

THIRD: The nature of the business of the Corporation is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware and to possess and exercise all of
the powers and privileges granted under such law and the other laws of the State
of Delaware.

FOURTH: AUTHORIZED CAPITAL. The total number of shares of all
classes of stock which the Corporation shall have authority to issue is Eighty
Five Million (85,000,000) shares, of which (i) Seventy Five Million (75,000,000)
shall be shares of common stock, par value $0.01 per share (the "Common Stock"),
the aggregate par value of which is $750,000 and (ii) Ten Million (10,000,000)
shall be shares of undesignated capital stock, par value $0.01 per share (the
"Undesignated Capital Stock"), the aggregate par value of which is $100,000.

A. COMMON STOCK

(1) GENERAL. The voting, dividend and liquidation rights of
the holders of the Common Stock are subject to and qualified by the rights of
the holders of the Undesignated Capital Stock of any series as may be designated
by the Board of Directors upon any issuance of the Undesignated Capital Stock of
any series.

(2) VOTING. The holders of the Common Stock are entitled to
one vote for each share held at all meetings of stockholders. There shall be no
cumulative voting.

<PAGE>

(3) DIVIDENDS. Dividends may be declared and paid on the
Common Stock from funds lawfully available therefor as and when determined by
the Board of Directors and subject to any preferential dividend rights of any
then outstanding Undesignated Capital Stock.

(4) LIQUIDATION. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive all assets of the Corporation available for distribution to
its stockholders, subject to any preferential rights of any then outstanding
Undesignated Capital Stock.

(5) REDEMPTION. The Common Stock is not redeemable.

B. UNDESIGNATED CAPITAL STOCK. The Board of Directors
expressly is authorized, subject to limitations prescribed by the Delaware
General Corporation Law and the provisions of this Certificate of Incorporation
of the Corporation, to provide, by resolution and by filing a certificate
pursuant to the Delaware General Corporation Law, for the issuance from time to
time of the shares of Undesignated Capital Stock in one or more series, to
establish from time to time the number of shares to be included in each such
series, and to fix the designation, powers, preferences and other rights of the
shares of each such series and to fix the qualifications, limitations and
restrictions thereon, including, but without limiting the generality of the
foregoing, the following:

(1) the number of shares constituting that series and the
distinctive designation of that series;

(2) the dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that
series;

(3) whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the terms of such voting
rights;

(4) whether that series shall have conversion privileges, and,
if so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;

(5) whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the dates upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different conditions
and at different redemption rates;

-2-
<PAGE>

(6) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;

(7) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and

(8) any other relative powers, preferences, and rights of that
series, and qualifications, limitations or restrictions on that series.

FIFTH. BOARD OF DIRECTORS. In furtherance of and not in
limitation of powers conferred by statute, it is further provided:

A. Election of directors need not be by written ballot unless
the By-Laws of the Corporation shall so provide. Except as otherwise provided in
this Amended and Restated Certificate of Incorporation or a certificate of
designation relating to the rights of the holders of any class or series of
Undesignated Capital Stock, voting separately by class or series, to elect
additional directors under specified circumstances, the number of directors of
the Corporation shall be as fixed from time to time by or pursuant to the
By-Laws of the Corporation. No director of the Corporation need be a stockholder
of the Corporation.

B. The Board of Directors shall be classified with respect to
the time for which they severally hold office into three separate classes, Class
I, Class II and Class III, which shall be as nearly equal in number as possible,
and shall be adjusted from time to time in the manner specified in the By-Laws
of the Corporation to maintain such proportionality. Each initial director in
Class I shall hold office for a term expiring at the 2000 annual meeting of
stockholders. Each initial director in Class II shall hold office initially for
a term expiring at the 2001 annual meeting of stockholders. Each initial
director in Class III shall hold office for a term expiring at the 2002 annual
meeting of stockholders. Notwithstanding the foregoing provisions of this
Article FIFTH, each director shall serve until such director's successor is duly
elected and qualified or until such director's earlier death, resignation or
removal. At each annual meeting of stockholders, the successors to the class of
directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election and until their successors have been duly
elected and qualified or until any such director's earlier death, resignation or
removal.

C. The Board of Directors is expressly authorized to adopt,
amend or repeal the By-Laws of the Corporation.

-3-
<PAGE>

SIXTH. MEETINGS OF STOCKHOLDERS. Meetings of stockholders may
be held within or without the State of Delaware, as the By-Laws of the
Corporation may provide. Upon the closing of an underwritten initial public
offering of the Corporation's Common Stock pursuant to the effective
registration statement under the Securities Act of 1933, as amended, any action
required or permitted to be taken at any annual or special meeting of
stockholders of the Corporation may be taken only upon the vote of stockholders
at an annual or special meeting duly noticed and called in accordance with the
General Corporation Law of the State of Delaware and may not be taken by written
consent of stockholders without a meeting, unless such consent is unanimous.

SEVENTH: SPECIAL MEETINGS OF STOCKHOLDERS. Special meeting
of stockholders may be called at any time by the Chairman of the Board, the
President, or the majority of the Board of Directors. Business transacted at any
special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.

EIGHTH. LIMITATION ON LIABILITY. No director of the
Corporation shall be personally liable to the Corporation or to any stockholder
of the Corporation for monetary damages for breach of fiduciary duty as a
director, provided that this provision shall not limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involved intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit.

If the General Corporation Law of Delaware or any other
statute of the State of Delaware hereafter is amended to authorize the further
elimination or limitation of the liability of directors of the corporation, then
the liability of a director of the corporation shall be limited to the fullest
extent permitted by the statutes of the State of Delaware, as so amended, and
such elimination or limitation of liability shall be in addition to, and not in
lieu of, the limitation on the liability of a director provided by the foregoing
provisions of this Article EIGHTH.

Any repeal of or amendment to this Article EIGHTH shall be
prospective only and shall not adversely affect any limitation on the liability
of a director of the corporation existing at the time of such repeal or
amendment.

NINTH. To the extent permitted by law, the Corporation shall
fully indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of the fact
that such person is or was a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys'

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fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding.

To the extent permitted by law, the Corporation may fully
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that
such person is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.

The Corporation may advance expenses (including attorneys'
fees) incurred by a director or officer in advance of the final disposition of
such action, suit or proceeding upon the receipt of an undertaking by or on
behalf of the director or officer to repay such amount if it shall ultimately be
determined that such director or officer is not entitled to indemnification. The
Corporation may advance expenses (including attorneys' fees) incurred by an
employee or agent in advance of the final disposition of such action, suit or
proceeding upon such terms and conditions, if any, as the Board of Directors and
its delegates deem appropriate.

TENTH. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute and the Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.

I, THE UNDERSIGNED, being the incorporator hereinbefore named,
for the purpose of forming a Corporation pursuant to the General Corporation Law
of Delaware do make this Certificate hereby declaring and certifying, under
penalties of perjury, that this is my act and deed and the facts herein stated
are true, and accordingly heretofore set my hand this 14th day of December,
1999.

------------------------------
Bradley K. McConnell

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<PAGE>

PEC SOLUTIONS, INC.
(A DELAWARE CORPORATION)

ARTICLE 1 - STOCKHOLDERS

1.1 PLACE OF MEETING. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors or the President or, if not so
designated, at the registered office of the Company.

1.2 ANNUAL MEETING. The annual meeting of stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held at such date, time and place as may be
fixed by the Board of Directors or the President. If this date shall fall upon a
legal holiday at the place of the meeting, then such meeting shall be held on
the next succeeding business day at the same hour. If no annual meeting is held
in accordance with the foregoing provisions, the Board of Directors shall cause
the meeting to be held as soon thereafter as convenient. If no annual meeting is
held in accordance with the foregoing provisions, a special meeting may be held
in lieu of the annual meting, and any action taken at that special meeting shall
have the same effect as if it had been taken at the annual meeting, and in such
case all references in these By-Laws to the annual meeting of the stockholders
shall be deemed to refer to such special meeting.

1.3 SPECIAL MEETINGS. Special meeting of stockholders may be called at
any time by the Chairman of the Board, the President, or the majority of the
Board of Directors Business transacted at any special meeting of stockholders
shall be limited to matters relating to the purpose or purposes stated in the
notice of meeting.

1.4 NOTICE OF MEETINGS. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than ten nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at the stockholder's address as it
appears on the records of the Company.

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<PAGE>

1.5 VOTING LIST. The officer who has charge of the stock ledger of the
Company shall prepare, at least 10 days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, at a place within the city where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time of the meeting, and may be inspected by any stockholder who is
present.

1.6 QUORUM. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the Company issued and outstanding and entitled to vote at the
meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business.

1.7 ADJOURNMENTS. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the Company may transact any business which might have been
transacted at the original meeting.

1.8 VOTING AND PROXIES. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to vote
at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for him or
her by written proxy executed by the stockholder or his or her authorized agent
and delivered to the Secretary of the Company. No such proxy shall be voted or
acted upon after three years from the date of its execution, unless the proxy
expressly provides for a longer period.

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1.9 ACTION AT MEETING. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-Laws. Any election by stockholders shall be determined
by a plurality of the votes cast by the stockholders entitled to vote at the
election.

1.10 ACTION WITHOUT MEETING. Upon the closing of an underwritten
initial public offering of the Company's Common Stock pursuant to the effective
registration statement under the Securities Act of 1933, as amended, any action
required or permitted to be taken at any annual or special meeting of
stockholders of the Company may be taken only upon the vote of stockholders at
an annual or special meeting duly noticed and called in accordance with the
General Company Law of the State of Delaware and may not be taken by written
consent of stockholders without a meeting, unless such consent is unanimous.

1.11 STOCKHOLDER NOMINATIONS AND PROPOSALS. (a) No proposal for a
stockholder vote (a "Stockholder Proposal") shall be submitted to the
stockholders of the Company unless the stockholder submitting such proposal (the
"Proponent") shall have filed a written notice setting forth with particularity
(i) the names and business addresses of the Proponent and all Persons (as such
term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended, (the "Exchange Act")) acting in concert with the Proponent; (ii) the
names and addresses of the Proponent and the Persons identified in clause (i),
as they appear on the Company's books (if they so appear); (iii) the class and
number of shares of the Company beneficially owned by the Proponent and the
Persons identified in clause (i); (iv) a description of the Stockholder Proposal
containing all information material thereto; (v) a description of all
arrangements or understandings between the Proponent and any other Persons
(including the names of such other Persons) in connection with the Stockholder
Proposal and any material interest of the Proponent or such Persons in such
Stockholder Proposal and (vi) such other information as the Board of Directors
reasonably determines is necessary or appropriate to enable the Board of
Directors and stockholders to consider the Stockholder Proposal. Upon receipt of
the Stockholder Proposal and prior to the stockholders' meeting at which such
Stockholder Proposal will be considered, if the Board of Directors or a
designated committee or the officer who will preside at the meeting of the
stockholders determines that the information provided in a Stockholder Proposal
does not satisfy the requirements of this Section 1.11 or is otherwise not in
accordance with applicable law, the Secretary of the Company shall promptly
notify the Proponent of the deficiency in the notice. Such Proponent shall have
the opportunity to cure the deficiency by providing additional

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<PAGE>

information to the Secretary within the period of time, not to exceed five days
from the date such deficiency notice is given to the Proponent, determined by
the Board of Directors, such committee or such officer. If the deficiency is not
cured within such period, or if the Board of Directors, such committee or such
officer determines that the additional information provided by the Proponent,
together with the information previously provided, does not satisfy the
requirements of this Section 1.11 or is otherwise not in accordance with
applicable law, then such Stockholder Proposal shall not be presented for action
at the stockholders' meeting in question.

(b) Only persons who are selected and recommended by the Board of
Directors or the nominating committee thereof, or who are nominated by the
stockholders in accordance with the procedures set forth in this Section 1.11,
shall be eligible for election or qualified to serve as directors. Nominations
of individuals for election to the Board of Directors at any annual meeting or
special meeting of the stockholders at which directors are to be elected may be
made by any stockholder of the Company entitled to vote for the election of
directors at that meeting by compliance with the procedures set forth in this
Section 1.11 except as may be otherwise provided in the Certificate of
Incorporation with respect to the right of holders of Preferred Stock of the
Company to nominate and elect a specified number of directors in certain
circumstances. Nominations by stockholders shall be made by written notice (a
"Nomination Notice"), which shall set forth (i) as to each individual nominated
(A) the name, date of birth, business address and residence address of such
nominee; (B) the business experience during the past five years of such nominee,
including his or her principal occupations or employment during such period, the
name and principal business of any company or other organization in which such
occupations and employment were carried on, and such other information as to the
nature of his or her responsibilities and the level of professional competence
as may be sufficient to permit assessment of his or her prior business
experience; (C) whether the nominee is or has ever been at any time a director,
officer or owner of 5% or more of any class of capital stock, partnership
interests or other equity interest of any Company, partnership or other entity;
(D) any directorships held by such nominee in any company with a class of
securities registered pursuant to section 12 of the Exchange Act or subject to
the requirements of section 15(d) of the Exchange Act or any company registered
as an investment company under the Investment Company Act of 1940, as amended;
(E) whether, in the last five years, such nominee has been convicted in a
criminal proceeding or has been subject to a judgment, order, finding or decree
of any federal, state or other governmental entity, concerning any violation of
federal, state, or other law, or any proceeding in bankruptcy, which conviction,
judgment, order, finding, decree or proceeding may be material to the evaluation
of the ability or integrity of the nominee; and (F) any other information
relating to the nominee that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to section 14 of the Exchange Act,
and the rules and regulations promulgated thereunder; and (ii) as to the person
submitting the Nomination Notice and any Person acting in concert with such

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Person, (w) the name and business address of such person and Persons, (x) the
name and business address of such person and Persons as they appear on the books
of the Company (if they so appear); (y) the class and number of shares of the
Company which are beneficially owned by such person and Persons, and (z) any
other information relating to such stockholder that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. A written consent to being named in a proxy statement as a nominee,
and to serve as a director if elected, signed by the nominee, shall be filed
with any Nomination Notice. If the presiding officer at any stockholders'
meeting determines that a nomination was not made in accordance with the
procedures prescribed by these By-laws, the officer shall so declare to the
meeting and the defective nomination shall be disregarded.

(c) Nomination Notices and Stockholder Proposals must be delivered to
the Secretary at the principal executive office of the Company or mailed and
received at the principal executive offices of the Company (a) in the case of
any annual meeting, 120 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that (i) in the
event that the annual meeting is called for a date that is not within 30 days
before or 60 days after such anniversary date, or (ii) in the case of the annual
meeting of stockholders held during the 1999 fiscal year of the Company, notice
by the stockholder in order to be timely must be so received no later than the
close of business on the tenth day following the day on which notice of the date
of the annual meeting was mailed or public disclosure of the date of the annual
meeting was made, whichever first occurs; and (b) in the case of a special
meeting of stockholders called for the purpose of electing directors, not later
than the close of business on the tenth day following the day on which notice of
the date of the special meeting was mailed or public disclosure of the date of
the special meeting was made, whichever first occurs.

ARTICLE 2 - DIRECTORS

2.1 GENERAL POWERS. The business and affairs of the Company shall be
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the Company except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.

2.2 NUMBER; ELECTION AND QUALIFICATION. The number of directors which
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors, but in no event shall be less than one. The number of
directors may be decreased at any time and from time to time by a majority of
the directors then in office,

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but only to eliminate vacancies existing by reason of the death, resignation,
removal or expiration of the term of one of more directors. Unless otherwise
provided in the Certificate of Incorporation, the Board of Directors shall
divide the directors into three classes, which shall be as equal in number as
possible; and, when the number of directors is changed, shall determine the
class or classes to which the increased or decreased number of directors shall
be apportioned, which shall be done so as to maintain as equal a number of
directors in each class as possible; PROVIDED, HOWEVER, that no decrease in the
number of directors shall affect the term of any director then in office.
Directors need not be stockholders of the Company.

2.3 ENLARGEMENT OF THE BOARD. The number of directors may be increased
at any time and from time to time by a majority of the directors then in office.

2.4 TENURE. The directors shall be elected at the annual meeting of
stockholders by such stockholders as have the right to vote on such election. At
each annual meeting of stockholders, directors elected to succeed those whose
terms are expiring shall be elected for a term of office expiring at the annual
meeting of stockholders held in the third year following their election and
until their respective successors are elected and qualified, or until such
director's earlier death, resignation or removal.

2.5 VACANCIES. Any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the Board, may
be filled by vote of a majority of the directors then in office, although less
than a quorum, or by a sole remaining director. A director elected to fill a
vacancy shall be elected for the unexpired term of his or her predecessor in
office, and a director chosen to fill a position resulting from an increase in
the number of directors shall hold office until the next annual meeting of
stockholders and until his or her successor is elected and qualified, or until
his or her earlier death, resignation or removal.

2.6 RESIGNATION. Any director may resign by delivering written
resignation to the Company at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.

2.7 REGULAR MEETINGS. Provided that meetings are held at least once
during each of the Company's fiscal quarters, regular meetings of the Board of
Directors may be held without notice at such time and place, either within or
without the State of Delaware, as shall be determined from time to time by the
Board of Directors; provided that any director who is absent when such a
determination is made shall be given notice of the determination. A regular
meeting of the Board of Directors may be held without notice immediately after
and at the same place as the annual meeting of stockholders.

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2.8 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by any member of the Board of Directors or the President of the
Company.

2.9 NOTICE OF SPECIAL MEETINGS. Notice of any special meeting of the
Board of Directors shall be given to each director by the Secretary or by the
officer or one of the directors calling the meeting. Notice shall be duly given
to each director (i) by giving notice to such director in person or by telephone
at least 24 hours in advance of the meeting, (ii) by sending a facsimile,
telegram or telex, or delivering written notice by hand, to his or her last
known business or home address at least 24 hours in advance of the meeting, or
(iii) by mailing written notice to his or her last known business or home
address at least 72 hours in advance of the meeting. A notice or waiver of
notice of a meeting of the Board of Directors need not specify the purposes of
the meeting.

2.10 MEETINGS BY TELEPHONE CONFERENCE CALLS. Directors or any members
of any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.

2.11 QUORUM. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present

2.12 ACTION AT MEETING. At any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these By-Laws.

2.13 ACTION BY CONSENT. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.

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2.14 REMOVAL. Any one or more or all of the directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors, except that the directors elected by the
holders of a particular class or series of stock may be removed without cause
only by vote of the holders of a majority of the outstanding shares of such
class or series.

2.15 COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Company. The Board may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members of the
committee present at any meeting and not disqualified from voting, whether or
not he, she or they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any such absent
or disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors and subject to the provisions of the
General Company Law of the State of Delaware, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Company and may authorize the seal of the Company to
be affixed to all papers which may require it. Each such committee shall keep
minutes and make such reports as the Board of Directors may from time to time
request. Except as the Board of Directors may otherwise determine, any committee
may make rules for the conduct of its business, but unless otherwise provided by
the directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these By-Laws for the Board of
Directors.

2.16 COMPENSATION OF DIRECTORS. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the Company or any of its parent or
subsidiary Companies in any other capacity and receiving compensation for such
service.

ARTICLE 3 - OFFICERS

3.1 ENUMERATION. The officers of the Company shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.

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3.2 ELECTION. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.

3.3 QUALIFICATION. No officer need be a stockholder. Any two or more
offices may be held by the same person.

3.4 TENURE. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his or
her successor is elected and qualified, unless a different term is specified in
the vote choosing or appointing him or her, or until his or her earlier death,
resignation or removal.

3.5 RESIGNATION AND REMOVAL. Any officer may resign by delivering a
written resignation to the Company at its principal office or to the President
or Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.

Any officer may be removed at any time, with or without cause, by vote
of a majority of the entire number of directors then in office.

Except as the Board of Directors may otherwise determine, no officer
who resigns or is removed shall have any right to any compensation as an officer
for any period following such officer's resignation or removal, or any right to
damages on account of such removal, whether such officer's compensation be by
the month or by the year or otherwise, unless such compensation is expressly
provided in a duly authorized written agreement with the Company.

3.6 VACANCIES. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his or her predecessor and until his or her successor is elected and qualified,
or until his or her earlier death, resignation or removal.

3.7 CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD. The Board of
Directors may appoint a Chairman of the Board and may designate the Chairman of
the Board as Chief Executive Officer. If the Board of Directors appoints a
Chairman of the Board, he or she shall perform such duties and possess such
powers as are assigned to him or her by the Board of Directors. If the Board of
Directors appoints a Vice-Chairman of the Board, he or she shall, in the absence
or disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall

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perform such other duties and possess such other powers as may from time to time
be vested in him or her by the Board of Directors.

3.8 PRESIDENT. Unless the Board of Directors otherwise determines, the
President shall be the Chief Operating Officer of the Company. Unless the Board
of Directors has designated the Chairman of the Board as Chief Executive
Officer, the President shall also be the Chief Executive Officer of the Company.
The President shall, subject to the direction of the Board of Directors, have
general charge and supervision of the business of the Company. Unless otherwise
provided by the Board of Directors, the President shall preside at all meetings
of the stockholders, if the President is a director, at all meetings of the
Board of Directors. The President shall perform such other duties and shall have
such other powers as the Board of Directors may from time to time prescribe.

3.9 VICE PRESIDENTS. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.

3.10 SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.

Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary, (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.

In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.

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3.11 TREASURER AND ASSISTANT TREASURERS. The Treasurer shall perform
such duties and shall have such powers as may from time to time be assigned to
him or her by the Board of Directors or the President. In addition, the
Treasurer shall perform such duties and have such powers as are incident to the
office of treasurer, including without limitation the duty and power to keep and
be responsible for all funds and securities of the Company, to deposit funds of
the Company in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
Company.

The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability, or refusal to act of
the Treasurer, the Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.

ARTICLE 4 - CAPITAL STOCK

4.1 ISSUANCE OF STOCK. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the Company or
the whole or any part of any unissued balance of the authorized capital stock of
the Company held in its treasury may be issued, sold, transferred or otherwise
disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.

4.2 CERTIFICATES OF STOCK. Every holder of stock of the Company shall
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
such stockholder in the Company. Each such certificate shall be signed by, or in
the name of the Company by, the Chairman or Vice-Chairman, if any, of the Board
of Directors, or the President or a Vice President, and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the Company.
Any or all of the signatures on the certificate may be a facsimile.

Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
By-Laws, applicable securities laws or any agreement among any number of
shareholders or among such holders and the Company shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction.

-11-
<PAGE>

4.3 TRANSFERS. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the Company by the surrender to the
Company or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the Company or its transfer agent may reasonably require. Except as
may be otherwise required by law, by the Certificate of Incorporation or by
these By-Laws, the Company shall be entitled to treat the record holder of stock
as shown on its books as the owner of such stock for all purposes, including the
payment of dividends and the right to vote with respect to such stock,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been transferred on the books of the Company in accordance with the
requirements of these By-Laws.

4.4 LOST, STOLEN OR DESTROYED CERTIFICATES. The Company may issue a new
certificate of stock in place of any previously issued certificate alleged to
have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the Company or any
transfer agent or registrar.

4.5 RECORD DATE. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.

If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.

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<PAGE>

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

ARTICLE 5 - INDEMNIFICATION

5.1 INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE
BY OR IN THE RIGHT OF THE COMPANY. (a) The Company shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (whether civil, criminal,
administrative or investigative) by reason of the fact that such person is or
was a director or officer of the Company, or is or was serving at the request of
the Company as a director or officer of another company, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, if such person acted in good faith and in a manner which
such person reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that such conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that such conduct was unlawful.

(b) The Company may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (whether civil, criminal, administrative or investigative) by
reason of the fact that such person is or was an employee or agent of the
Company, or is or was serving at the request of the Company as an employee or
agent of another company, partnership, joint venture, trust, employee benefit
plan or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, if such
person acted in good faith and in a manner which such person reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe that
such conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which such person reasonably believed to
be in or not opposed to the best interests of the Company, and,

-13-
<PAGE>

with respect to any criminal action or proceeding, had reasonable cause to
believe that such conduct was unlawful.

5.2 INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN THE RIGHT
OF THE COMPANY. (a) The Company shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding by or in the right of the Company to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the Company, or is or was serving at the request of the
Company as a director of officer of another company, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner which such person reasonably believed to be in or not
opposed to the best interest of the Company. No such indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Company unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.

(b) The Company may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by or in the right of the Company to procure a judgment in
its favor by reason of the fact that such person is or was an employee or agent
of the Company, or is or was serving at the request of the Company as an
employee or agent of another company, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit if such person acted in
good faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Company. No such indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Company unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.

5.3 AUTHORIZATION OF INDEMNIFICATION. Any indemnification under this
Article 5 shall be made by the Company only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because such person or persons have met the
applicable standard of conduct set forth in Sections 5.1 and 5.2 hereof. Such
determination shall be made (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding,

-14-
<PAGE>

even though less than a quorum, or (2) if there are no such directors, or if
such directors so direct, by independent legal counsel in a written opinion, or
(3) by the stockholders.

5.4 ADVANCEMENT OF EXPENSES. The Company may advance expenses
(including attorneys' fees) incurred by a director or officer in advance of the
final disposition of such action, suit or proceeding upon the receipt of an
undertaking by or on behalf of the director of officer to repay such amount if
it shall ultimately be determined that such director or officer is not entitled
to indemnification. The Company may advance expenses (including attorneys' fees)
incurred by an employee or agent in advance of the final disposition of such
action, suit or proceeding upon such terms and conditions, if any, as the Board
of Directors deems appropriate.

5.5 CLAIMS. If a claim for indemnification or payment of expenses under
this Article 5 is not paid with 60 days after a written claim therefor is
received by the Company, the claimant may recover the unpaid amount of such
claim and, if successful in whole or in part, shall be entitled to be paid the
expense of prosecuting the claim. In any such action, the Company shall have the
burden of proving that the claimant was not entitled to the requested
indemnification or payment of expenses under applicable law.

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

ARTICLE 6 - GENERAL PROVISIONS

6.1 FISCAL YEAR. Except as from time to time otherwise designated by
the Board of Directors, the fiscal year of the Company shall begin on the first
day of January in each year and end on the last day of December in each year.

6.2 CORPORATE SEAL. The corporate seal shall be in such form as shall
be approved by the Board of Directors.

6.3 WAIVER OF NOTICE. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before,

-15-
<PAGE>

at or after the time stated in such waiver, or the appearance of such person or
persons at such meeting in person or by proxy, shall be deemed equivalent to
such notice.

6.4 VOTING OF SECURITIES. Except as the directors may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
Company (with or without power of substitution) at, any meeting of stockholders
or shareholders of any other Company or organization, the securities of which
may be held by this Company.

6.5 EVIDENCE OF AUTHORITY. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
Company shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.

6.6 CERTIFICATE OF INCORPORATION. All references in these By-Laws to
the Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the Company, as amended and in effect from time to time.

6.7 TRANSACTIONS WITH INTERESTED PARTIES. No contract or transaction
between the Company and one or more of the directors or officers, or between the
Company and any other Company, partnership, association, another organization in
which one or more of the directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board of Directors or a committee of the Board of Directors which
authorizes the contract or transaction or solely because his, her or their votes
are counted for such purpose, if:

(1) The material facts as to his or her relationship or
interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or
the committee, and the Board or committee in good
faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be
less than a quorum;

(2) The material facts as to such his or her relationship
or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the
stockholders; or

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<PAGE>

(3) The contract or transaction is fair as to the Company
as of the time it is authorized, approved or,
ratified, by the Board of Directors, a committee of
the Board of Directors, or the stockholders.

Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.

6.8 SEVERABILITY. Any determination that any provision of these By-Laws
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.

6.9 PRONOUNS. All pronouns used in these By-Laws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.

ARTICLE 7 - AMENDMENTS

7.1 BY THE BOARD OF DIRECTORS. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.

7.2 BY THE STOCKHOLDERS. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the Company issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting. Notwithstanding the foregoing, the affirmative
vote of the holders of at least 66-2/3% of the outstanding stock shall be
required to alter, amend or repeal Sections 2.2 and 2.3 of Article 2 or this
Article 7.

-17-

<PAGE>

OFFICE LEASE AGREEMENT

between

BUILDING IV ASSOCIATES L.P.
a Virginia limited partnership
("LANDLORD")

and

PERFORMANCE ENGINEERING CORPORATION
a Virginia corporation
("TENANT")

<PAGE>

OFFICE LEASE AGREEMENT

THIS OFFICE LEASE AGREEMENT (this "LEASE") is made and entered into
this ____ day of ____________, 1999 (the "EFFECTIVE DATE"), by and between
BUILDING IV ASSOCIATES L.P., a Virginia limited partnership ("LANDLORD") and
PERFORMANCE ENGINEERING CORPORATION, a Virginia corporation ("TENANT"), upon all
terms set forth in this Lease and in all Exhibits hereto, to each and all of
which terms Landlord and Tenant hereby mutually agrees, and in consideration of
One Dollar and other valuable considerations, the receipt and sufficiency of
which are hereby acknowledged, and of the rents, agreements and benefits flowing
between the parties hereto, as follows:

ARTICLE 1
BASIC LEASE INFORMATION AND CERTAIN DEFINITIONS

SECTION 1.01. Each reference to this Lease to information and
definitions contained in Article 1 and each use of the terms capitalized and
defined in this SECTION 1.01 shall be deemed to refer to, and shall have the
following meanings:

A. Building: Fair Lakes Four
12700 Fair Lakes Circle
Fairfax, Virginia 22033

B. Premises: The Premises located on the entire second (2nd)
floor of the Building, as more fully described and shown on
the floor plan attached as EXHIBIT "A".

C. Term: Approximately thirteen (13) years and nine (9) months.

D. Commencement Date: As defined in SECTION 1.01 of EXHIBIT "C".

E. Expiration Date: December 31, 2013

F. Rentable Area of the Building: 75,044 square feet.

G. Rentable Area of the Premises: 21,000 square feet.

H. Tenant's Proportionate Share: 27.98%.

I. Base Rent: As defined in SECTION 3.01 of EXHIBIT "C".

J. Security Deposit: $84,875.00, as adjusted pursuant to ARTICLE
23 of EXHIBIT "C".

K. Adjustment Factor: 3.5%

L. Landlord's Address for Notices:

c/o The Peterson Companies
12500 Fair Lakes Circle
Suite 400
Fairfax, Virginia 22033
Attention: Asset Manager

M. Tenant's Address for Notices:

Performance Engineering Corporation
12750 Fair Lakes Circle
Fairfax, Virginia 22033
Attention: David Karlgaard

2
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

N. Lease: Collectively refers to this Office Lease Agreement
together with the following Exhibits which are attached
hereto and incorporated herein by this reference.

EXHIBITS

"A" -- Floor Plans
"B" -- Leasehold Improvements
"C" -- General Lease Provisions
"D" -- Rules and Regulations
"E" -- Right of First Refusal and Offer Letter
"F" -- Nondisturbance, Subordination and Attornment
Agreement

O. Broker: CB Commercial

ARTICLE 2
DEMISE AND TERM

Landlord leases to Tenant, and Tenant leases from Landlord, the
Premises located in the Building for the Term and subject to the provisions
hereof. The Term of this Lease shall be for the period specified in SECTION 1.01
and shall begin at midnight on the Commencement Date (as defined in the General
Lease Provisions) and shall, unless this Lease is sooner terminated in
accordance with the provisions of this Lease, end at midnight on the Expiration
Date, provided, however, that if for any reason the Expiration Date shall be a
day other than the final day of a calendar month then, the Term of this Lease
shall be extended so that it will expire on the last day of the calendar month
in which the Expiration Date takes place.

ARTICLE 3
RENEWAL OPTION

Tenant shall have the right to renew and extend the Term of this Lease
with respect to the entire Premises then subject to this Lease for the Renewal
Term (herein so called) upon and subject to the following terms and conditions:

1. Tenant may extend this Lease for two (2) Renewal Terms of five (5)
years each by giving written notice thereof to Landlord no later than (i) twelve
(12) months prior to the expiration of the original Term with respect to the
first Renewal Term and (ii) twelve (12) months prior to the expiration of the
first Renewal Term with respect to the second Renewal Term. Landlord, at its
sole option, shall have the right to shorten the notice period required for
Tenant's exercise of its renewal options hereunder from twelve (12) months to
some shorter period of time by providing written notice to Tenant of Landlord's
consent to the shorter notice period; however, consent to a shorter notice
period with respect to the first Renewal Term shall not be deemed consent by
Landlord to a shorter notice period with respect to the second Renewal Term. The
first Renewal Term shall commence immediately upon the expiration of the
original Term and the second Renewal Term shall commence immediately upon the
expiration of the first Renewal Term. Upon exercise by Tenant of its right to a
Renewal Term, the Expiration Date of the Term shall automatically become the
last day of the Renewal Term. If Tenant does not exercise its rights to a
Renewal Term in a timely manner, Tenant's failure shall conclusively be deemed a
waiver of its rights to such Renewal Term and all future Renewal Terms.

2. The exercise by Tenant of its rights to a Renewal Term must be made,
if at all, by written notice executed by Tenant and delivered to Landlord on or
before the date set forth above. Once Tenant shall exercise its rights to a
Renewal Term, Tenant may not thereafter revoke such exercise. Tenant shall not
have the right to exercise a Renewal Term if Tenant is in monetary or material
non-monetary Default under this Lease, either at the time Tenant gives notice of
its election or immediately prior to the commencement of the Renewal Term.

3
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

3. Tenant shall take the Premises "as is" for the Renewal Term and
Landlord shall have no obligation to make any improvements or alterations to the
Premises.

4. Base Rent per square foot of Rentable Area of the Premises for the
first year of the Renewal Term shall be the sum of the following: (i) the
adjusted Net Base Rent in effect immediately prior to the expiration of the
original Term, with respect to the first Renewal Term, and the expiration of the
first Renewal Term, with respect to the second Renewal Term, shall be multiplied
by the Adjustment Factor and the amount computed shall be added to the adjusted
Net Base Rent in effect immediately prior to the expiration of the original
Term, with respect to the first Renewal Term, and the expiration of the first
Renewal Term, with respect to the second Renewal Term and (ii) the total
commissions paid with respect to Tenant's lease of the Premises during the
Renewal Term(s) amortized over the respective Renewal Term(s) at nine and
one-half percent (9.5%) per annum. During each year of the Renewal(s), Base Rent
shall be increased annually on the anniversary of the Commencement Date by the
Adjustment Factor.

5. Subject to SUBPARAGRAPH 4 above, the leasing of the Premises for the
Renewal Term shall be upon the same terms and conditions as are applicable for
the original Term, and shall be upon and subject to all of the provisions of
this Lease, including, without limitation, the obligation of Tenant to pay
Tenant's Additional Rent under the Lease.

ARTICLE 4
INTENTIONALLY OMITTED

ARTICLE 5
INTENTIONALLY OMITTED

ARTICLE 6
INTENTIONALLY OMITTED

ARTICLE 7
RIGHT OF FIRST OFFER AND RIGHT OF FIRST REFUSAL

Tenant's rights and obligations with regard to the Right of First Offer
and the Right of First Refusal as described and agreed to by letter dated April
7, 1998 from Landlord to Tenant, a copy of which is attached hereto as EXHIBIT
"E", are incorporated herein by this reference, except that the following
changes shall be incorporated:

1. In paragraph 1(a), change the first sentence to read:

"If at any time during the Offer Period,
the Fair Lakes IV Landlord is prepared AND ABLE to offer to a third party in the
open market any space in Fair Lakes IV THAT WILL BE AVAILABLE TO LEASE, then the
Fair Lakes IV Landlord shall send a written offer notice (the "OFFER NOTICE") to
Tenant of such intent to lease."

2. Paragraph 1(d) shall be changed to read as follows:

"Should Tenant either fail to respond within
the five (5) business day period, or elects not to accept the Offer Notice, then
Landlord shall have the right to offer for lease such Offered Space to any other
third parties. However, Landlord shall not have the right to actually lease such
Offered Space to a third party until Landlord provides Tenant, and Tenant elects
not to accept, its Right of First Refusal option as described in Paragraph 2
below."

3. At the beginning of the first paragraph under Part 2 -
Right of First Refusal; Fair Lakes IV, insert the following sentence:

4
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

"Provided Landlord has previously offered
to Tenant, and Tenant has elected not to accept, a Right of First Offer Notice
pursuant to Paragraph 1 above for the space in question, Tenant shall have a
Right of First Refusal option as further described below."

4. Throughout Paragraph 2, the term "Offer Notice" shall be
changed to "Refusal Notice".

ARTICLE 8
TENANT IMPROVEMENT ALLOWANCE

Landlord shall provide Tenant with an allowance (the "TENANT
IMPROVEMENT ALLOWANCE") for the construction of leasehold improvements to the
Premises of up to $8.00 per square foot of Rentable Area comprising the
Premises, but in no event to exceed $168,000.00. The Tenant Improvement
Allowance shall be applied by Landlord to the costs to be borne by Tenant
pursuant to EXHIBIT "B" to the Lease. Tenant shall reimburse Landlord for all
amounts paid by Landlord to Tenant from the Tenant Improvement Allowance on a
monthly basis with Tenant's payment of Base Rent in an amount equal to the
Tenant Improvement Allowance Rate. The Tenant Improvement Allowance Rate shall
mean the Tenant Improvement Allowance provided by Landlord to Tenant amortized
over the remaining Term at an interest rate of nine and one-half percent (9
1/2%) per annum. The Tenant Improvement Allowance Rate shall constitute
Additional Rent due under the Lease with Tenant's payment of Base Rent.

ARTICLE 9
GENERAL LEASE PROVISIONS

As set forth in SECTION 1.01 of the Office Lease Agreement, this Lease
includes and incorporates the General Lease Provisions attached hereto as
EXHIBIT "C". As more fully set forth in the General Lease Provisions, this Lease
sets forth the entire agreement between Landlord and Tenant relating to the
Premises and the Building. The parts of this Lease which are written, printed,
or typewritten shall have no greater force or effect than and shall not control
over other parts of the Lease, but all parts shall be given equal effect.

5
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

WITNESS the following signatures and seals of Landlord and Tenant made
as of the date first above written.

LANDLORD:

BUILDING IV ASSOCIATES L.P.
a Virginia limited partnership

By: Building IV Associates, Inc.
a Virginia corporation
its general partner

By:
---------------------------
Name:
---------------------------
Its:
---------------------------

TENANT:

PERFORMANCE ENGINEERING
CORPORATION
a Virginia corporation

By:
---------------------------
Name:
---------------------------
Its:
---------------------------

6
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

EXHIBIT "A" TO LEASE

Floor Plan(s) of the Premises

Fair Lakes Four Office Building
Second Floor

[GRAPHIC OMITTED]

A-1
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

EXHIBIT "B" TO LEASE

Between

BUILDING IV ASSOCIATES L.P.
("LANDLORD")

and

PERFORMANCE ENGINEERING CORPORATION
("TENANT")

LEASEHOLD IMPROVEMENTS

This EXHIBIT "B" is attached to and made a part of that certain Office
Lease Agreement dated _____________, 19___ (the "LEASE"), between BUILDING IV
ASSOCIATES L.P. ("Landlord"), and PERFORMANCE ENGINEERING CORPORATION,
("TENANT"). The terms used in this Exhibit that are defined in the Lease shall
have the same meanings as provided in the Lease.

The purpose of this EXHIBIT "B" is to set forth the relative rights and
obligations of Landlord and Tenant with respect to the construction and
installation of the initial tenant improvements.

A. DEFINITIONS

1. "BUILDING STANDARD" means the allowances, materials, finishes and
design services required by Landlord for the Building as specified on SCHEDULE 1
attached hereto and incorporated herein.

2. "NON-BUILDING STANDARD" means all materials, finishes, and design
services used in connection with the construction and installation of the
Leasehold Improvements which exceed Building Standard allowances or deviate from
Building Standard specifications.

3. "LANDLORD'S CONTRACTOR" means the person or firm from time to time
selected by Landlord to construct and install the Leasehold Improvements in the
Premises.

4. "LEASEHOLD IMPROVEMENTS" shall mean the aggregate of Building
Standard and Non-Building Standard work in the Premises required by the Approved
Plan.

5. "LANDLORD'S ARCHITECT" shall mean the architect or space planner
engaged by Landlord to prepare the plans and specifications for the Leasehold
Improvements.

6. "APPROVED PLAN" shall mean the plan for Leasehold Improvements
approved by Landlord and Tenant pursuant to PARAGRAPH D.4. hereof.

B. GENERAL PROVISIONS

1. Unless otherwise agreed to in writing by Landlord and Tenant, all
work involved in the design and construction of the Leasehold Improvements shall
be carried out by Landlord's Architect, and Landlord's Contractor under the sole
direction of Landlord. Tenant shall cooperate with Landlord, Landlord's
Contractor, and Landlord's Architect to promote the efficient and expeditious
completion of such work so that occupancy of the Premises may occur on the
Commencement Date.

2. On or before the Commencement Date, Landlord shall use its best
efforts to substantially complete the Leasehold Improvements which are to be
constructed or installed by Landlord in the Premises pursuant to the Approved
Plan.

B-1
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

3. If the cost to construct the Leasehold Improvements exceeds the
Tenant Allowances stipulated in the Lease, Landlord shall have no obligation to
commence installation of any Leasehold Improvements in the Premises or continue
construction of the Leasehold Improvements until Landlord receives Tenant's
advance payment as described in this Exhibit. Tenant agrees that in the event of
default of payment thereof, Landlord (in addition to other remedies) shall have
the same rights as in the Event of Default of payment of Rent under the Lease
and all delays in the completion of the Leasehold Improvements resulting from
Tenant's non-payment of such deficiency shall constitute Tenant Delay.

C. DESIGN

1. Tenant shall devote such time in consultation with Landlord's
Architect as necessary to enable Landlord's Architect to develop Tenant's
complete working drawings and specifications of the Leasehold Improvements.
Landlord shall pay for the cost of design services (including all necessary
architectural, mechanical and electrical drawings) required for the Approved
Plan.

2. All design, construction and installation shall conform to the
requirements of applicable building, plumbing and electrical codes and the
requirements of any authority having jurisdiction over, or with respect to, such
work.

3. All architectural, mechanical and electrical plans and
specifications must be approved by Landlord. Any changes in the Approved Plan
must also be approved by Landlord. Tenant shall not be permitted to modify the
Building in any way, including but not limited to the structural, mechanical and
electrical systems, except as approved by Landlord on the Approved Plan. No
alterations by Tenant to the Leasehold Improvements shall be allowed at any time
except as provided in the Lease.

D. PROCEDURES FOR COMPLETION OF LEASEHOLD IMPROVEMENTS

The following procedures shall be followed in completing the Leasehold
Improvements.

1. As soon as reasonably practical after the execution of the Lease,
Tenant shall meet the Landlord's Architect and provide information for design of
a space plan for the Premises.

2. Landlord's Architect shall complete the space plan and submit the
same to Tenant and Landlord approval. Within five (5) business days after
Tenant's receipt of such space plan, Tenant shall notify Landlord whether Tenant
approves or disapproves the same.

3. Upon approval of the space plan by Tenant, Landlord shall cause a
preliminary budget to be prepared indicating the estimated total design and
construction costs to construct the space plan. The budget will indicate the
estimated costs to be borne by both Landlord and Tenant, pursuant to the
allowances set forth in this Lease. Tenant acknowledges that the budget is
merely an estimate of the anticipated costs to improve the Premises generally in
accordance with the space plan, and that the budget is subject to change pending
completion of all design and construction work.

4. Upon approval of the space plan and budget by Tenant and Landlord,
Landlord's Architect shall be authorized to complete architectural, mechanical,
and electrical working drawings and specifications. Tenant shall provide
Landlord's Architect with any additional information needed for completion of
the working drawings.

5. Landlord's Architect shall complete working drawings and
specifications and submit the same to Tenant and Landlord for approval. Within
five (5) business days after Tenant's receipt of such working drawings and
specifications, Tenant shall notify Landlord in writing as to whether Tenant
approves or disapproves such working drawings and specifications.

6. Upon approval of working drawings by Tenant and Landlord, Landlord
shall, within a reasonable period, have the working drawings bid by several
contractors approved by Landlord. Landlord will submit the construction pricing
along with all other estimated costs for design, engineering, permits and
Landlord's construction management fees (not to exceed five percent

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(5%)) to Tenant for Tenant's approval, indicating the estimated costs, if any,
to be borne by Tenant. Within five (5) business days after Tenant's receipt of
Landlord's price, Tenant shall notify Landlord in writing as to whether Tenant
approves or disapproves of Landlord's price. If Tenant fails to notify Landlord
within such five (5) day period, Tenant shall be deemed to have approved
Landlord's prices. Tenant's signature on the working drawings, plans and
specifications shall acknowledge Tenant's full acceptance of the working
drawings, plans and specifications and Tenant's binding obligation to pay for
all items shown on or in the same as priced by Landlord. Tenant's failure to
sign the working drawings, plans and specifications within the five (5) business
day period provided for herein shall be deemed a "TENANT DELAY" pursuant to
PARAGRAPH F below. Upon approval of working drawings and specifications by
Tenant and Landlord such drawings and specifications shall be the Approved Plan.

7. Any costs to be borne by Tenant shall be paid by Tenant to Landlord
as follows:

(a) 50% of Tenant's costs shall be paid prior to the
commencement of construction.

(b) 50% of Tenant's costs shall be paid prior to the
Commencement Date or occupancy.

8. Landlord and Landlord's Contractor shall seek all necessary permits
for construction of the Leasehold Improvements. As soon as the permits required
for construction have been obtained, Landlord shall authorize Landlord's
Contractor to commence construction of Leasehold Improvements.

9. In the event Tenant desires to make any changes or revisions to the
Approved Plan, then any delay in the furnishing, delivery or installation of any
such changed items, including all delays in the revision or working drawings and
specifications, shall be deemed Tenant Delay. The cost of such changes,
including any changes by the Landlord's Architect or Contractor, shall be due
from Tenant upon the submission of pricing for such changed items.

E. DELIVERY OF PREMISES

1. Tenant is permitted to make periodic inspections of the Premises
during construction provided that such inspections are made during reasonable
business hours and Tenant is accompanied by a representative of Landlord. If
Tenant enters the Building or Premises without being accompanied by a
representative of Landlord, Tenant shall be deemed to be trespassing upon the
Building or the Premises and Landlord shall not be liable for any damage or
injury sustained by Tenant, or any of Tenant's agents, representatives or
employees arising from Tenant's unauthorized entry upon the Building or the
Premises.

2. Prior to delivery of possession of the Premises to Tenant or
acceptance of the Premises by Tenant, a final inspection of the Premises shall
be made by Tenant, Landlord, Landlord's Architect, and Landlord's Contractor to
make certain that construction was accomplished in substantial accordance with
the Approved Plan. A punch-list of items which require completion or correction
shall be prepared as a result of final inspection, if necessary. Landlord's
Architect shall have authority to determine when, in his best judgment,
substantial completion of the Leasehold Improvements has been accomplished.

3. Tenant shall be given possession of the Premises upon substantial
completion of construction of the Premises, subject to the punch-list items
described above.

4. Landlord's Contractor shall be responsible for obtaining the final
inspections and all necessary governmental approvals which are required for
lawful occupancy of the Premises, other than the non-residential use permit
which shall be obtained by Landlord.

5. Nothing contained in this SECTION E shall be deemed to grant Tenant
any authority to direct Landlord's Architect or Landlord's Contractor in the
performance of their duties during the construction of the Premises.

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F. COMMENCEMENT OF RENT

At Lease execution Tenant and Landlord recognized a Commencement Date
which allowed for a reasonable amount of time to complete the Leasehold
Improvements in order to provide Tenant with occupancy of the Premises by the
Commencement Date. Tenant's obligation for payment of Rent under this Lease
shall commence on the Commencement Date, unless such date has been changed and
acknowledged in writing by Landlord and Tenant.

Landlord shall not be responsible for any delays caused by Tenant which
result in delivery of possession of the Premises later than the Commencement
Date nor shall the Commencement Date be modified for such delay. Such delays
include, but are not limited to the following, all such delays being referred to
as "TENANT DELAY":

1. Tenant's failure to comply with the procedures for completion of the
Leasehold Improvements outlined in this Exhibit on a timely basis;

2. Tenant's request for changes or modifications to the work after the
development of the Approved Plan;

3. Late delivery of or inability to obtain materials required for
Non-Building Standard improvements;

4. Building code problems related to Non-Building Standard design or
construction; and

5. The performance of any work by any person or entity employed or
retained by Tenant.

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EXHIBIT "B" TO LEASE

SCHEDULE 1

SCHEDULE OF BUILDING STANDARD WORK

RE: Fair Lakes IV

The following shall constitute the general description and minimum
quality of Building Standard Work, which are utilized in the construction of
Leasehold Improvements by Tenant. Tenant, at its sole cost, shall have the
right, after consultation with and reasonable approval of the Landlord, to make
reasonable substitutions for specific items described herein.

A. PARTITIONS

1. Interior partitions will be constructed of 2 1/2" metal studs
at 24" on center, from floor slab to the underside of the
finished ceiling, with 1/2" gypsum wallboard panels with taped
and finished joints prepared for paint.

2. Demising and corridor partitions will be constructed of 2 1/2"
studs at 24" on center from floor slab to underside of the
deck above with 1/2" gypsum wallboard panels insulated with 2
1/2" Batt and with taped and finished joints prepared for
paint.

B. DOORS

1. Suite Entry Doors shall be single 3'0" x 8'0" solid core,
mahogany veneer with building standard finish, and polished
stainless steel butt hinges, lever handles, and mortised
lockset, keyed to Landlord's master system.

2. Tenant Interior Doors shall be 3'0" x 7'0" solid core,
painted, with brushed stainless steel lever hardware.

3. All doors shall have building standard hollow metal frames.

C. CEILING

1. Ceiling will consist of a 2' x 2' suspended system with 5/8"
acoustical tile in a Donne Fineline grid. The approximate
finished ceiling height is 8'6".

D. PAINTING

1. All partitions, columns and walls will be painted with two
coats of flat latex wall paint. Door frames and interior doors
will be painted with two coats of semi-gloss enamel. Suite
entry doors will be stained and sealed and will match the
building standard finish.

E. FLOORING

1. Carpeting shall be a minimum of 30 ounce face weight cut pile
in a color chosen by Tenant from the manufacturer's standard
pallet and approved by Landlord.

2. Vinyl composition tile may be substituted for carpet at
selected areas such as work rooms, pantries, supply rooms,
etc. Color may be chosen by Tenant from the manufacturer's
standard pallet as approved by Landlord.

3. Vinyl wall base will be provided in all areas receiving carpet
or floor tile. One color may be chosen by Tenant from the
manufacturer's standard pallet as approved by Landlord.

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F. ELECTRICAL

1. Lighting Fixtures will be the Building Standard 2' x 4'
florescent lights.

2. Electric duplex receptacles and light switches will be black
with brushed stainless steel or plastic cover plates to match
existing.

3. Telephone or data outlets will consist of pre-cut openings in
the wall with pull strings up to the ceiling. All
telephone/data wiring and cover plates are by Tenant's
installer and is not considered part of Leasehold
Improvements. All telephone/data outlets shall have cover
plates.

G. HEATING, VENTILATING, AIR CONDITIONING

1. A variable air volume (VAV) system provides temperature
control to all areas of the Building. Conditioning is provided
through light troffer air boots or ceiling diffusers.

H. SPRINKLERS AND FIRE SAFETY

1. An Automatic Sprinkler and Fire Alarm System will be provided
in accordance with all national and local codes, including
required exit and emergency lights, fire horns, fire hose
cabinets and wall mounted extinguishers as required by local
authorities.
All sprinkler heads shall be recessed with white caps.

I. WINDOW COVERINGS

1. The building has been pre-fitted with thin-line horizontal
blinds to match the base building color pallet. No other
window treatments will be permitted.

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EXHIBIT "C" TO LEASE

Between

BUILDING IV ASSOCIATES L.P.
("LANDLORD")

and

PERFORMANCE ENGINEERING CORPORATION
("TENANT")

General Lease Provisions
TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
PART 1 - DELIVERY OF THE PREMISES TO TENANT; RENTABLE AREA....................1
Section 1.01. Commencement Date.....................................1
Section 1.02. Delivery of the Premises to Tenant....................1
Section 1.03. Rentable Area.........................................1

PART 2 - ACCEPTANCE OF THE PREMISES AND BUILDING BY TENANT....................1

PART 3 - BASE RENT............................................................1
Section 3.01. Base Rent.............................................1
Section 3.02. Intentionally Omitted.................................2
Section 3.03. Payment...............................................2
Section 3.04. Acceptance of Rent....................................2
Section 3.05. Survival of Rent Obligation...........................2
Section 3.06. Late Payment Fee......................................3
Section 3.07. Interest on Past Due Rent.............................3

PART 4 - ADDITIONAL RENT......................................................3
Section 4.01. Operating Expenses....................................3
Section 4.02. Real Estate Taxes.....................................7
Section 4.03. Parking...............................................8
Section 4.04. Additional Rent Defined...............................8
Section 4.05. Rent Defined..........................................8

PART 5 - SERVICES BY LANDLORD.................................................8

PART 6 - UTILITIES............................................................9
Section 6.01. Water, Heating, Ventilating and Air
Conditioning................................................9
Section 6.02. Electricity...........................................9

PART 7 - USE..................................................................10

PART 8 - COMPLIANCE WITH LAWS AND BUILDING REGULATIONS........................10
Section 8.01. Compliance with Laws..................................10
Section 8.02. Observance of Building's Rules and
Regulations.................................................10
Section 8.03. Hazardous Materials...................................10
</TABLE>

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<TABLE>
<CAPTION>
<S> <C> <C>
PART 9 - ALTERATIONS..........................................................11
Section 9.01. Approval of Landlord..................................11
Section 9.02. Ownership of Improvements to Premises.................12

PART 10 - LIENS...............................................................13

PART 11 - REPAIRS.............................................................13
Section 11.01. Tenant's Obligations................................13
Section 11.02. Landlord's Obligations..............................13

PART 12 - INSURANCE...........................................................13
Section 12.01. Tenant's Insurance..................................13
Section 12.02. Insurance Rating....................................14
Section 12.03. Waiver of Subrogation...............................14

PART 13 - DAMAGE BY FIRE OR OTHER CASUALTY....................................15
Section 13.01. Damage to Premises..................................15
Section 13.02. Damage to Building..................................15
Section 13.03. Partial Damage......................................15
Section 13.04. Damage During Last Year of Term.....................16
Section 13.05. No Landlord Liability...............................16
Section 13.06. Apportionment of Rent...............................16

PART 14 - CONDEMNATION........................................................16
Section 14.01. Entire Building.....................................16
Section 14.02. Portion of Building.................................16
Section 14.03. Portion of Premises.................................16
Section 14.04. Termination of Lease................................17
Section 14.05. Landlord's Right to Award...........................17

PART 15 - ASSIGNMENT AND SUBLETTING...........................................17
Section 15.01. Rights of Tenant....................................17
Section 15.02. Excess Rent.........................................18
Section 15.03. Rights of Landlord..................................19
Section 15.04. Affiliate Transfer..................................19

PART 16 - INDEMNIFICATION.....................................................19

PART 17 - SURRENDER OF THE PREMISES...........................................20
Section 17.01. Condition of Premises...............................20
Section 17.02. Tenant Holdover.....................................20

PART 18 - ESTOPPEL CERTIFICATES...............................................20

PART 19 - SUBORDINATION AND ATTORNMENT........................................21
Section 19.01. Existing Financings.................................21
Section 19.02. Future Financings...................................21
Section 19.03. Attornment..........................................21

PART 20 - QUIET ENJOYMENT.....................................................21
</TABLE>

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<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
PART 21 - SIGNS; FURNISHINGS; COMMUNICATION EQUIPMENT.........................22
Section 21.01. Signs and Advertisements............................22
Section 21.02. Furnishings.........................................22
Section 21.03. Communications Equipment............................22

PART 22 - DEFAULTS AND REMEDIES...............................................23
Section 22.01. Events of Default...................................23
Section 22.02. Remedies............................................24
Section 22.03. Remedies Cumulative.................................24
Section 22.04. No Acceptance or Surrender..........................24
Section 22.05. Customs and Practices...............................25
Section 22.06. Payment of Tenant's Obligations by Landlord.........25
Section 22.07. Default by Landlord.................................25

PART 23 - SECURITY DEPOSIT....................................................25
Section 23.01. Application of Security Deposit.....................25
Section 23.02. Transfer of Security Deposit........................26
Section 23.03. Letter of Credit....................................26
Section 23.04. Changes to Security Deposit.........................26

PART 24 - INTENTIONALLY OMITTED...............................................26

PART 25 - ATTORNEYS FEES AND LEGAL EXPENSES...................................26

PART 26 - NOTICES.............................................................26

PART 27 - MISCELLANEOUS.......................................................27
Section 27.01. No Partnership......................................27
Section 27.02. Brokers.............................................27
Section 27.03. Severability........................................27
Section 27.04. Trial by Jury.......................................27
Section 27.05. Force Majeure.......................................27
Section 27.06. Captions............................................28
Section 27.07. Benefit and Burden..................................28
Section 27.08. No Representations by Landlord......................28
Section 27.09. Entire Agreement....................................28
Section 27.10. No Offer............................................28
Section 27.11. Authority...........................................28
Section 27.12. Changes Requested by Lender.........................29
Section 27.13. Governing Law and Construction......................29
Section 27.14. Landlord's Liability................................29
Section 27.15. Use of Name of Building.............................29
Section 27.16. Changes by Landlord.................................29
Section 27.17. Time of Essence.....................................30
</TABLE>

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PART 1 - DELIVERY OF THE PREMISES TO TENANT; RENTABLE AREA

SECTION 1.01. COMMENCEMENT DATE.

The Commencement Date shall be the earlier of Tenant's occupancy or
April 1, 2000; provided, however, that if Tenant will be performing alterations
to the Premises requiring building or other permits, then the Commencement Date
shall be delayed by one-half (1/2) of the number of days that Landlord and
Tenant reasonably anticipate will be required for Tenant to construct such
alterations. In no event, however, shall the Commencement Date be delayed by
more than forty-five (45) days or later than May 15, 2000.

SECTION 1.02. DELIVERY OF THE PREMISES TO TENANT.

Landlord shall deliver possession of the Premises on or before April 1,
2000 broom clean and with all systems and base building improvements in good
working order and in compliance with all applicable laws and ordinances. Tenant
acknowledges and agrees that Tenant is accepting the Premises in its "as is" and
"where is" condition and that Landlord shall have no obligation to perform any
work to the Premises prior to delivery of possession thereof to Tenant subject
to any improvements to be made to the Premises pursuant to ARTICLE 8 and in
accordance with the provisions of EXHIBIT "B" to this Lease.

SECTION 1.03. RENTABLE AREA.

The term "RENTABLE AREA" as used herein means all floor area in the
Building. The Rentable Area of the Premises is stated in the Basic Lease
Information and has been calculated by Landlord's architect ("LANDLORD'S
ARCHITECT") in accordance with Washington, D.C. Association of Realtors modified
method for calculating space in office buildings. The Rentable Area of the
Building and the Premises shall be adjusted, if necessary, by Landlord's
Architect in the event of any future expansion or modification of the Building
and/or the Premises. If the number of square feet of (i) the Rentable Area of
the Building; or (ii) the Rentable Area of the Premises changes, then Tenant's
Proportionate Share shall be adjusted effective as of the date of any such
change.

PART 2 - ACCEPTANCE OF THE PREMISES AND BUILDING BY TENANT

Tenant shall accept the Premises in its "as is" and "where is"
condition and Landlord shall have no obligation to make any improvements to the
Premises prior to the Commencement Date. Taking possession of the Premises by
Tenant shall be conclusive evidence that Tenant: (i) accepts the Premises as
suitable for the purposes for which they are leased; (ii) accepts the Building
and every part and appurtenance thereof as being in a good and satisfactory
condition; and (iii) waives any defects in the Premises or the Building except
for the completion of those items, if any, on Landlord's punch list or latent
defects which cannot reasonably be discovered by an inspection of the Premises
prior to taking possession.

PART 3 - BASE RENT

SECTION 3.01. BASE RENT.

Tenant shall pay to Landlord monthly, in advance, without demand, on
the first day of each calendar month, the monthly Base Rent specified below.
Base Rent shall be calculated on the first day of each Lease Year by multiplying
the Base Rent per Square Foot (as hereinafter defined) by the Rentable Area of
the Premises. The first monthly installment of Base Rent shall be payable in
advance on the Commencement Date. If the Commencement Date is a date other than
the first day of a calendar month, then Tenant shall pay to Landlord on the
Commencement Date a prorated installment of Base Rent for the first fractional
month of the Term. If the Expiration Date is a date

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other than the last day of a calendar month, then the Term shall be extended to
the last day of such month.

<TABLE>
<CAPTION>
Base Rent Per Net Base Rent
LEASE YEAR SQUARE FOOT PER SQUARE FOOT
---------- ----------- ---------------

For purposes hereof, "Lease Year 1" or the first "Lease Year" shall
mean the period commencing on the Commencement Date and terminating on December
31, 2000. All other references to "Lease Year" shall mean a period of twelve
(12) consecutive months commencing on January 1, 2001, and each successive
twelve (12) month period thereafter.

SECTION 3.02. INTENTIONALLY OMITTED.

SECTION 3.03. PAYMENT.

All Base Rent and Additional Rent (as hereinafter defined) shall be
paid to Landlord by Tenant when due, without deduction or offset, in lawful
money of the United States, at Landlord's address for Notice or such other place
as Landlord may from time to time designate in writing.

SECTION 3.04. ACCEPTANCE OF RENT.

If Landlord shall direct Tenant to pay Base Rent and/or Additional Rent
to a lockbox or other depository whereby checks issued in payment of Base Rent
and/or Additional Rent (or both or all, as the case may be) are initially cashed
or deposited by a person or entity other than Landlord (albeit on Landlord's
authority), then, for any and all purposes under this Lease: (i) Landlord shall
not be deemed to have accepted such payment until ten (10) days after the date
on which Landlord shall have actually received such funds, and (ii) Landlord
shall be deemed to have accepted such payment if (and only if) within said ten
(10) day period, Landlord shall not have refunded (or attempted to refund) such
payment to Tenant. Nothing contained in the immediately preceding sentence shall
be construed to place Tenant in default of Tenant's obligation to pay rent if
and for so long as Tenant shall timely pay the rent required pursuant to this
Lease in the manner designated by Landlord.

SECTION 3.05. SURVIVAL OF RENT OBLIGATION.

The obligation of Tenant with respect to the payment of past due Base
Rent and Additional Rent shall survive the termination of this Lease.

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SECTION 3.06. LATE PAYMENT FEE.

In the event any installment of Rent due hereunder is not paid within
five (5) calendar days after it is due, then Tenant shall also pay to Landlord
as Additional Rent a late payment fee equal to five percent (5%) of such
delinquent installment of Rent or any component thereof for each and every month
or part thereof that such Rent or any component thereof remains unpaid.

SECTION 3.07. INTEREST ON PAST DUE RENT.

All past due installments of Rent shall bear interest until paid at a
rate per annum equal to four percent (4%) above the prime rate of interest from
time to time publicly announced by NationsBank, N.A., or any successor thereof
(the "DEFAULT RATE"); provided, however, that if at the time such interest is
sought to be imposed the rate of interest exceeds the maximum rate permitted
under federal law or under the laws of the Commonwealth of Virginia, the rate of
interest shall be the maximum rate of interest then permitted by applicable law.

PART 4 - ADDITIONAL RENT

SECTION 4.01. OPERATING EXPENSES.

(a) Throughout the Term, Tenant shall pay on a monthly basis, without
demand, as Additional Rent for the Premises, Tenant's Proportionate Share of the
Operating Expenses (as defined in SECTION 4.01(b) hereof). Such payments shall
be made as follows:

(1) Prior to the Commencement Date and on the first day of
January of each year during the Term, or as soon thereafter as is practicable,
Landlord shall furnish Tenant with Landlord's estimate of the Operating Expenses
for the forthcoming year. On the first day of each month during such year,
Tenant shall pay one-twelfth (1/12th) of Tenant's Proportionate Share of the
estimated Operating Expenses for such year. If for any reason Landlord has not
provided Tenant with Landlord's Operating Expenses estimate on or before the
first day of January of any year during the Term, then, until the first day of
the calendar month following the month in which Tenant is given Landlord's
estimate of Operating Expenses, Tenant shall continue to pay to Landlord on the
first day of each calendar month the monthly sum payable by Tenant under this
SECTION 4.01 for the month of December of the preceding year.

(2) On the first day of April of each year during the Term, or
as soon thereafter as reasonably practical, Landlord shall furnish to Tenant a
statement of the actual Operating Expenses for the preceding year. Within thirty
(30) days after the delivery of that statement, a lump sum payment will be made
by Tenant equal to the amount, if any, by which Tenant's Proportionate Share of
the actual Operating Expenses exceeds the amount, if any, which Tenant has paid
toward the estimated Operating Expenses pursuant to SECTION 4.01(a)(1) above. If
Tenant's Proportionate Share of the actual Operating Expenses is less than the
amount Tenant has paid toward the estimated Operating Expenses pursuant to
SECTION 4.01(a)(1) above, Landlord shall apply such amount to the next accruing
installments of Rent due hereunder. The foregoing notwithstanding, Landlord
shall have the right from time to time during any year, but not more frequently
than twice in any calendar year, to notify Tenant in writing of any change in
Landlord's estimate of Operating Expenses for the then current year, in which
event Tenant's Proportionate Share of Operating Expenses, as previously
estimated, shall be adjusted to reflect the amount shown in such notice and
shall be effective, and due from Tenant, on the first day of each month
following Landlord's giving of such notice. Landlord also shall have the right
to bill Tenant for understatements in Operating Expenses charged to Tenant for
only the immediately preceding two (2) calendar years and Tenant shall reimburse
Landlord for such understated charges within thirty (30) days after receipt of
an invoice from Landlord. The effect of this SECTION 4.01(a) is that Tenant will
pay during each year during the Term Tenant's Proportionate Share of actual
Operating Expenses.

(3) If the Commencement Date occurs on a date other than the
first day of January, or if the Term ends on a date other than the last day of
December, the actual Operating

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Expenses for the year in which the Commencement Date or the Expiration Date
occurs, as the case may be, shall be prorated so that Tenant shall pay that
portion of Tenant's Proportionate Share of Operating Expenses for such year
represented by a fraction, the numerator of which shall be the number of days
during such fractional year falling within the Term, and the denominator of
which is 365 (or 366, in the case of a leap year). The provisions of this
SECTION 4.01 shall survive the Expiration Date or any sooner termination
provided for in this Lease.

(b) As used in this Lease, "OPERATING EXPENSES" means all expenses,
costs, and disbursements of every kind which Landlord incurs, pays or becomes
obligated to pay in connection with the operation, repair, and maintenance of
the Building, which cost shall include all expenditures by Landlord to maintain
all facilities in operation at the beginning of the term and such additional
facilities installed in subsequent years as Landlord may consider necessary or
beneficial for the operation of the Building in a first class manner. All
Operating Expenses shall be determined according to generally accepted
accounting principles (which shall be consistently applied) and shall include,
but are not limited to, the following:

(1) Wages, salaries, and fees of all personnel or entities
(exclusive of Landlord's executive personnel) engaged in the operation, repair,
maintenance, or security of the Building, including taxes, insurance and
benefits relating thereto; provided, however, that if such personnel or entities
service other buildings besides the Building, then such wages, salaries and fees
will be prorated to the Building on the basis of (a) the percentage of such
personnel's or entities' time spent servicing the Building, or (b) the square
footage of the buildings serviced (it being understood and agreed that in no
event shall Landlord allocate more than 100% of the compensation and benefits
for any single employee among the properties being serviced by such employee).

(2) All supplies and materials used in the operation, repair,
security, and maintenance of the Building;

(3) Cost of all maintenance and service agreements for the
Building and the equipment therein, including, without limitation, alarm
service, water treatment services, janitorial services, security systems
service, window cleaning, service on electrical, HVAC and mechanical components,
trash removal, elevator maintenance, extermination service, plumbing service,
grounds keeping, and landscaping;

(4) Cost of all insurance relating to the Building for which
Landlord is responsible hereunder, or which Landlord considers reasonably
necessary for the operation of the Building, including, without limitation, the
deductible payments actually made under policies maintained by Landlord, the
cost of property, casualty and liability insurance applicable to the Building
and Landlord's personal property used in connection therewith, and the cost of
business interruption or rental insurance in such amounts as will reimburse
Landlord for all losses of earnings and other income attributable to such perils
as are commonly insured against by prudent landlords or required by Landlord's
lender and the cost of repairs made as a result of damages net of insurance
reimbursement;

(5) Cost of repairs and maintenance (excluding repairs and
maintenance paid by proceeds of insurance or by Tenant or other third parties,
and alterations attributable solely to tenants of the Building) of the Building;

(6) All utility costs of the Building (exclusive, however,
of such special utility services as described in PART 6 of the General Lease
Provision, the costs of which special utility services shall be payable as
therein provided), including, without limitation, water, power, fuel, heating,
lighting, air conditioning, and ventilating;

(7) Amortization of the cost of installation of capital
investment items which are installed primarily to reduce, and actually does
reduce, operating costs for the general benefit of the Building's tenants or to
maintain and/or repair the Building in first class condition and operation or
which may be required by any governmental authority or regulation. All such
costs shall be amortized at nine percent (9%) per annum over the reasonable life
of the capital investment items, with the reasonable life and amortization
schedule being determined by Landlord, but in no event to extend beyond the
reasonable life of the Building;

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(8) Landlord's central accounting costs, the cost of an
annual audit and Landlord's legal fees relating to the operation of the
Building;

(9) A management fee to the manager of the Building whether
or not related to Landlord not to exceed three percent (3%) of gross rents per
year;

(10) Building office rent or rental value for any central
Building management office whether in the Building or in another building within
the planned mixed use development known as Fair Lakes (and hereinafter called
the same) provided that if the management office is located in another building
or provides services to buildings in addition to the Building, then only the
Building's pro rata share of rent (based on square footage) shall be included;
and

(11) The Fair Lakes League Assessment.

(c) Notwithstanding any other provision of this Lease, Operating
Expenses (as defined in Section 4.01(b) above), shall not include, and Landlord
shall be solely liable for, the following expenses:

(1) Repairs or other work occasioned by insured casualty or
by the exercise of eminent domain, to the extent Landlord is reimbursed by
warranties, service contracts or insurance maintained by Landlord or Tenant
hereof or by the condemning authority;

(2) Leasing commissions, attorneys' fees, cost and
disbursements and other expenses incurred in connection with negotiations or
disputes with present or prospective tenants or other occupants of the Building;

(3) Costs incurred in improving, decorating, building-out,
painting or redecorating premises for other tenants of the Building;

(4) Expenses in connection with services or other benefits of
a type which are not provided Tenant but which are provided to another tenant of
the Building;

(5) Costs incurred due to violation by Landlord or any other
tenant of the Building of the terms and conditions of any lease of space in the
Building;

(6) Interest or debt or amortization payments on any mortgage
or mortgages;

(7) Payments of rent by Landlord to any ground lessor;

(8) Landlord's general overhead not related to the operation
of the Building (but without limiting Landlord's right to seek reimbursement as
provided in Sections 4.01(b)(1), (8), (9) and (10) above).

(9) Advertising and promotional expenditures with respect to
the Building except for those advertising and promotional expenditures that
directly benefit Tenant;

(10) Any costs, fines or penalties incurred due to violations
of any nature by Landlord of any governmental rule or authority;

(11) Wages, salaries or other compensation paid to any
executive employees;

(12) Rentals and other related expenses incurred in leasing
air-conditioning systems, elevators or other equipment ordinarily considered to
be of a capital nature, except to the extent that (i) Landlord is leasing in
lieu of purchasing such items, if the purchase thereof would be includable in
Operating Expenses, or (ii) rental required on a temporary basis in order for
Landlord to be able to provide services that Landlord is required to provide to
Tenant pursuant to this Lease, if the need therefor was not caused by the
negligence of Landlord or any tenant, or (iii) such expenses are otherwise
properly included under SECTION 4.01(b)(7);

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(13) Any cost or expense whatsoever arising from or related
to any clean-up of any hazardous or toxic materials, or any governmental penalty
of fines associated therewith, excepting, however, any such cost or expense
resulting from the negligent or intentional acts of Tenant or its employees,
invitees, guests, agents, representatives, contractors, licensees, successors or
assigns. The term "hazardous or toxic materials" as used in this Lease shall
mean those materials identified in The Comprehensive Environmental Response,
Compensation and Liability Act of 1980 of the United States Code and by the laws
of the Commonwealth of Virginia, as such sections may be amended from time to
time;

(14) The cost of excessive use of Building utilities (such
as HVAC) by other tenants of the Building, and/or utility service by other
tenants outside normal Building hours;

(15) Costs incurred in connection with the sale, financing,
refinancing, mortgaging or change of ownership of the Building or the Project,
including without limitation, brokerage commissions, attorneys, and accountants
fees, closing costs, title insurance premiums, transfer taxes and interest
charges;

(16) Any and all loss, claim, damage, award, deductibles paid
under any insurance policies or other amount paid or payable by Landlord
(including all attorneys' fees, court costs and other costs incurred in
connection therewith) as a result or arising out of any act of negligence,
breach of contract or willful misconduct by the Landlord or its agents,
employees or contractors to the extent not covered by insurance;

(17) Bad debt losses, rent losses or reserves for such
losses; and

(18) Non-cash items, such as deductions for depreciation and
amortization of the Building and the Building equipment.

(d) At Tenant's request, Landlord shall meet with Tenant at a mutually
convenient time to address any questions Tenant may have about particular
Operating Expenses, and Landlord shall provide any such additional backup
documentation as is reasonably requested by Tenant. In the event Tenant does not
contest a statement of Operating Expenses within ninety (90) days after it is
rendered, such statement shall become binding and conclusive; provided, however,
that if a timely audit of Operating Expenses for a particular year reveals an
error resulting in any incorrect charge with regard to particular expenses in
such year, Tenant shall thereupon have the right to re-examine Landlord's books
and records with respect to the immediately preceding two (2) calendar years for
the sole purpose of determining whether the same error resulted in an incorrect
charge with respect to the same expenses in such immediately preceding two (2)
calendar years, and if so, Tenant shall be entitled to a refund of such amount.
In addition, Tenant shall have the right, at Tenant's expense, one time during
each calendar year to examine, to copy and to have an audit conducted of all
books and records of Landlord pertaining to Operating Expenses relating to the
immediately preceding calendar year. If Tenant elects to hire any third party to
assist it with such inspection or audit, such third party must be a certified
public accountant or accounting firm, retained on a non-contingent fee basis
(the "AUDITOR"). Such audit and inspection shall be conducted at a time and
place reasonably acceptable to Landlord and Tenant during normal business hours.
If the amount paid by Tenant to Landlord exceeded the amounts to which Landlord
was entitled hereunder, and if Landlord does not otherwise dispute the results
of the audit as permitted pursuant to the terms hereof, Landlord shall credit
the amount of such excess against the next installment of Rent due and payable
hereunder. If this Lease shall have expired or otherwise terminated, then
Landlord shall refund any overpayment due to Tenant within thirty (30) days
after the amount of the overpayment is determined. In the event that Tenant's
Proportionate Share of Operating Expenses, as calculated by Landlord, exceeds
the correct amount by more than three percent (3%), then Landlord shall promptly
reimburse Tenant for the cost of such audit and inspection. If the amount paid
by Tenant to Landlord is less than the amount Landlord was entitled to
hereunder, Tenant shall make a lump sum payment of the difference between the
amount paid by Tenant and the amount owed to Landlord hereunder within thirty
(30) days after the amount of the underpayment is determined.

(e) At Tenant's option from time to time, upon forty-five (45) days
prior written notice to Landlord, Tenant may elect to provide or contract
directly for any service otherwise required or permitted to be provided by
Landlord under this Lease (other than management services), and

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thereafter the cost of providing such service or utility to the Premises and
other tenants of the Building shall not be included for purposes of calculating
Tenant's Proportionate Share of Operating Expenses. If Tenant elects to provide
any service or utility to the Premises, Tenant shall be required to provide such
service or utility in a first-class manner. If Tenant fails to do so, Landlord
shall have the right to commence, once again, providing such service or utility
to the Premises and including the costs thereof in the calculation of Tenant's
Proportionate Share of Operating Expenses. If, after Landlord has transferred
the Building, Fair Lakes IV and Fair Lakes VI to an entity that is not related
in any manner with Landlord, Tenant is leasing one hundred percent (100%) of the
Rentable Area in the Building, Fair Lakes IV and Fair Lakes VI, Tenant
determines in its reasonable discretion that the Building, Fair Lakes IV and
Fair Lakes VI are not being managed in a first-class manner, then Tenant shall
have the right to assume the management responsibilities for the Building,
provided that the Building must be managed in a first-class manner in accordance
with a maintenance and service schedule to be mutually agreed to by Tenant and
Landlord. If Tenant assumes the management of the Building, the management fee
shall not be included for purposes of calculating Tenant's Proportionate Share
of Operating Expenses. If, in Landlord's reasonable discretion, Landlord
determines that Tenant is not managing the Building in a first-class manner,
then Landlord shall, once again, assume the responsibilities for managing the
Building and shall include the management fee for purposes of calculating
Tenant's Proportionate Share of Operating Expenses. Upon sixty (60) days prior
written notice to Landlord, Tenant also may require Landlord to bid out major
contracts for Operating Expenses.

SECTION 4.02. REAL ESTATE TAXES.

(a) Throughout the Term, Tenant shall pay on a monthly basis, without
demand, as Additional Rent for the Premises, Tenant's Proportionate Share of the
actual Real Estate Taxes (as defined in SECTION 4.02(c) hereof). Such payments
shall be made as follows:

(1) Prior to the Commencement Date and on the first day of
January of each year during the Term, or as soon thereafter as practicable,
Landlord shall furnish Tenant with Landlord's estimate of the Real Estate Taxes
for the forthcoming year. On the first day of each month during such year,
Tenant shall pay one-twelfth (1/12th) of Tenant's Proportionate Share of the
estimated Real Estate Taxes for such year. If for any reason Landlord has not
provided Tenant with Landlord's estimate of Real Estate Taxes on or before the
first day of January of any year during the Term (or by the Commencement Date,
as the case may be), then until the first day of the calendar month following
the month in which Tenant is given Landlord's estimate of Real Estate Taxes,
Tenant shall continue to pay to Landlord on the first day of each calendar month
the monthly sum payable by Tenant under this SECTION 4.02 for the month of
December of the preceding year.

(2) On the first day of April of each year during the Term
or as soon thereafter as reasonably practical, Landlord shall furnish to
Tenant a statement of the actual Real Estate Taxes for the preceding year.
Within thirty (30) days after the delivery of that statement, a lump sum
payment will be made by Tenant equal to the amount, if any, by which Tenant's
Proportionate Share of the actual Real Estate Taxes exceeds the amount, if
any, which Tenant has paid toward the estimated Real Estate Taxes pursuant to
SECTION 4.02(a)(1) above. If Tenant's Proportionate Share of the actual Real
Estate Taxes is less than the amount Tenant has paid toward the estimated
Real Estate Taxes pursuant to SECTION 4.02(a)(1) above, Landlord shall apply
such amount to the next accruing installment(s) of Rent due hereunder. The
foregoing notwithstanding, Landlord shall have the right once the actual Real
Estate Taxes assessment for the applicable year has been received by
Landlord, to notify Tenant in writing of any change in Landlord's estimate of
Real Estate Taxes for the then current year, in which event Tenant's
Proportionate Share of Real Estate Taxes, as previously estimated, shall be
adjusted to reflect the amount shown in such notice and shall be effective,
and due from Tenant, on the first day of each month following Landlord's
giving of such notice. The effect of this SECTION 4.02(a) is that Tenant will
pay during each year during the Term Tenant's Proportionate Share of the
actual Real Estate Taxes in excess of the Base Real Estate Taxes.

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(b) If the Commencement Date occurs on a date other than the first day
of January, or if the term ends on a date other than the last day of December,
the actual Real Estate Taxes for the year in which the Commencement Date or the
Expiration Date occurs, as the case may be, shall be prorated so that Tenant
shall pay that portion of Tenant's Proportionate Share of Real Estate Taxes for
such year represented by a fraction, the numerator of which shall be the number
of days during such fractional year falling within the Term, and the denominator
of which is 365 (or 366, in the case of a leap year). The provisions of this
SECTION 4.02 shall survive the Expiration Date or any sooner termination
provided for in this Lease.

(1) All real estate taxes, including general and special
assessments, if any, which are imposed upon Landlord or assessed against the
Building or the land upon which the Building is situated; and

(2) Any other present or future taxes or governmental
charges that are imposed upon Landlord, or assessed against the Building or the
land upon which the Building is situated, including, but not limited to, any tax
levied on or measured by the rents payable by tenants of the Building which is
in the nature of, or in substitution for, real estate taxes. Any inheritance,
estate, gift, franchise, corporation, income, or net profits tax which may be
assessed against Landlord and/or the Building shall be excluded.

SECTION 4.03. PARKING.

SECTION 4.04. ADDITIONAL RENT DEFINED.

The term "ADDITIONAL RENT" shall include, but not be limited to (i)
the late payment fee, if any, under SECTION 3.06; (ii) Tenant's Proportionate
Share of Operating Expenses as calculated under SECTION 4.01; (iii) Tenant's
Proportionate Share of Real Estate Taxes as calculated under SECTION 4.02; and
(iv) all other costs and expenses which Tenant assumes, agrees or is required to
pay to Landlord pursuant to this Lease. In the event of nonpayment of Additional
Rent, Landlord shall have all the rights and remedies herein provided for in
case of nonpayment of Rent.

SECTION 4.05. RENT DEFINED.

The term "RENT" shall include Base Rent and Additional Rent.

PART 5 - SERVICES BY LANDLORD

While Tenant is occupying the Premises and is not in Default under
this Lease, Landlord shall furnish the Premises with: (i) passenger elevator
service in common with other tenants for access to and from the Premises,
provided that Landlord may reasonably limit the number of elevators to be
operated at night after normal business hours and on Saturdays, Sundays, and
holidays and that Landlord may remove elevators from service for maintenance;
(ii) janitorial cleaning services Monday through Friday (except holidays) as
required in Landlord's reasonable judgment; (iii) replacement, as necessary, of
all lamps and ballasts in Building Standard light fixtures within the Premises;
and (iv) the utility services provided for in PART 6 below. If Tenant requires
services which are not specified herein and Landlord elects to provide such
services to

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Tenant, Tenant will pay to Landlord, upon demand, as Additional Rent, Landlord's
charges for providing such services.

Failure to furnish, or any stoppage of, the services provided for in
this PART 5 and in PART 6 below resulting from any cause will not make Landlord
liable in any respect for damages to any person, property, or business, nor be
construed as an eviction of Tenant, nor entitle Tenant to any abatement of Rent,
or damages because of malfunctions or any interruptions in service.

Notwithstanding the foregoing, if such malfunction or interruption in
service is within Landlord's reasonable control, and such malfunction or
interruption in service (i) continues for three (3) consecutive business days
and (ii) makes it reasonably impossible for Tenant's continued use and occupancy
of the Premises (or portion thereof), and (iii) requires Tenant to vacate the
Premises, then Tenant shall be entitled to an abatement of Base Rent and/or
Adjusted Rent for the portion of the Premises vacated for the period commencing
on the date of the malfunction or interruption of services, and continuing until
the earlier of the following (i) the date such service is corrected or restored
or (ii) the date Tenant reoccupies any part of the Premises which was vacated
because of the interruption in service, notwithstanding the fact that the
malfunction or interruption in service has not been corrected.

PART 6 - UTILITIES

SECTION 6.01. WATER, HEATING, VENTILATING AND AIR CONDITIONING.

(a) While Tenant is occupying the Premises and is not in Default under
this Lease, Landlord shall furnish Tenant with the following utilities in the
manner and to the extent customarily provided in office buildings in the
Northern Virginia area: (1) potable water at those points of supply provided
periodically for normal lavatory use by tenants in the Building; (2) heating,
ventilating, and air-conditioning in season on business days from 7:00 a.m. to 6
p.m., and on Saturdays from 8 a.m. to 1 p.m. (except Holidays); and (3) electric
lighting for public areas and special service areas of the Building. For
purposes hereof, "HOLIDAY" shall mean New Year's Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. If Tenant requires HVAC or
electrical service outside the hours and days specified above, the additional
service may be requested by Tenant and Tenant will pay for such services at the
rate Landlord is then charging therefor, which charge shall be comprised of
actual direct utility costs, maintenance and depreciation costs of equipment and
an administrative cost. Landlord shall have no obligation to provide any
additional service to Tenant at any time Tenant is in Default under this Lease.

(b) Landlord shall not be liable for its failure to maintain
comfortable atmospheric conditions in all or any portion of the Premises due to
heat generated by any equipment or machinery installed by Tenant (with or
without Landlord's consent) that exceeds generally accepted engineering design
practices for normal office purposes. If Tenant desires additional cooling to
offset excessive heat generated by such equipment or machinery, Landlord will
have the right to install supplemental air conditioning units in the Premises,
and the full cost thereof, including the cost of installation of unit(s) and
meter(s), operation and use, will be paid by Tenant to Landlord on demand.
Tenant will be required to maintain any supplemental air conditioning units
installed pursuant to this Section.

SECTION 6.02. ELECTRICITY.

(a) While Tenant is occupying the Premises and is not in Default under
this Lease, Landlord will furnish sufficient power in the Premises for lighting
and for personal desktop computers, typewriters, word processors, calculating
machines, copying machines, and other similar office equipment of low electrical
consumption. Tenant will not install or operate in the Premises any heavy duty
electrical equipment or machinery without first obtaining prior written consent
of Landlord. Landlord may require, as a condition of its consent, for the
installation of such equipment or machinery, payment by Tenant as Additional
Rent for excess consumption of electricity that may be occasioned by the
operation of said equipment or machinery. Upon

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reasonable prior notice, Landlord may make periodic inspections of the Premises
at reasonable times to determine that Tenant's electrically operated equipment
and machinery complies with the provisions of Part 6.

(b) If Landlord determines that Tenant's use of electricity in the
Premises exceeds the electrical demands on a square foot basis of other tenants
in the Building, then Tenant shall pay to Landlord (or the utility company if
direct service is provided by such company) promptly upon demand therefore, for
all such excessive electric consumption and demand. Tenant also shall pay a
service charge related thereto as calculated by Landlord.

PART 7 - USE

The Premises shall be used solely for general office purposes that are
permitted by applicable zoning ordinances and land use requirements and for no
other purpose. Tenant agrees to use and maintain the Premises in a clean,
careful, safe, lawful, and proper manner.

PART 8 - COMPLIANCE WITH LAWS AND BUILDING REGULATIONS

SECTION 8.01. COMPLIANCE WITH LAWS.

Tenant shall, at its sole expense, promptly and faithfully (i) comply
with all present and future laws, ordinances, orders, rules, regulations, and
requirements of every governmental authority having jurisdiction over the
Premises; (ii) comply with the provisions of the Americans with Disabilities Act
42 U.S.C. Section 12101 ET SEQ as it applies to the Premises and Tenant's
activities therein; (iii) comply with any direction made pursuant to law by any
public officers which requires abatement of any nuisance or imposes upon
Landlord or Tenant any duty or obligation arising from Tenant's occupancy or use
of the Premises or from conditions which have been created by or at the
insistence of Tenant; (iv) comply with the requirements of the local board of
fire underwriters, or anybody exercising similar functions with respect to the
construction, care and safety, maintenance and operation of the Premises; and
(v) indemnify Landlord and hold Landlord harmless from any loss, cost, claim, or
expense which Landlord may incur or suffer by reason of Tenant's failure to
comply with its obligations under clauses (i), (ii), (iii) or (iv) above. If
Tenant receives notice of any such direction or of violation of any such law,
order, ordinance, or regulation, Tenant shall promptly notify Landlord thereof.

SECTION 8.02. OBSERVANCE OF BUILDING'S RULES AND REGULATIONS.

Tenant and its servants, employees, agents, visitors, and licensees
shall observe faithfully and comply strictly with the Rules and Regulations
attached to this Lease as EXHIBIT "D". Landlord shall at all times have the
right to make reasonable changes in and additions to such Rules and Regulations;
provided such changes in existing or new rules and regulations do not materially
interfere with the lawful conduct of Tenant's business in the Premises. Any
failure by Landlord to enforce any of the Rules and Regulations now or hereafter
in effect, either against Tenant or any other tenant in the Building, shall not
constitute a waiver of any such Rules and Regulations. Except as may be required
by the provisions of Part 20 of this Lease, Landlord shall not be liable to
Tenant for the failure or refusal by any other tenant, guest, invitee, visitor,
or occupant of the Building to comply with any of the Rules and Regulations. If
there is any inconsistency between this Lease and the Rules and Regulations set
forth in EXHIBIT "D" hereto, this Lease shall govern.

SECTION 8.03. HAZARDOUS MATERIALS.

(a) Except for those materials that are necessary in the normal course
of Tenant's business activities associated with the Permitted Use, Tenant, its
agents, employees, contractors or invites shall not (i) cause or permit any
Hazardous Materials (hereinafter defined) to be brought upon, stored, used or
disposed on, in or about the Premises and/or the Building, or (ii) permit the

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release, discharge, spill or emission of any substance considered to be a
Hazardous Material from the Premises.

(b) Any Hazardous Materials permitted by SUBPARAGRAPH (A), all
containers therefor, and all materials that have been contaminated by Hazardous
Materials shall be used, kept, stored and disposed of by Tenant in a manner that
shall in all respects comply with all applicable federal, state and local laws,
ordinances, regulations and standards.

(c) Tenant hereby agrees that it is and shall be fully responsible for
all costs, expenses, damages or liabilities (including, but not limited to those
incurred by Landlord and/or its mortgagee) which may occur from the use,
storage, disposal, release, spill, discharge or emissions of Hazardous Materials
by Tenant whether or not the same may be permitted by this Lease. Tenant shall
defend, indemnify and hold harmless Landlord, its mortgagee and its agents from
and against any claims, demands, administrative orders, judicial orders,
penalties, fines, liabilities, settlements, damages, costs or expenses
(including, without limitation, reasonable attorney and consultant fees, court
costs and litigation expenses) of whatever kind or nature, known or unknown,
contingent or otherwise, arising out of or in any way related to the use,
storage, disposal, release, discharge, spill or emission of any Hazardous
Material by Tenant, its agents, employees, contractors or invites. The
provisions of this Section shall be in addition to any other obligations and
liabilities Tenant may have to Landlord at law or in equity and shall survive
the transactions contemplated herein or any termination of this Lease.

(d) As used in this Lease, the term "HAZARDOUS MATERIALS" shall
include, without limitation:

(i) Those substances included within the definitions of
"hazardous substances", "hazardous materials," toxic substances," or "solid
waste" in the Comprehensive Environmental Response Compensation and Liability
Act of 1980 (42 U.S.C. ss.9601 eT Seq.) ("CERCLA"), as amended by Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), the Resource Conservation
and Recovery Act of 1976 ("RCRA"), and the Hazardous Materials Transportation
Act, and in the regulations promulgated pursuant to said laws, all as amended;

(ii) Those substances listed in the United States Department
of Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (of any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto);

(iii) Any material, waste or substance which is
(A) petroleum, (B) asbestos, (C) polychlorinated biphenyls, (D) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C.
ss.1251 eT Seq. (33 U.S.C. ss.1321) or listed pursuant to Section of the Clean
Water Act (33 U.S.C. ss.1317); (E) flammable explosives; or (F) radioactive
materials;

(iv) Those substances regulated pursuant to or identified in
the Virginia Pesticide Law; Air Pollution Control Board; Virginia Waste
Management Act; Environmental Health Service; Transportation of Hazardous
Radioactive Materials; Virginia Hazardous Materials Emergency Response Program;
State Water Control Law; The Groundwater Act of 1973; and Miscellaneous
Offenses; and in the regulations promulgated pursuant to said laws, all as
amended; and

(v) Such other substances, materials and wastes which are or
become regulated as hazardous or toxic under applicable local, state or federal
law, or the United States government, or which are classified as hazardous or
toxic under federal, state, or local laws or regulations.

PART 9 - ALTERATIONS

SECTION 9.01. APPROVAL OF LANDLORD.

Tenant shall not, at any time during the Term, without Landlord's
prior written consent, make any alterations (structural or otherwise) to the
Premises. Should Tenant desire any

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alterations, Tenant agrees to submit all plans and specifications for same,
including complete architectural plans, to Landlord for Landlord's written
approval, before beginning such work and Landlord's approval shall not be
unreasonably withheld, conditioned or delayed. Landlord shall not be considered
as unreasonably withholding its approval by refusing to consent to any
alterations which would (i) alter the exterior appearance of the Building, or
the public lobbies, corridors, or common areas thereof; (ii) causes or are
likely to cause any weakening of any part of the structure of the Premises or
Building or which may cause damage or disruption to any Building system; or
(iii) violate any underlying ground lease or deed of trust or mortgage. Upon
Tenant's receipt of Landlord's written approval, Tenant may proceed with the
construction of the approved alterations, but only so long as they are in
substantial compliance with the plans and specifications and provisions of this
PART 9. Additionally, the construction of any alterations, the alterations
themselves, or any maintenance thereof shall comply with all building, safety,
fire, plumbing, electrical and other codes, governmental requirements (including
but not limited to Title III of the Americans with Disabilities Act of 1990, all
regulations issued thereunder and the Accessibility Guidelines for Buildings and
Facilities issued pursuant thereto, as the same are in effect on the date hereof
and may be hereafter modified, amended or supplemented) and insurance
requirements, and shall not require an amount of water, electricity, gas, heat,
ventilation, or air-conditioning which exceeds Building Standard unless prior
written arrangements satisfactory to Landlord are made with respect thereto. All
alterations shall be made at Tenant's expense, either by Tenant's contractors
which have been approved in advance by Landlord or, at Landlord's option, by
Landlord's contractors on terms reasonably satisfactory to Tenant. If Landlord's
contractor is performing the alterations, Tenant shall pay to Landlord a fee
equal to five percent (5%) of the actual costs of such work, such fee to cover
Landlord's overhead related to the work, including, but not limited to,
Landlord's review of the plans and specifications, coordination of the work,
consultation with professionals regarding the work, and general administration
allocable to the work; provided that, if Landlord is performing the alterations,
the fee that Tenant shall pay to Landlord shall increase to ten percent (10%) of
the actual costs of such work. Any extraordinary third party costs incurred by
Landlord as a result of Tenant's Alterations work shall be paid by Tenant. All
such construction shall be completed promptly and in a good and workmanlike
manner and shall be performed in compliance with PART 10 hereof.

SECTION 9.02. OWNERSHIP OF IMPROVEMENTS TO PREMISES.

All Leasehold Improvements constructed by Landlord pursuant to EXHIBIT
"B" are and shall remain the property of Landlord, and shall not be removed from
the Premises. At the time of Landlord's approval of Alterations to the Premises,
Landlord shall notify Tenant as to whether the Alterations will be and remain
the Landlord's property, and shall not be removed from the Premises. If Landlord
notifies Tenant that Landlord will not retain the ownership of such Alterations
Tenant shall, at Tenant's sole expense, cause the same to be removed and restore
the Premises to the condition in which they existed prior to the alterations.
Tenant further agrees to remove, at Tenant's expense, all of its furniture,
furnishings, personal property and movable trade fixtures by the Expiration
Date, and to promptly reimburse Landlord for the cost of repairing all damage
done to the Premises or the Building by such removal.

PART 10 - LIENS

Tenant shall keep the Premises and the Buildings free from any liens
arising from any work performed, materials furnished, or obligations incurred by
or at the request of Tenant, its agents, employees or independent contractors.
If any lien is filed against the Premises, the Building or Tenant's leasehold
interest therein, which arises out of any purported act or agreement of Tenant,
Tenant shall discharge same within thirty (30) days after its filing. If Tenant
fails to discharge such lien within such period, then, in addition to any other
right or remedy Landlord may, at its election, discharge the lien by depositing
with a court or a title company, or by bonding, the amount claimed to be due.
Tenant shall pay on demand, as Additional Rent, any amount paid by Landlord for
the discharge or satisfaction of any such lien, and all attorney's fees and
other costs and expenses of Landlord reasonably incurred in defending any such
action or in obtaining the discharge of such lien, together with all necessary
disbursements in connection therewith.

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PART 11 - REPAIRS

SECTION 11.01. TENANT'S OBLIGATIONS.

Except as set forth in PART 5 and SECTION 11.02 of this Lease, Tenant
shall keep the Premises and every part thereof in good condition and repair at
all times during the Term and at Tenant's sole cost and expense. At the end of
the Term, Tenant shall surrender to Landlord the Premises and all alterations,
additions, and improvements thereto in the same condition as when received,
subject to the provisions of PART 17 hereof. Landlord shall give Tenant five (5)
days notice to commence to make repairs, and if Tenant fails to commence to make
such repairs within such time period, Landlord, at its option, may make such
repairs, and Tenant shall pay Landlord, on demand, Landlord's actual costs in
making such repairs plus a fee of ten percent (10%) to cover Landlord's
overhead, all to constitute Additional Rent. Landlord has no obligation and has
made no promise to alter, remodel, improve, repair, decorate, or paint the
Premises or any part thereof, except as specifically set forth in this Lease.

SECTION 11.02. LANDLORD'S OBLIGATIONS.

Subject to the other provisions of this Lease imposing obligations in
this respect upon Tenant, and subject to the provisions of PARTS 13 AND 14
hereof, Landlord shall repair, replace, and maintain (a) the external and
structural parts of the Building and the Building systems and (b) all common
areas.

PART 12 - INSURANCE

SECTION 12.01. TENANT'S INSURANCE.

Tenant, at its sole expense, shall obtain and keep in force the
following insurance:

(a) Commercial general liability insurance coverage on an
"occurrence basis" against claims for personal injury, including, without
limitation, bodily injury, death, and broad form property damage, in limits not
less than $1,000,000 per occurrence and a $2,000,000 aggregate, with coverage to
include a per location endorsement, contractual liability, fire legal liability
in the amount of $500,000, and other broad form endorsements that would be
carried by a prudent individual conducting a business similar to Tenant's
business. All such insurance policies shall name Tenant as the named insured
thereunder and shall name Landlord and Landlord's mortgagees as additional
insureds thereunder, all as their respective interests may appear;

(b) Worker's Compensation and Employer's Liability insurance,
with a waiver of subrogation endorsement waiving rights of subrogation against
Landlord, in form and amount satisfactory to Landlord and at a minimum is equal
to that required by the law of Virginia;

(c) Special Causes of Loss Insurance insuring any Leasehold
Improvements made to the Premises after the Commencement Date and Tenant's
interest in the Premises and all property located in the Premises, including
furniture, equipment fittings, installations, fixtures, supplies and any other
personal property, Leasehold Improvements and alterations ("TENANT'S PROPERTY"),
in an amount equal to the full replacement value, it being understood that no
lack or inadequacy of insurance by Tenant shall in any event make Landlord
subject to any claim by virtue of any theft or loss or damage to any uninsured
or inadequately insured property;

(d) During the course of construction of any work performed
by Tenant or on Tenant's behalf pursuant to this Lease or any alterations by
Tenant until completion thereof, Builder's Risk Insurance on a "special causes
of loss" basis (including collapse) on a completed value (non-reporting) form
for full replacement value covering all work incorporated in the Building and
all materials and equipment in or about the Premises;

C-13
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<PAGE>

(e) Auto liability coverage for owned, hired and non-owned
vehicles with a $1,000,000 combined single limit; and

(f) Excess liability coverage in the amount of $5,000,000
which will follow form and respond to and increase the limits of the coverages
described in SECTIONS 12.01(a), (b), (c), AND (d) above.

All policies shall be issued by companies having a Best's rating of at
least A-XI and shall be in amounts and in form satisfactory from time to time to
Landlord and Landlord's lender. All policies shall contain an endorsement or
agreement by the insurer that any loss shall be payable in accordance with the
terms of such policy notwithstanding any act or negligence of Tenant which might
otherwise result in a forfeiture of said insurance, and the further agreement of
the insurer waiving all rights of setoff, counterclaim, or deduction against
Tenant. Tenant will deliver certificates of insurance evidencing each policy to
Landlord as soon as practicable after the placing of the required insurance, but
not later than ten (10) days prior to the date Tenant takes possession of all or
any part of the Premises. All policies shall contain an undertaking by their
insurers to notify Landlord and Landlord's lender in writing, by registered or
certified U.S. Mail, return receipt requested, not less than thirty (30) days
before any material change, reduction in the scope or limits of coverage,
cancellation, or other termination thereof. All policies shall name Landlord and
Landlord's manager as additional insureds and shall be evidenced as such on a
Certificate of Insurance issued to Landlord.

Landlord reserves the right to periodically review the insurance
coverages required by this SECTION 12.01 and to revise such requirements to
reflect insurance industry practices or require other forms or amounts of
insurance as may be reasonably required to reflect changes in insurance industry
practices.

SECTION 12.02. INSURANCE RATING.

Tenant will not keep, use, sell or offer for sale in, or upon the
Premises any article which may be prohibited by any insurance policy
periodically in force covering the Building and the Leasehold Improvements. If
Tenant's occupancy or business in or on the Premises, whether or not Landlord
has consented to the same, results in any increase in premiums for the insurance
periodically carried by Landlord with respect to the Building or the Leasehold
Improvements, Tenant shall pay any such increase in premiums as Additional Rent
within ten (10) days after being billed therefor by Landlord.

If any of the Landlord's insurance policies shall be canceled or
cancellation shall be threatened or the coverage thereunder reduced or
threatened to be reduced in any way because of the use of the Premises or any
part thereof by Tenant or any assignee or subtenant of Tenant or by anyone
Tenant permits on the Premises and, if Tenant fails to remedy the condition
giving rise to such cancellation, threatened cancellation, reduction of
coverage, or threatened reduction of coverage within forty-eight (48) hours
after written notice thereof, Landlord may, at its option, either terminate this
Lease or enter upon the Premises and attempt to remedy such condition, and
Tenant shall promptly pay the cost thereof to Landlord as Additional Rent.
Landlord shall not be liable for any damage or injury caused to any property of
Tenant or of others located on the Premises resulting from such entry. If
Landlord is unable or elects not to remedy such condition, then Landlord shall
have all of the remedies provided for in this Lease in the event of a Default by
Tenant. Notwithstanding the foregoing provisions of this Section, if Tenant
fails to remedy as aforesaid, Tenant shall be in Default of its obligations
hereunder and Landlord shall have no obligation to remedy such Default.

SECTION 12.03. WAIVER OF SUBROGATION.

All policies covering real or personal property which Tenant obtains
affecting the Premises shall include, if possible, a clause or endorsement
denying the insurer any rights of subrogation

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<PAGE>

against Landlord to the extent rights have been waived by the insured before the
occurrence of injury or loss, if same are obtainable. Tenant waives any rights
of recovery against Landlord for injury or loss due to hazards covered by
policies of insurance containing such a waiver of subrogation clause or
endorsement to the extent of the injury or loss covered thereby.

PART 13 - DAMAGE BY FIRE OR OTHER CASUALTY

SECTION 13.01. DAMAGE TO PREMISES.

Tenant shall immediately notify Landlord of any damage to the Building
which affects the Premises. If all or any portion of the Premises are damaged or
destroyed by any casualty against which Tenant is required to be insured under
Section 12.01 of the General Lease Provisions, and if, in Landlord's reasonable
opinion, (i) the Premises cannot be rebuilt or made fit for Tenant's purposes
within two hundred seventy (270) days of the damage or destruction, or (ii) the
proceeds from Tenant's insurance required to be maintained by Tenant pursuant to
PART 12 are insufficient to repair or restore the damage or destruction, then
Landlord (with respect to the events in (i) or (ii) above) or Tenant (with
respect to (i) above only) shall have the right to terminate this Lease by
giving the other, within sixty (60) days after such damage or destruction,
written notice of termination, and thereupon Rent and any other payments for
which Tenant is liable under this Lease shall be apportioned and paid to the
date of such damage, and Tenant shall immediately vacate the Premises; provided,
however, that those provisions of this Lease which are designated to cover
matters of termination and the period thereafter shall survive the termination
hereof. Notwithstanding the foregoing, in no event shall Tenant have the right
to terminate this Lease if the damage or destruction of the Premises is a result
of (i) a default by Tenant or (ii) the negligence or willful act of Tenant, or
Tenant's agents, employees, representatives, contractors, successors or assigns,
licensees or invitees.

SECTION 13.02. DAMAGE TO BUILDING.

If the Building or any portion thereof is damaged or destroyed by any
cause whatsoever, to the extent that, (a) in Landlord's reasonable judgment, it
would not be economically feasible to repair or restore such damage or
destruction, or (b) in Landlord's reasonable judgment, the damage or destruction
to the Building cannot be repaired or restored within three hundred sixty (360)
days after such damage or destruction, either Landlord or Tenant may, at their
option, terminate this Lease by giving notice of such termination to the other
party within sixty (60) days after such damage or destruction.

SECTION 13.03. PARTIAL DAMAGE.

In the event of partial destruction or damage to the Building or the
Premises which is not subject to SECTION 13.01 OR 13.02, but which renders the
Premises partially, but not wholly untenantable, this Lease shall terminate as
to the portion of the Premises which, in Landlord's reasonable opinion, cannot
be used or occupied by Tenant as a result of such casualty and shall remain in
effect as the remainder of the Premises. Landlord shall in such event, within a
reasonable time after the date of such destruction or damage, subject to Tenant
Delay and to the extent and availability of insurance proceeds, restore the
Premises to as near the same condition as existed prior to such partial damage
or destruction, provided that Tenant pays to Landlord Tenant's insurance
proceeds as required in SECTION 13.05 of the General Lease Provisions. In no
event shall Rent abate or shall any termination occur if damage to or
destruction of the Premises is the result of either (i) a default by Tenant or
(ii) the negligence or willful act of Tenant, or Tenant's agents, employees,
representatives, contractors, successors or assigns, licensees or invitees.

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SECTION 13.04. DAMAGE DURING LAST YEAR OF TERM.

If the Building or the Premises or any portion thereof is destroyed by
fire or other causes at any time during the last year of the Term, then either
Landlord or Tenant shall have the right, at the option of either party, to
terminate this Lease by giving written notice to the other within sixty (60)
days after the date of such destruction.

SECTION 13.05. NO LANDLORD LIABILITY.

Landlord shall have no liability to Tenant for inconvenience, loss of
business, or annoyance arising from any repair of any portion of the Premises or
the Building. If Landlord is required by this Lease or by any lender or lessor
of Landlord to repair or if Landlord undertakes to repair, Tenant shall pay to
Landlord that amount of Tenant's insurance proceeds which insures such damage as
a contribution towards such repair, and Landlord shall use reasonable efforts to
have such repairs made promptly and in a manner which will not unnecessarily
interfere with Tenant's occupancy.

SECTION 13.06. APPORTIONMENT OF RENT.

In the event of termination of this Lease pursuant to this PART 13,
then all Rent shall be apportioned and paid to the date on which possession is
relinquished or the date of such damage, whichever last occurs, and Tenant shall
immediately vacate the Premises according to such notice of termination;
provided, however, that those provisions of this Lease which are designated to
cover matters of termination and the period thereafter shall survive the
termination hereof.

PART 14 - CONDEMNATION

SECTION 14.01. ENTIRE BUILDING.

In the event that the whole or substantially the whole of the Building
and/or the Premises are taken or condemned for any public purposes, this Lease
and the leasehold estate created hereby shall cease and terminate as of the date
of such taking.

SECTION 14.02. PORTION OF BUILDING.

In the event that any portion of the Building shall be taken or
condemned for any public purpose (whether or not such taking includes any
portion of the Premises), which taking, in Landlord's sole judgment, shall
interfere materially with Landlord's use and operation of the Building or is
such that Landlord determines that the Building cannot be restored to usefulness
in an economically feasible manner, then Landlord shall have the option to
terminate this Lease, effective as of the date specified by Landlord in its
notice of termination.

SECTION 14.03. PORTION OF PREMISES.

In the event that a portion, but less than substantially the whole, of
the Premises should be taken or condemned for any public purpose, then this
Lease shall be terminated as of the date of such taking as to the portion of the
Premises so taken, and, unless Landlord exercises its option to terminate this
Lease pursuant to SECTION 14.02 above, this Lease shall remain in full force and
effect as to the remainder of the Premises. In such event, the Rent will be
diminished by an amount representing the part of such amounts properly
applicable to the portion of the Premises so taken. Further, in such event
Tenant's Proportionate Share shall be recomputed based upon the remaining
Rentable Area in the Premises and in the Building.

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<PAGE>

SECTION 14.04. TERMINATION OF LEASE.

In the event of the termination or partial termination of this Lease
pursuant to the provisions of this Part 14, this Lease and the Term and the
estate hereby granted shall expire as of the date of such termination in the
same manner and with the same effect as if that were the date set for the normal
expiration of the Term of this Lease, and the Rent shall be apportioned as of
such date.

SECTION 14.05. LANDLORD'S RIGHT TO AWARD.

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

PART 15 - ASSIGNMENT AND SUBLETTING

SECTION 15.01. RIGHTS OF TENANT.

(a) Tenant may not sell, assign, transfer, or hypothecate this Lease
or any interest herein (either voluntarily or by operation of law, and
including, if Tenant is a corporation, partnership or limited liability company,
the sale or transfer of a controlling interest in Tenant), or sublet the
Premises or any part thereof without the prior written consent of Landlord. If
Tenant should desire to assign this Lease or sublet the Premises (or any part
thereof) and provided that Tenant is not then in default hereunder, Tenant shall
give Landlord written notice at least thirty (30) days in advance of the date on
which Tenant desires to make such assignment or sublease. Landlord shall then
have a period of fifteen (15) days following receipt of such notice within which
to notify Tenant in writing that Landlord elects:

(1) if Tenant desires to assign or sublease certain space for
the remainder of the Term, to terminate this Lease as to the space so affected
as of the date specified by Tenant in its notice, in which event Tenant, subject
to the provisions of this Lease which expressly survive the termination hereof,
shall be relieved of all further obligations hereunder as to such space; or

(2) to permit Tenant to assign or sublet such space, subject,
however, to the subsequent written approval by Landlord of the instrument of
assignment or sublease as to form and substance and of the proposed assignee or
subtenant; or

(3) to refuse, in Landlord's sole discretion, to consent to
Tenant's assignment or subleasing of such space and to continue this Lease in
full force and effect as to the entire Premises. If Landlord should fail to
notify Tenant in writing of such election within such fifteen (15) day period,
Landlord shall be deemed to have elected option (2) above.

(b) Except as may be otherwise expressly set forth to the contrary, no
assignment or subletting by Tenant shall relieve Tenant of Tenant's obligations
under this Lease. Any attempted assignment or sublease by Tenant in violation of
the terms and provisions of this SECTION 15.01 shall be void.

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<PAGE>

(1) If Tenant is a corporation, the stock of which is not
listed on a "national securities exchange" (as defined in the Securities Act of
1934), then the sale, issuance or transfer (whether cumulatively or in a single
transaction), of stock by Tenant or the shareholders of record, as of the date
hereof, the result of which either changes or makes possible the change in the
voting control of Tenant; and

(2) If Tenant is a joint venture, partnership, limited
liability company or other association (collectively referred to as the
"PARTNERSHIP"), the sale, issuance or transfer (whether cumulatively or in a
single transaction) of ownership of the entity the result of which changes the
management of the entity or the voting control of the entity.

(d) Landlord's consent to an assignment or sublease shall not be
unreasonably withheld, conditioned or delayed, provided all of the following
conditions have been satisfied:

(1) if a sublease, the sublease must have provisions which
satisfy subparagraph (e) hereof;

(2) the entity, organization, or individual to which such
space is proposed to be sublet is of a type similar to the existing tenants in
Fair Lakes, is not of a type that would be an undesirable tenant in a
first-class office complex in Fair Lakes, or is not of a type that because of
its controversial or unsavory nature, might bring undue notoriety or disruption
to the Building;

(3) if an assignment, the entity to which Tenant desires to
assign has financial credit that is equal to or greater than that of Tenant on
the Effective Date in Landlord's sole discretion;

(4) the entity to which Tenant desires to sublease is not
then a tenant in the Building and is not then in negotiations with Landlord for
the lease of space in the Building; and

(5) the assignment or sublease will not violate any exclusive
or restriction in any other lease of space in Fair Lakes by Landlord or its
Affiliates (as defined in SECTION 15.04).

(e) A sublease of portions of the Premises, must include (or shall be
deemed to include) provisions stating that it is subject and subordinate to this
Lease and to the matters to which this Lease is or shall be subordinate, and
that in the event of the termination of this Lease, or the re-entry or
dispossession of Tenant by Landlord under this Lease, Landlord, at its option,
may either terminate the sublease, in which case the subtenant shall peacefully
vacate the premises sublet, or, require the subtenant to attorn to Landlord as
its sublessor pursuant to the then applicable terms of such sublease for the
remaining term thereof, except that Landlord shall not be (i) liable for any
previous act or omission of Tenant as sublessor under such sublease, (ii)
subject to any offset which theretofore accrued to such subtenant against
Tenant, or (iii) bound by any previous modification of such sublease not
consented to in writing by Landlord or by a previous prepayment of rent more
than one month in advance. A sublease also must provide that all Rent payments
to be made by the subtenant must be made through Tenant and not directly by
subtenant to Landlord.

SECTION 15.02. EXCESS RENT.

If the rent agreed upon between Tenant and its proposed subtenant
under any proposed sublease of the Premises (or any part hereof) is greater than
the Base Rent, that Tenant must pay Landlord hereunder for that portion of the
Premises that is subject to such proposed sublease, then fifty percent (50%) of
such excess rent (after deducting therefrom reasonable costs for brokerage
commissions, construction expenses for tenant improvements and legal and
advertising fees) shall be considered Additional Rent owed by Tenant to
Landlord, and shall be paid by Tenant to Landlord in the same manner that Tenant
pays rent under this Lease.

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<PAGE>

SECTION 15.03. RIGHTS OF LANDLORD.

Landlord may sell, transfer, assign, and convey, all or any part of
the Building and/or the Land and any and all of its rights under this Lease, and
in the event Landlord assigns its rights under this Lease and provides written
notice of such assignment to Tenant, Landlord shall be released from any further
obligations hereunder, and Tenant agrees to look solely to Landlord's successor
in interest for performance of such obligations.

SECTION 15.04. AFFILIATE TRANSFER.

Notwithstanding the provisions of SECTION 15.01 hereof, Tenant shall
have the right, without the prior written consent of Landlord, to assign its
entire interest in this Lease to an Affiliate (hereinafter defined) so long as
(i) the Affiliate deliver to Landlord, concurrently with such assignment, a
written notice of the assignment and an assumption agreement whereby the
Affiliate assumes and agrees to perform, observe and abide by the terms,
conditions, obligations and provisions of this Lease applicable to Tenant, (ii)
the Affiliate has financial credit that is equal to or greater than that of
Tenant on the Effective Date, and (iii) the entity remains an Affiliate.
Further, Tenant shall also have the right, without the prior written consent to
Landlord, to sublet all or any portion of the Premises to an Affiliate so long
as (i) such sublease satisfies the requirements of this Section, (ii) the
Affiliate has financial credit that is equal to or greater than that of Tenant
on the Effective Date, and (iii) the entity remains an Affiliate. No subletting
or assignment by Tenant made pursuant to this Section shall relieve Tenant of
Tenant's obligations under this Lease. As used herein, the term Affiliate shall
mean and collectively refer to (i) a corporation, individual or other entity
which owns and controls all of the voting stock of Tenant (if it is a
corporation) or controls the day-to-day decision making of Tenant (the
"Parent"), or (ii) a corporation in which either the Tenant or its Parent owns
and controls all of the voting stock of the corporation and is able to elect (by
ownership of stock or proxy) the board of directors and the officers of the
corporation, or (iii) an Affiliate of the Parent, and/or (iv) a successor or
surviving corporation in the event of a merger, takeover or other form of
corporate acquisition of the Tenant. A transfer permitted under this Section
will be excluded from the provisions of SECTION 15.02 hereof.

PART 16 - INDEMNIFICATION

Tenant waives all claims against Landlord for damage to any property
or injury to, or death of, any person, in, upon, or about the Building or the
Premises, arising at any time and from any cause except to the extent such
damage is caused by reason of the negligence or willful misconduct of Landlord,
its agents, employees, representatives, or contractors, and Tenant shall
indemnify Landlord and shall hold Landlord harmless from any damage to any
property or injury to, or death of, any person arising from the use of the
Building or the Premises by Tenant or its agents, employees, representatives,
contractors, or invitees, except to the extent such damage, injury or death is
caused by the negligence or willful misconduct of Landlord, its agents,
employees, representatives, or contractors. Tenant's foregoing indemnity
obligation shall include reasonable attorney's fees and all other costs and
expenses reasonably incurred by Landlord from the first notice that any claim or
demand has been made or may be made.

The provisions of this PART 16 shall survive the termination of this
Lease for any reason with respect to any damage, injury, or death occurring
before such termination.

If Landlord is made a party to any litigation commenced by or against
Tenant or relating to this Lease or to the Premises, and provided that in any
such litigation Landlord is not finally adjudicated to be at fault, then Tenant
shall pay all costs and expenses to the extent such costs and expenses are not
attributable to Landlord's fault, including reasonable attorneys' fees and court
costs, incurred by or imposed upon Landlord because of any such litigation, and
the amount of such costs and expenses, including reasonable attorneys' fees and
court costs, shall be a demand obligation owing by Tenant to Landlord and shall
constitute Additional Rent.

C-19
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<PAGE>
PART 17 - SURRENDER OF THE PREMISES

SECTION 17.01. CONDITION OF PREMISES.

Upon expiration of the Term or other termination of this Lease for any
cause whatsoever, Tenant shall peacefully vacate the Premises in as good order
and condition as the same were at the beginning of the Term or may thereafter
have been improved by Landlord or Tenant, except for reasonable use and wear
thereof and damage to the Premises by fire or other casualty or condemnation.

SECTION 17.02. TENANT HOLDOVER.

In the event that Tenant shall not immediately surrender the Premises
on the Expiration Date of the Term, Tenant, at the option of Landlord, shall
become a month-to-month Tenant at one hundred fifty percent (150%) of the Rent
in effect during the last month of the Term and subject to all of the terms,
conditions, covenants and agreements of this Lease; provided, however, that if
Landlord has executed a lease for space in the Building, then Tenant shall be
obligated to pay Landlord twice the Rent in effect during the last month of the
Term. Tenant shall give to Landlord at least thirty (30) days' written notice of
any intention to quit the Premises, and Tenant shall be entitled to thirty (30)
days' written notice to quit the Premises, unless Tenant is in Default
hereunder, in which event Tenant shall not be entitled to any notice to quit,
the usual thirty (30) days' written notice to quit being hereby expressly
waived. Notwithstanding the foregoing provisions of this Section, in the event
that Tenant shall hold over after the expiration of the Term, then at any time
prior to Landlord's acceptance of Rent from Tenant as a monthly Tenant
hereunder, Landlord, at its option, may forthwith re-enter and take possession
of the Premises without process, or by any legal process in force in the
Commonwealth of Virginia. Tenant shall be liable to Landlord for all damage
which Landlord suffers because of any holding over by Tenant, and Tenant shall
indemnify Landlord against all claims made against Landlord resulting from
Landlord's delay in delivering possession of the Premises to any other tenant or
prospective tenant.

PART 18 - ESTOPPEL CERTIFICATES

Tenant shall execute and return within ten (10) calendar days any
certificate or agreement that Landlord may request in writing from time to time,
stating that this Lease is unmodified and in full force and effect, or in full
force and effect as modified, and stating the modification. The certificate also
shall state (i) that all work has been completed, and the work and the Premises
are accepted as satisfactory except for items listed on a punch list, if any,
attached to such certificate; (ii) the amount of Base Rent and Additional Rent
and the dates on which Rent commenced to accrue and to which the Rent has been
paid in advance, and the amount of any security deposit or prepaid Rent; (iii)
that Tenant is paying Rent on a current basis; (iv) that Tenant is in full and
complete possession of the Premises and doing business; (v) that there is no
present default on the part of Landlord, or attach a memorandum stating any such
instance of default; (vi) that Tenant has not advanced any amounts to or on
behalf of Landlord which have not been reimbursed; (vii) that Tenant has no
rights to setoff and no defense or counterclaim against enforcement of its
obligations under the Lease, including the payment of Rent; (viii) that Tenant
understands that this Lease has been collaterally assigned to Landlord's
mortgagee as security for a loan to Landlord and that Rent may not be prepaid
other than as may be provided for in this Lease nor may this Lease be amended,
modified, or waived so as to have a material impact on the financial obligations
of either Tenant or Landlord without such mortgagee's prior written approval;
(ix) that there are no actions, whether voluntary or otherwise, pending against
Tenant under the bankruptcy laws of the United States or any state thereof; (x)
that Tenant has no other notice of any sale, transfer or assignment of this
Lease or of the Rent; and (xi) any other fact pertaining to Tenant's interest in
this Lease which Landlord, or Landlord's mortgagee, may request. Failure to
deliver the certificate within ten (10) calendar days shall be conclusive upon
Tenant for the benefit of Landlord and any successor to Landlord that this Lease
is in full force and effect and has not been modified except as may be
represented by the party requesting the certificate. Any such certificate may be
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prospective purchaser, any ground lessor, or any beneficiary under the deed of
trust on the Building, the underlying land, or any part thereof.

PART 19 - SUBORDINATION AND ATTORNMENT

SECTION 19.01. EXISTING FINANCINGS.

(a) This Lease is subject and subordinate to any deeds of trust or
other security instruments which, as of the date of this Lease, cover the
Building, the underlying land, or any interest of Landlord therein, and to any
advances made on the security thereof, and to any increases, renewals,
modifications, consolidations, and extensions of any of such deeds of trust or
security instruments (the "EXISTING INDEBTEDNESS"). Landlord agrees to provide
notice to Tenant of such deeds of trust or other security instruments covering
the Building. This provision is declared by Landlord and Tenant to be
self-operative and no further instrument shall be required to effect such
subordination of this Lease. Upon demand, however, Tenant shall execute,
acknowledge, and deliver to Landlord any further instruments and certificates
evidencing such subordination as Landlord, or the holder of the Existing
Indebtedness may reasonably require.

(b) Landlord agrees to obtain from the holder of the Existing
Indebtedness a Subordination, Non-Disturbance and Attornment Agreement, in form
similar to that attached hereto as EXHIBIT "F" (and by this reference
incorporated herein), which provides that, in the event of a foreclosure or a
transfer in lieu thereof, Tenant will not be disturbed in its possession and
this Lease shall, notwithstanding the foreclosure or transfer in lieu thereof,
continue in full force and effect upon and subject to all terms, covenants,
conditions, and obligations of this Lease so long as (i) no Default has occurred
on the part of Tenant under this Lease and (ii) Tenant attorns to the purchaser
or transferee as landlord under this Lease. Landlord agrees to use good faith
efforts to obtain revisions reasonably requested by Tenant to the Subordination,
Non-Disturbance and Attornment Agreement from the lender of the Existing
Indebtedness.

SECTION 19.02. FUTURE FINANCINGS.

During the Term of this Lease, Landlord reserves the right to encumber
its interest in this Lease, the Building and/or the underlying land, by new or
additional deeds of trust or other security instruments and to refinance the
Existing Indebtedness (the "New Financing"). Tenant agrees to subordinate this
Lease to any New Financing so long as the holder of the New Financing executes
and delivers to Tenant a Subordination, Non-Disturbance and Attornment Agreement
which contains the provision set forth in Section 19.01(b) hereof.

SECTION 19.03. ATTORNMENT.

Provided the holder of the Existing Indebtedness and New Financing has
delivered to Tenant a Subordination, Non-Disturbance and Attornment Agreement
which satisfies the provisions of Section 19.01(b) hereof, Tenant shall attorn
to the purchaser upon a sale or to the grantee under any deed in lieu of
foreclosure and shall recognize such purchaser or grantee as Landlord under this
Lease without any change in the terms or other provisions of this Lease. In such
agreement, Tenant will waive the right, if any, to elect to terminate this Lease
or to surrender possession of the Premises in the event of foreclosure of and
deed of trust or security instrument (or any transfer in lieu thereof).

PART 20 - QUIET ENJOYMENT

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however, to (i) the terms of this Lease; (ii) the deeds of trust, ordinances,
restrictive covenants, leases, easements, and other agreements or encumbrances
now or hereafter affecting the Building or the land on which the Building is
situated; (iii) the right of Landlord to construct on its property any
additional buildings or other improvements now or hereafter permitted by the
governmental authorities having jurisdiction over Landlord's property; and (iv)
the right of Landlord to relocate parking spaces for the Building, conduct
renovations to the Building or make alterations to the Building so long as
Landlord's exercise of these rights does not substantially interfere with
Tenant's use of the Premises. This covenant and all other covenants of Landlord
in this Lease shall be binding upon Landlord and its successors only with
respect to breaches occurring during its and their respective ownership of
Landlord's interest hereunder.

PART 21 - SIGNS; FURNISHINGS; COMMUNICATION EQUIPMENT

SECTION 21.01. SIGNS AND ADVERTISEMENTS.

No sign, advertisement, or notice referring to Tenant shall be
inscribed, painted, affixed, or otherwise displayed on any part of the exterior
or the interior of the Building, except those installed by Landlord on the
directories and the entrance door to the Premises and such other areas, if any,
as Landlord may determine. As long as Tenant leases all of the Rentable Area in
the Building and occupies for normal business purposes at least fifty percent
(50%) of the Rentable Area in the Building (with such other Rentable Area being
occupied for normal business purposes by Tenant's permitted assignees or
sublessees), then Tenant shall have the exclusive right, at its sole cost and
expense, to (i) install a sign on the top level exterior of the Building and
(ii) install a monument sign at the main drive or parking entrance to the
Building bearing Tenant's then current corporate logo as it uses in its business
(collectively, the "SIGNS"). The Signs shall conform to all applicable zoning
and governmental ordinances and the Fair Lakes signage standards and shall be
subject to the reasonable approval of Landlord and the Fair Lakes League as to
location, size and design. Tenant shall be obligated, at its sole cost and
expense, to install, maintain, repair and remove the Signs. If Tenant exhibits
or installs any sign, advertisement or notice except the Signs, Landlord shall
have the right to remove the same at Tenant's expense. Landlord shall have the
right to prohibit any advertisement of or by Tenant which in its opinion tends
to impair the reputation of the Building or its desirability as a high-quality
office building and, upon written notice from Landlord, Tenant shall immediately
refrain from and discontinue any such advertisement. Except as otherwise set
forth above, Landlord reserves the right to affix, install, and display signs,
advertisements, and notices on any part of the exterior or interior of the
Building.

SECTION 21.02. FURNISHINGS.

Landlord shall have the right to prescribe the weight and position of
safes and other heavy equipment and fixtures, which, if considered necessary by
Landlord, shall be installed in such manner as Landlord directs in order to
distribute their weight adequately. In no event shall Tenant place on any part
of the floor of the Premises a load exceeding the floor load per square foot
which such floor was designed to carry and which is allowed by law. Any and all
damage or injury to the Premises or the Building caused by moving such heavy
equipment or fixtures or the same being in or upon the Premises, shall be
repaired by and at the sole cost of Tenant. All furniture, equipment, and other
bulky matter of any description shall be delivered to the Premises only through
the designated service entrance of the Building and the designated service
elevator during normal business hours or as otherwise directed or scheduled by
Landlord. All moving of furniture, equipment, and other materials shall be under
the supervision of Landlord, who shall not, however, be responsible for any
damage to or charges for moving the same. Tenant agrees to remove promptly from
the sidewalks adjacent to the Building any of Tenant's furniture, equipment, or
other material there delivered or deposited.

SECTION 21.03. COMMUNICATIONS EQUIPMENT.

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Tenant shall have the right, subject to provisions of this SECTION
21.03 and the License Agreement to be executed by Tenant, to install, operate
and maintain, at Tenant's sole cost and expense, land lines between the Building
and the Fair Lakes V or Fair Lakes VI buildings (so long as Tenant is leasing
space in such buildings) antennas and other support structures reasonably
required for the conduct of Tenant's day-to-day business ("COMMUNICATIONS
EQUIPMENT"). The Communications Equipment shall be limited to receive-only
antennas and land lines necessary for the conduct of Tenant's normal business
activities and shall not be used for the purpose of transmitting for commerce or
reselling antenna transmissions services or other services for a profit. Prior
to the installation of any Communications Equipment, Tenant shall execute the
License Agreement which shall include, among other things, requirements that (i)
the plans and specifications for the proposed Communications Equipment conform
with all laws and applicable regulations and are subject to Landlord's prior
approval, and (ii) such Communications Equipment shall not interfere with other
satellite or communications equipment previously installed in Fair Lakes or
typically used for general office uses. Tenant shall pay to Landlord a monthly
fee (the "LICENSE FEE") equal to (i) $300.00 per pole-type antenna or satellite
dish with a diameter smaller than thirty-six inches (36") and (ii) $500.00 per
pole-type antenna or satellite dish with a diameter equal or greater than
thirty-six inches (36"). The License Fee amount shall increase by three percent
(3%) per year commencing on the first (1st) anniversary of the Commencement Date
and on each anniversary thereafter.

PART 22 - DEFAULTS AND REMEDIES

SECTION 22.01. EVENTS OF DEFAULT.

The occurrence of any one or more of the following events shall
constitute a Default or an Event of Default under this Lease: (a) if Tenant
fails to pay any Base Rent hereunder as and when such Rent becomes due and such
failure shall continue for more than five (5) days after Landlord gives Tenant
written notice of past due Rent; (b) if Tenant fails to pay Rent on time more
than three (3) times in any period of twelve (12) months, notwithstanding that
such payments have been made within the applicable cure period; (c) if the
Premises become vacant, deserted, or abandoned for more than ninety (90)
consecutive days or if Tenant fails to take possession of the Premises and
commence business operations therein on the Commencement Date or promptly
thereafter; (d) if Tenant permits to be done anything which creates a lien upon
the Premises and fails to discharge, or bond such lien or post such security
with Landlord as is required by Part 10; (e) if Tenant violates the provisions
of PART 15 by attempting to make an unpermitted assignment or sublease; (f) if
Tenant fails to maintain in force all policies of insurance required by this
Lease and any such failure shall continue for more than ten (10) days after
Landlord gives Tenant notice of such failure; (g) if any petition is filed by or
against Tenant under any present or future section or chapter of the Bankruptcy
Code, or under any similar law or statute of the United States or any state
thereof (which, in the case of an involuntary proceeding, is not permanently
discharged, dismissed, stayed, or vacated, as the case may be, within sixty (60)
days of commencement), or if any order for relief shall be entered against
Tenant in any such proceedings; (h) if Tenant becomes insolvent or makes a
transfer in fraud of creditors or makes an assignment for the benefit of
creditors; (i) if a receiver, custodian, or trustee is appointed for the
Premises or for all or substantially all of the assets of Tenant, which
appointment is not vacated within sixty (60) days following the date of such
appointment; (j) if Tenant fails to perform or observe any other term of this
Lease, including without limitation the payment of Additional Rent, and such
failure shall continue for more than ten (10) days after Landlord gives Tenant
written notice of such failure, or, if such failure cannot be corrected within
such ten (10) day period, if Tenant does not commence to correct such default
within said ten (10) day period and thereafter diligently prosecute the
correction of same to completion within a reasonable time and in any event prior
to the time failure to complete such correction could cause Landlord to be
subject to prosecution for violation of any law, rule, ordinance or regulation
or causes, or could cause a default under any deed of trust, mortgage,
underlying lease, tenant lease or other agreement applicable to the Building or
the land upon which it is situated; (k) it Tenant fails to perform any term
(other than the payment of Rent) of this Lease more than three (3) times in any
period of twelve (12) months, notwithstanding that Tenant has corrected any
previous failures within the applicable cure period; or (l) Tenant is in Default
under any lease for space in Fair Lakes VI or Fair Lakes IV.

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SECTION 22.02. REMEDIES.

Upon the occurrence of any Event of Default, Landlord shall have the
right, at Landlord's option, to terminate this Lease. With or without
terminating this Lease, Landlord may re-enter and take possession of the
Premises and the provisions of this SECTION 22.02 shall operate as a notice to
quit, any other notice to quit or of Landlord's intention to re-enter the
Premises being hereby expressly waived. If necessary, Landlord may proceed to
recover possession of the Premises under and by virtue of the laws of the
Commonwealth of Virginia or by such other proceedings, including re-entry and
possession, as may be applicable. If Landlord elects to terminate this Lease,
everything contained in this Lease on the part of Landlord to be done and
performed shall cease without prejudice; subject, however, to the right of
Landlord to recover from Tenant all Rent and other sums accrued up to the time
of termination or recovery of possession by Landlord, whichever is later.
Whether or not this Lease is terminated by reason of Tenant's Default, Landlord
may, but shall not be obligated to, relet the Premises for such rent and upon
such terms as are not unreasonable under the circumstances and, if the entire
Rent provided in this Lease plus the costs, expenses, and damages hereafter
described shall not be realized by Landlord, Tenant shall be liable for all
damages sustained by Landlord, including, without limitation, deficiencies in
Base Rent, Adjusted Rent and Additional Rent, the value of any rent abatement,
tenant allowance or other payments made to Tenant, attorney's fees and expenses
reasonably incurred, brokerage fees, and the expense of placing the Premises in
first-class rentable condition. Landlord shall in no way be responsible or
liable for any failure to collect any rent due and/or accrued from such
reletting, to the end and intent that Landlord may elect to hold Tenant liable
for the Base Rent, Adjusted Rent, and Additional Rent, and any and all other
items of cost and expense which Tenant shall have been obligated to pay
throughout the remainder of the Term. Any damages or loss of rent sustained by
Landlord may be recovered by Landlord, at Landlord's option, at the time of the
reletting, or in separate actions, from time to time, as said damage shall have
been made more easily ascertainable by successive relettings. The provisions
contained in this SECTION 22.02 shall be in addition to, and shall not prevent
the enforcement of, any claim Landlord may have against Tenant for anticipatory
breach of this Lease.

SECTION 22.03. REMEDIES CUMULATIVE.

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

SECTION 22.04. NO ACCEPTANCE OR SURRENDER.

No act or thing done by Landlord or its agents during the Term shall
constitute an acceptance of an attempted surrender of the Premises, and no
agreement to accept a surrender of the Premises shall be valid unless made in
writing and signed by Landlord. No re-entry or taking possession of the Premises
by Landlord shall constitute an election by Landlord to terminate this Lease,
unless a written notice of such intention is given to Tenant. Notwithstanding
any such reletting or re-entry or taking possession, Landlord may at any time
thereafter terminate this Lease for a previous Default. Landlord's acceptance of
Rent following an Event of Default hereunder shall not be construed as a waiver
of such Event of Default. No waiver by Landlord of any breach of this Lease
shall constitute a waiver of any other violation or breach of any of the terms
hereof.

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Forbearance by Landlord to enforce one or more of the remedies herein provided
upon a breach hereof shall not constitute a waiver of any other breach of this
Lease.

SECTION 22.05. CUSTOMS AND PRACTICES.

No custom or practice which may develop between the parties in the
administration of the terms of this Lease shall be construed to waive or lessen
Landlord's right to insist upon strict performance of the terms of this Lease.

SECTION 22.06. PAYMENT OF TENANT'S OBLIGATIONS BY LANDLORD.

In the Event of Default, Landlord may, but shall not be required to,
make such payment or do such act required to be performed by Tenant. If Tenant
fails to act and Landlord makes such payment or does such act, all costs and
expenses incurred by Landlord, plus interest thereon at the Default Rate from
the date paid by Landlord to the date of payment thereof by Tenant, shall be
immediately paid by Tenant to Landlord. The taking of such action by Landlord
shall not be considered as a cure of such Default by Tenant or to prevent
Landlord from pursuing any remedy it is otherwise entitled to in connection with
such Default.

SECTION 22.07. DEFAULT BY LANDLORD.

Tenant agrees to give written notice of any default by Landlord under
this Lease to any lender of Landlord secured by the Premises upon request
thereof by such lender and a reasonable time within which to cure such default
prior to Tenant taking any action to remedy such default or cancel the Lease.

PART 23 - SECURITY DEPOSIT

SECTION 23.01. APPLICATION OF SECURITY DEPOSIT.

On or before August 1, 1999, Tenant shall deliver to Landlord half
(1/2) the sum stipulated in the Basic Lease Information as a Security Deposit.
On or before the Commencement Date, Tenant shall deliver to Landlord the balance
of the sum stipulated in the Basic Lease Information as a Security Deposit.
Landlord shall be required to maintain such deposit in a separate account if
such deposit is made in cash. The Security Deposit shall be security for the
performance by Tenant of all of Tenant's obligations, covenants, conditions, and
agreements under this Lease. Within thirty (30) days after the expiration of the
Term, and provided Tenant has vacated the Premises and is not in Default
hereunder, Landlord shall return the Security Deposit to Tenant, less such
portion thereof as Landlord shall have appropriated to satisfy any Default by
Tenant hereunder. In the event of any Default by Tenant hereunder, Landlord
shall have the right, but shall not be obligated to use, apply or retain all or
any portion of the Security Deposit for (i) the payment of any Base Rent,
Additional Rent or any other sum as to which Tenant is in Default, (ii) the
payment of any amount which Landlord may spend or become obligated to spend to
repair physical damage to the Premises or the Building pursuant to PART 11
hereof, or (iii) the payment of any amount Landlord may spend or become
obligated to spend or for compensation of Landlord for any losses incurred by
reason of Tenant's Default, including, but not limited to, any damage or
deficiency arising in connection with the reletting of the Premises. If any
portion of the Security Deposit is so used or applied, within three (3) business
days after written notice to Tenant of such use or application, Tenant shall
deposit with Landlord an amount sufficient to restore the Security Deposit to
its original amount, and Tenant's failure to do so shall constitute a Default
under this Lease.

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SECTION 23.02. TRANSFER OF SECURITY DEPOSIT.

In the event of the sale or transfer of Landlord's interest in the
Building, Landlord shall transfer the Security Deposit to the purchaser or
assignee, in which event Tenant shall look only to the new landlord for the
return of the Security Deposit (subject to the provisions of this Lease), and
Landlord shall thereupon be released from all liability to Tenant for the return
of the Security Deposit.

SECTION 23.03. LETTER OF CREDIT.

Provided the conditions of this SECTION 23.03 have been satisfied,
Tenant shall have the right to post a letter of credit as the Security Deposit.
The letter of credit shall (i) be issued by a federally insured bank having an
office in the Washington, D.C. metropolitan area which is reasonably acceptable
to Landlord; (ii) be irrevocable; (iii) authorize the Landlord to draw by its
sight draft accompanied by a certificate by Landlord (or its representative)
that Landlord is entitled to draw upon the same pursuant to provisions of this
Lease and (iv) by its terms shall not expire prior to the first year anniversary
of the Commencement Date. At least thirty (30) days prior to the expiration of
the Letter of Credit, Tenant shall deliver to Landlord one of the following (i)
cash in an amount equal to the Security Deposit, (ii) an amendment to the letter
of credit extending the expiry date for an additional year or (iii) a new letter
of credit having an expiry date of at least one year from the date of expiration
of the existing letter of credit. Should Tenant deliver either a new letter of
credit or cash in lieu of the letter of credit, then, Landlord will return the
letter of credit to Tenant. The failure of Tenant to deliver Landlord an
extension of the letter of credit, a new letter of credit or cash in lieu of the
letter of credit, at least thirty (30) days prior to the expiration of the date
of the letter of credit Landlord is holding as a Security Deposit shall entitle
Landlord to draw upon the letter of credit and hold such proceeds pursuant to
the provisions of SECTION 23.01 hereof.

SECTION 23.04. CHANGES TO SECURITY DEPOSIT.

Within five (5) business days after Landlord disburses any Tenant
Improvement Allowance to Tenant, Tenant shall increase the Security Deposit by
an amount equal to the disbursed Tenant Improvement Allowance amount (the
"ADDITIONAL SECURITY DEPOSIT"). Provided that there has been no monetary Default
or material non-monetary Default by Tenant under this Lease at the applicable
time, Tenant shall have the right to reduce the Additional Security Deposit by
twenty-five percent (25%) on the commencement date of each of the third Lease
Year, fourth Lease Year, fifth Lease Year and sixth Lease Year. However, in no
event shall the Security Deposit be reduced below $84,875.00.

PART 24 - INTENTIONALLY OMITTED

PART 25 - ATTORNEYS FEES AND LEGAL EXPENSES

In any action or proceeding brought by either party against the other
under this Lease, the prevailing party shall be entitled to recover from the
other party reasonable attorneys fees, and other reasonable legal expenses and
court costs incurred by such party in such action or proceeding as the court may
find to be reasonable.

PART 26 - NOTICES

Any notice, demand, request, consent, approval or other communication
which either party hereto is required or desires to give or make or communicate
to the other shall be in writing and shall be given or made or communicated by
United States registered or certified mail or by any overnight or express mail
service which provide receipts to indicate delivery, addressed to the

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parties hereto at the respective addresses specified in the Basic Lease
Information, or at such other address as they have subsequently specified by
written notice.

All notices shall be effective upon being deposited in the manner
prescribed above, however, the time period in which a response to such notice
must be given shall commence to run from the date of receipt by the addressee
thereof as shown on the return receipt of the notice. Rejection or other refusal
to accept or the inability to deliver because of changed address of which no
notice was given, shall be deemed to be receipt of the notice as of the date of
such rejection, refusal or inability to deliver.

PART 27 - MISCELLANEOUS

SECTION 27.01. NO PARTNERSHIP.

Nothing contained in this Lease shall be construed as creating a
partnership or joint venture of or between Landlord and Tenant, or to create any
other relationship between the parties hereto other than that of Landlord and
Tenant.

SECTION 27.02. BROKERS.

Landlord recognizes the Broker as the Broker under this Lease and
shall pay the Broker a commission pursuant to a separate agreement between the
Broker and Landlord, Landlord and Tenant each represent and warrant to the other
that, except as provided above, neither of them has employed or dealt with any
broker, agent or finder in carrying on the negotiations relating to this Lease.
In the event of a breach by a party of their foregoing representation and
warranty (the "DEFAULTING PARTY"), the Defaulting Party shall indemnify and hold
the other party harmless from and against any claim or claims, damages or
expenses (including any claims for brokerage or other commissions asserted by
any broker, agent, or finder fees) which may arise as a result of such breach.

SECTION 27.03. SEVERABILITY.

Every agreement contained in this Lease is, and shall be construed as,
a separate and independent agreement. If any term of this Lease or the
application thereof to any person or circumstances shall be invalid and
unenforceable, the remainder of this Lease, or the application of such term to
persons or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected.

SECTION 27.04. TRIAL BY JURY.

Landlord and Tenant each hereby waive trial by jury in any action,
proceeding or counterclaim brought by either of them against the other in
connection with any matter arising out of or in any way connected with this
Lease, the relationship of Landlord and Tenant hereunder, Tenant's use or
occupancy of the Premises, or any claim of injury or damage.

SECTION 27.05. FORCE MAJEURE.

Whenever a period of time is herein prescribed for action to be taken
by Landlord, Landlord shall not be liable or responsible for, and there shall be
excluded from the computation for any such period of time, any delays due to
strikes, riots, acts of God, shortages of labor or materials, war, governmental
laws, regulations, or restrictions, or any other cause of any kind whatsoever
which is beyond the reasonable control of Landlord.

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SECTION 27.06. CAPTIONS.

The article, part, and section headings contained in this Lease are
for convenience only and shall not enlarge or limit the scope or meaning of the
provisions hereof. Words of any gender used in this Lease shall include any
other gender, and words in the singular number shall be held to include the
plural, unless the context otherwise requires.

SECTION 27.07. BENEFIT AND BURDEN.

If there be more than one Tenant, the obligations hereunder imposed
upon Tenant shall be joint and several, and all agreements and covenants herein
contained shall be binding upon the respective heirs, personal representatives,
successors, and, to the extent permitted under this Lease, assigns of the
parties hereto.

SECTION 27.08. NO REPRESENTATIONS BY LANDLORD.

Neither Landlord nor Landlord's agents or brokers have made any
representations or promises with respect to the Premises or the Building except
as herein expressly set forth and all reliance with respect to any
representations or promises is based solely on those contained herein. No
rights, easements, or licenses are acquired by Tenant under this Lease by
implication or otherwise except as expressly set forth in this Lease.

SECTION 27.09. ENTIRE AGREEMENT.

This Lease sets forth entire agreement between the parties and cancels
all prior negotiations, arrangements, brochures, agreements, and understandings,
if any, between Landlord and Tenant regarding the subject matter of this Lease.
No amendment or modification of this Lease shall be binding or valid unless
expressed in a writing executed by both parties hereto.

SECTION 27.10. NO OFFER.

The submission of this Lease to Tenant shall not be construed as an
offer, nor shall Tenant have any rights with respect thereto unless said lease
is consented to by any lender and any lessor to Landlord, to the extent such
consent is required, and Landlord executes a copy of this Lease and delivers the
same to Tenant. Such consent shall be deemed to have been obtained if Landlord
executes a copy of this Lease and delivers the same to Tenant.

SECTION 27.11. AUTHORITY.

If Tenant signs as a corporation, each of the persons executing this
Lease on behalf of Tenant represents and warrants that Tenant is a duly
organized and existing corporation, that Tenant has been and is qualified to do
business in the Commonwealth of Virginia, that the corporation has full right
and authority to enter into this Lease, and that all persons signing on behalf
of the corporation were authorized to do so by appropriate corporate actions. If
Tenant signs as a partnership, trust, or other legal entity, each of the persons
executing this Lease on behalf of Tenant represents and warrants that Tenant has
complied with all applicable laws, rules, and governmental regulations relative
to its right to do business in the Commonwealth of Virginia, that such entity
has the full right and authority to enter into this Lease, and that all persons
signing on behalf of the Tenant were authorized to do so by any and all
necessary or appropriate partnership, trust, or other actions.

C-28
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

SECTION 27.12. CHANGES REQUESTED BY LENDER.

If, in connection with obtaining financing for the Building, any
lender shall request reasonable modifications in this Lease as a condition for
such financing, Tenant will not unreasonably withhold, delay, or defer its
consent thereto, provided such modifications do not increase the obligations of
Tenant hereunder or materially adversely affect either the leasehold interest
hereby created or Tenant's use and enjoyment of the Premises.

SECTION 27.13. GOVERNING LAW AND CONSTRUCTION.

This Lease shall be governed by and construed under the laws of the
Commonwealth of Virginia. This Lease consists of three (3) parts, the Basic
Lease, General Lease Provisions and Exhibits which are to be read together as a
complete integrated document. Printed parts of this Lease shall be as binding on
the parties hereto as other parts hereof. Parts of this Lease which are written
or typewritten shall have no greater force or effect than and shall not control
parts which are printed, but all parts shall be given equal effect. Tenant
declares that Tenant has read and understands all parts of this Lease, including
all printed parts thereof. Should any provision of this Lease require judicial
interpretation, it is agreed that the court interpreting or considering same
shall not apply the presumption that the terms hereof shall be more strictly
construed against a party by reason of the rule or conclusion that a document
should be construed more strictly against the party who itself or through its
agents prepared the same, it being agreed that all parties hereto have
participated in the preparation of this Lease and that each party had full
opportunity to consult with legal counsel of its choice before the execution of
this Lease.

SECTION 27.14. LANDLORD'S LIABILITY.

Anything contained in this Lease to the contrary notwithstanding,
Tenant agrees that Tenant shall look solely to the estate and property of
Landlord in the Building and the land upon which is situated for the collection
of any judgment or other judicial process requiring the payment of money by
Landlord for any default or breach by Landlord under this Lease, subject,
however, to the prior rights of any mortgagee or lessor of the Building and land
upon which the Building is situated. No other assets of Landlord or any
partners, shareholders, or other principals of Landlord shall be subject to
levy, execution or other judicial process for the satisfaction of Tenant's
claim.

SECTION 27.15. USE OF NAME OF BUILDING.

Tenant shall not, without prior written consent of Landlord, use the
name of the Building for any purpose other than as the address of the business
to be conducted by Tenant on the Premises, and Tenant shall not do or permit the
doing of anything in connection with Tenant's business or advertising which in
the reasonable judgment of Landlord may reflect unfavorably on Landlord or the
Building or confuse or mislead the public as to any apparent connection or
relationship between Tenant and Landlord, the Building or the land upon which it
is situated.

SECTION 27.16. CHANGES BY LANDLORD.

Landlord shall have the unrestricted right to make changes to all
portions of Fair Lakes (of which the Building and land upon which it is situated
are a part) in Landlord's reasonable discretion for the purpose of improving
access of or security to Fair Lakes or the flow of pedestrian vehicular traffic
therein. Landlord shall be entitled to change the name or address of the
Building or Fair Lakes. Landlord shall have the right to close, from time to
time, the common areas of the land upon which the Building is situated, Fair
Lakes and other portions of Fair Lakes for such temporary periods as Landlord
deems legally sufficient to evidence Landlord's ownership and control thereof
and to prevent any claim of adverse possession by, or any implied or actual
dedication to the public or any party other than Landlord.

C-29
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

SECTION 27.17. TIME OF ESSENCE.

Time is of the essence in this Lease.

C-30
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

EXHIBIT "D" TO LEASE

BETWEEN

BUILDING IV ASSOCIATES L.P.
("LANDLORD")

and

PERFORMANCE ENGINEERING CORPORATION
("TENANT")

RULES AND REGULATIONS

This EXHIBIT "D" is attached to and made a part of that Office Lease
Agreement dated _____________________, 19___ (the "LEASE"), between BUILDING IV
ASSOCIATES L.P. ("LANDLORD"), and PERFORMANCE ENGINEERING CORPORATION,
("TENANT"). Unless the context otherwise requires the terms used in this Exhibit
that are defined in the Lease shall have the same meanings as provided in the
Lease.

The following rules and regulations have been formulated for the
safety and well-being of all tenants of the Building and to ensure compliance
with governmental and other requirements. Any continuing violation of these
rules and regulations by Tenant shall constitute a Default by Tenant under the
Lease.

Landlord may, upon request of any Tenant, waive compliance by such
Tenant with any of the following rules and regulations, provided (i) no waiver
shall be effective unless signed by Landlord; (ii) any such waiver shall not
relieve such Tenant from the obligation to comply with such rule or regulation
in the future unless otherwise agreed to by Landlord; (iii) no waiver granted to
any Tenant shall relieve any other tenant from the obligation of complying with
these rules and regulations, unless such other tenant has received a similar
written waiver from Landlord; and (iv) any such waiver by Landlord shall not
relieve Tenant from any liability to Landlord for any loss or damage occasioned
as a result of Tenant's failure to comply with any rule or regulation.

1. Sidewalks, plaza areas, entrances, courts, elevators, stairways,
corridors and all other public areas of the Building shall not be obstructed or
encumbered by any tenant or used for any purpose other than ingress and egress
to and from the premises of such tenant.

2. No awnings or other projections shall be attached to the outside
wall or windows of the Building. No curtains, blinds, shades, or screens (other
than those furnished by Landlord as Building Standard) shall be attached to or
hung in, or used in connection with, any window or door of the premises of any
tenant.

3. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the corridor, or
other public areas of the Building.

4. Plumbing fixtures and appliances shall be used only for the
purposes for which they were constructed, and no sweepings, rubbish, rags, or
other substances (including, without limitation, coffee grounds) shall be thrown
therein. The cost of repairing any stoppage or damage resulting from misuse of
such fixtures by a tenant or such tenant's servants, employees, agents,
visitors, or licensees, shall be paid by such tenant.

5. No tenant shall bring or keep, or permit to be brought or kept, any
inflammable, combustible, or explosive fluid, materials, chemical, or substance
in or about its premises.

6. No tenant shall mark, paint, drill into, or in any way deface, any
part of the Building or its premises except for decorative purposes. No boring,
cutting, or stringing of wires shall be permitted.

D-1
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

7. No cooking shall be done or permitted in the Building by any
tenant, except for that which is consistent with an employee kitchen within the
premises. No tenant shall cause or permit any unusual or objectionable odors to
emanate from its premises.

8. Neither the whole nor any part of the premises of any tenant shall
be used for manufacturing, for the storage of merchandise, or for the sale or
exchange of merchandise, goods, or property of any kind.

9. Tenants shall not construct, maintain, use, or operate within their
respective premises any electrical device, wiring, or apparatus in connection
with a loud-speaker system or other sound system, except as reasonably required
as part of a communication system approved prior to the installation thereof by
Landlord. No such loud-speaker system shall be constructed, maintained, used or
operated outside of the premises.

10. No tenant shall make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with other tenants or occupants of the
Building or neighboring buildings whether by the use of any musical instrument,
radio, television, or other audio device, whistling, singing, or in any other
way. Nothing shall be thrown out of any doors, windows, or any passageways.

11. No additional locks or bolts of any kind shall be placed upon any
of the doors or windows by and tenant, nor shall any changes be made in any
existing locks or the locking mechanisms therein, without Landlord's approval.
The doors leading to the corridors or main halls shall be kept closed during
business hours except as they may be used for ingress or egress. Each tenant
shall, upon the termination of its tenancy, restore to Landlord all keys of
offices and storage and toilet rooms either furnished to, or otherwise procured
by, such tenant. In the event of the loss of any keys so furnished, such tenant
shall pay to Landlord the replacement cost thereof.

12. The normal hours of operation of the Building shall be 7:00 a.m.
to 6 p.m. Monday through Friday, and 8 a.m. to 1 p.m. on Saturdays, customary
legal holidays excluded.

13. No tenant shall use or occupy or permit any portion of its
premises to be used or occupied as an employment bureau or for the storage,
manufacture, or sale of liquor, narcotics, or drugs. No tenant shall engage or
pay any employees in the Building, except those actually working for such tenant
in the Building, nor advertise for laborers giving an address at the Building.

14. Landlord reserves the right to exclude from the Building at all
times any person who is not known or does not properly identify himself to the
Building management or watchman on duty, Landlord may at its option, require all
persons admitted to or leaving the Building between the hours of 6 p.m. and 7:30
a.m., Monday through Friday, and at any hour on Saturdays, Sundays, and legal
holidays, to register. Each Tenant shall be responsible for all persons for whom
it authorizes entry into the Building, and shall be liable to Landlord for all
acts or omissions of such persons.

15. Each tenant, before closing and leaving its premises at any time,
shall lock all entrance doors and turn off all lights and electrical appliances.

16. No premises shall be used, or permitted to be used, for lodging or
sleeping or for any immoral or illegal purpose.

17. Landlord's employees shall not perform, and shall not be requested
by any tenant to perform, any work outside of their regular duties, unless under
specific instructions from the office of Landlord. The requirements of tenants
will be attended to only upon application to Landlord, and any such special
requirements shall be billed to tenants (and paid when the next installment of
rent is due) in accordance with the schedule of charges maintained by Landlord
from time to time or at such charge as is agreed upon in advance by Landlord and
such tenant.

18. Canvassing, soliciting, and peddling in the Building are
prohibited, and each tenant shall cooperate in seeking their prevention.

D-2
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

19. No animals of any kind shall be brought into or kept about the
Building by any tenant.

20. No vending machines for commercial or public use shall be
permitted to be placed or installed in any part of the Building by any Tenant.
Tenant may have vending machines in kitchen or other non-public areas of the
Premises so long as (i) such machines are not available for use by the general
public; (ii) Landlord has approved such machines and (iii) the machines are not
visible to the exterior of the Premises or the Building. Landlord reserves the
right to place or install vending machines in any of the public areas of the
Building.

21. No plumbing or electrical fixtures shall be installed by any
Tenant without the written consent of Landlord.

22. Bicycles, motorcycles, or any other type of vehicle shall not be
brought into the lobby or elevators of the Building or into the premises of any
tenant.

23. Landlord has the right to evacuate the Building in event of
emergency or catastrophe.

24. Landlord shall have the right, exercisable without notice and
without liability to any tenant, to change the name and street address of the
Building.

25. Landlord reserves the right to rescind any of these Rules and
Regulations and make such other and further rules and regulations as in the
judgment of Landlord shall from time to time be needed for the safety,
protection, care, and cleanliness of the Building, the operation thereof, the
preservation of good order therein, and the protection and comfort of its
tenants, their agents, employees, and invitees, which Rules and Regulation when
made and notice thereof given to a Tenant shall be binding upon him in like
manner as if originally herein prescribed.

D-3
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

EXHIBIT "E"

Right of First Refusal and Offer Letter

[TO BE ATTACHED.]

E-1
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

EXHIBIT "F"

Non-Disturbance, Subordination and Attornment Agreement

[TO BE ATTACHED.]

F-1
Initials: _____ (Landlord) _____ (Tenant)

<PAGE>

Exhibit 10.2
FIRST AMENDMENT TO OFFICE LEASE AGREEMENT

THIS FIRST AMENDMENT TO OFFICE LEASE AGREEMENT (this "FIRST AMENDMENT")
is made and entered into this _____ day of ____________, 19____, by and between
BUILDING IV ASSOCIATES L.P. a Virginia limited partnership ("LANDLORD"), and
PERFORMANCE ENGINEERING CORPORATION, a Virginia corporation ("TENANT"), with
reference to the following:

RECITALS

A. Pursuant to a certain Office Lease Agreement dated May 17, 1999 by
and between Landlord and Tenant (the "LEASE"), Landlord leased to Tenant certain
premises more particularly described therein in the Building commonly known as
Fair Lakes Four, 12700 Fair Lakes Circle, Fairfax, Virginia 22033.

B. Landlord and Tenant desire to amend the Lease as more particularly
described herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as
follows:

1. All capitalized terms used herein, unless specifically defined
herein, shall have the same meaning and definition as used in the Lease.

2. Effective December 1, 1999 (the "FIRST AMENDMENT SPACE COMMENCEMENT
DATE"), pursuant to Tenant's Right of First Offer option set forth in ARTICLE 7
of the Lease, the Premises shall be increased to include 1,947 square feet
located on the first (1st) floor of the Building, more commonly known as Suite
150 (the "FIRST AMENDMENT SPACE"), as more fully described and set forth on
EXHIBIT "A" attached hereto and made a part hereof by this reference. The
expiration date with respect to the First Amendment Space shall be co-terminus
with the Expiration Date of the Lease, which is December 31, 2013 (the "FIRST
AMENDMENT SPACE EXPIRATION DATE"). Landlord and Tenant hereby confirm that
Tenant shall remain in that portion of the Premises presently consisting of
approximately 21,000 square feet of Rentable Area on the second (2nd) floor of
the Building (the "ORIGINAL PREMISES"). From and after the First Amendment Space
Commencement Date, the Premises shall be comprised of the Original Premises and
the First Amendment Space and shall consist of 22,947 square feet of Rentable
Area and Tenant's Proportionate Share shall be 30.58%.

3. Except as expressly set forth in this First Amendment, Tenant shall
take and lease the First Amendment Space upon the same terms and conditions as
are set forth in the Lease. Notwithstanding anything in the Lease to the
contrary, as to the First Amendment Space: (i) the Commencement Date shall be
the First Amendment Space Commencement Date, (ii) the First Amendment Space
Tenant Improvement Allowance (hereinafter defined) shall be provided in lieu of
the Tenant Improvement Allowance provided in ARTICLE 8 of the Lease; and (iii)
SECTION B.2 of

1
<PAGE>

EXHIBIT "B" shall not apply. Nothing herein shall accelerate, delay or otherwise
affect the Commencement Date or any other dates as to the Original Premises.

4. The Base Rent under the Lease shall be increased by adding thereto
the First Amendment Space Base Rent as set forth in this Paragraph 4. Tenant
shall pay to Landlord monthly, in advance, without demand, on the first day of
each calendar month, the monthly Net Base Rent for the First Amendment Space
specified below (the "FIRST AMENDMENT SPACE BASE RENT"), which shall be
increased by the First Amendment Space Tenant Improvement Allowance Rate as
stated in Paragraph 5 of this First Amendment. The First Amendment Space Base
Rent shall be calculated on the first day of each Lease Year under the Lease by
multiplying the Base Rent per Square Foot (as hereinafter defined) by the
Rentable Area of the First Amendment Space. The first monthly installment of
First Amendment Space Base Rent shall be payable in advance on the First
Amendment Space Commencement Date.

FIRST AMENDMENT SPACE

Base Rent
Per Square Foot Net Base Rent
LEASE YEAR (INCLUDES 3% COMMISSION) PER SQUARE FOOT
---------- ------------------------ ---------------
1 $15.41 $14.52
2 $15.95 $15.06
3 $16.51 $15.62
4 $17.09 $16.20
5 $17.68 $16.79
6 $18.30 $17.41
7 $18.95 $18.06
8 $19.61 $18.72
9 $20.30 $19.41
10 $21.01 $20.12
11 $21.74 $20.85
12 $22.50 $21.61
13 $23.29 $22.40
14 $24.11 $23.22

For purposes hereof, "Lease Year 1" or the first "Lease Year" shall
mean the period commencing on the First Amendment Space Commencement Date and
terminating on December 31, 2000. All other references to "Lease Year" shall
mean a period of twelve (12) consecutive months commencing on January 1, 2001,
and each successive twelve (12) month period thereafter and shall coincide with
the Lease Year for the Original Premises.

5. Tenant agrees to accept the First Amendment Space in its "as is" and
"where is" condition, and Landlord will have no obligation to make any
improvements or modifications to the First Amendment Space and Landlord shall
have no obligation to make any alterations or improvements to the First
Amendment Space. If Tenant elects to use the First Amendment Space Tenant
Improvement Allowance, Landlord shall not be obligated to complete alterations

2
<PAGE>

or improvements prior to the First Amendment Space Commencement Date.
Notwithstanding the foregoing, provided that Tenant does not default under the
Lease, Landlord shall provide Tenant with an allowance (the "FIRST AMENDMENT
SPACE TENANT IMPROVEMENT ALLOWANCE") for the construction of leasehold
improvements to the First Amendment Space of up to $8.00 per square foot of
Rentable Area comprising the First Amendment Space, but in no event to exceed
$15,576.00. The First Amendment Space Tenant Improvement Allowance shall be
applied by Landlord to the costs to be borne by Tenant pursuant to EXHIBIT "B"
to the Lease. Tenant shall reimburse Landlord for all amounts paid by Landlord
to Tenant from the First Amendment Space Tenant Improvement Allowance on a
monthly basis with Tenant's payment of Base Rent in an amount equal to the First
Amendment Space Tenant Improvement Allowance Rate. The First Amendment Space
Tenant Improvement Allowance Rate shall mean the First Amendment Space Tenant
Improvement Allowance provided by Landlord to Tenant amortized over the
remaining Term at an interest rate of nine and one-half percent (9 1/2%) per
annum. The First Amendment Space Tenant Improvement Allowance Rate shall be
added to and constitute part of the First Amendment Space Base Rent.

6. From and after the First Amendment Space Commencement Date, Tenant
shall pay the Tenant's Proportionate Share of Operating Expenses and Real Estate
Taxes with respect to the First Amendment Space in accordance with PART 4 of the
Lease.

7. By no later than December 31, 1999, Tenant shall deliver to Landlord
an additional Security Deposit of $5,005.55, subject to increase in accordance
with PARAGRAPH 1(b)(vii) OF EXHIBIT "E" OF THE LEASE. The last sentence of
SECTION 23.04 of the General Lease Provisions is hereby amended by replacing
"$84,875.00" with "$89,875.55."

8. In the event that prior to occupancy of the First Amendment Space
Tenant performs alterations to the First Amendment Space that require building
or other permits, and provided that Tenant does not default under the Lease,
then Landlord agrees that the Base Rent for the First Amendment Space shall
abate for one-half (1/2) of the total days that Landlord and Tenant reasonably
anticipate will be required to construct such alterations (excluding Tenant
Delay), not to exceed forty-five (45) days of rental abatement.

9. Except as expressly modified by this First Amendment, the Lease
remains unchanged and in full force and effect. In the event of a conflict
between the provisions of this First Amendment and the Lease, this First
Amendment shall prevail. This First Amendment sets forth entire agreement
between the parties and cancels all prior negotiations, arrangements, brochures,
agreements, and understandings, if any, between Landlord and Tenant regarding
the subject matter of this First Amendment. No amendment or modification of this
First Amendment shall be binding or valid unless expressed in a writing executed
by both parties hereto.

[SIGNATURES FOLLOW ON NEXT PAGE.]

3
<PAGE>

IN WITNESS WHEREOF, Landlord and Tenant have executed this First
Amendment as of the day and year first above written.

LANDLORD:

BUILDING IV ASSOCIATES L.P.
a Virginia limited partnership

By: Building IV Associates, Inc.
a Virginia corporation
its general partner

By:
---------------------------
Name:
---------------------------
Its:
---------------------------

TENANT:

PERFORMANCE ENGINEERING CORPORATION
a Virginia corporation

By:
---------------------------
Name:
---------------------------
Its:
---------------------------

4
<PAGE>

EXHIBIT "A"

FLOOR PLAN OF FIRST AMENDMENT SPACE

[TO BE ATTACHED.]

<PAGE>

Exhibit 10.3

OFFICE LEASE AGREEMENT

between

BUILDING V ASSOCIATES L.P.
a Virginia limited partnership
("LANDLORD")

and

PERFORMANCE ENGINEERING CORPORATION
a Virginia corporation
("TENANT")

<PAGE>

OFFICE LEASE AGREEMENT

THIS OFFICE LEASE AGREEMENT (this "LEASE") is made and entered into
this ____ day of _________, 1998 (the "EFFECTIVE DATE"), by and between BUILDING
V ASSOCIATES L.P., a Virginia limited partnership ("LANDLORD") and PERFORMANCE
ENGINEERING CORPORATION, a Virginia corporation ("TENANT"), upon all terms set
forth in this Lease and in all Exhibits hereto, to each and all of which terms
Landlord and Tenant hereby mutually agrees, and in consideration of One Dollar
and other valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, and of the rents, agreements and benefits flowing between
the parties hereto, as follows:

ARTICLE 1
BASIC LEASE INFORMATION AND CERTAIN DEFINITIONS

A. Building: Fair Lakes Five
12750 Fair Lakes Circle
Fairfax, Virginia 22033

B. Premises: The Premises located on the entire first (1st),
second (2nd), third (3rd) and fourth (4th) floors of the
Building, as more fully described and shown on the floor
plan(s) attached as EXHIBIT "A".

C. Term: Fourteen (14) years.

D. Commencement Date: As defined in SECTION 1.01 of EXHIBIT "C".

E. Expiration Date: The later to occur of (i) December 31, 2013
and (ii) the date which is fourteen (14) years after the
Commencement Date.

F. Rentable Area of the Building: 96,591 square feet.

G. Rentable Area of the Premises: 96,591 square feet.

H. Tenant's Proportionate Share: 100%.

I. Base Rent: As defined in SECTION 3.01 of EXHIBIT "C".

J. Security Deposit: $700,000.00, as adjusted pursuant to
ARTICLE 23 of EXHIBIT "C".

K. Adjustment Factor: 3.5%

L. Landlord's Address for Notices:

c/o The Peterson Companies
12500 Fair Lakes Circle
Suite 400
Fairfax, Virginia 22033
Attention: Asset Manager

2
<PAGE>

M. Tenant's Address for Notices:

----------------------------
----------------------------
----------------------------
Attention:
------------------

N. Lease: Collectively refers to this Office Lease Agreement
together with the following Exhibits which are attached hereto
and incorporated herein by this reference.

EXHIBITS

"A" -- Floor Plans
"B" -- Leasehold Improvements
"C" -- General Lease Provisions
"D" -- Rules and Regulations
"E" -- Fair lakes VI Rent Formula
"F" -- Nondisturbance, Subordination and Attornment
Agreement

O. Broker: CB Commercial

ARTICLE 2
DEMISE AND TERM

ARTICLE 3
RENEWAL OPTION

3
<PAGE>

3. Tenant shall take the Premises "as is" for the Renewal Term and
Landlord shall have no obligation to make any improvements or alterations to the
Premises.

ARTICLE 4
EXPANSION OPTION; NEW BUILDING

(a) Landlord agrees to keep Tenant apprised on a regular basis
regarding the available space for lease in buildings located in Fair Lakes that
are owned by Landlord or its affiliates. Tenant agrees to keep Landlord apprised
on a regular basis regarding Tenant's additional space needs. Provided that
Tenant is not in monetary or material non-monetary Default under this Lease or
any other lease of space by Tenant from Landlord or its affiliates, Landlord
agrees not to execute a lease or contract of sale for Fair Lakes VI or the Land
(as such terms are hereinafter defined) during the Expansion Period except for a
lease with Tenant as described in this ARTICLE 4.

(b) Provided Tenant is not in monetary or material non-monetary Default
under this Lease at the applicable time and there has been no monetary or
material non-monetary Default under this Lease by Tenant at any time during the
Term, Landlord agrees that during the Expansion Period (hereinafter defined),
Tenant shall, in the manner described by and in compliance with the provisions
of this Article, have a non-assignable and non-transferable right to lease space
in a building ("FAIR LAKES VI" or the "FAIR LAKES VI BUILDING") that Tenant
requires Landlord to construct on the land on which the Building is located (the
"LAND"), provided that Tenant shall be obligated to lease a minimum of
seventy-five percent (75%) of the rentable space in Fair Lakes VI. As used in
this ARTICLE 4, the term "EXPANSION PERIOD" shall mean and refer to the period
commencing on the Effective Date and expiring upon the date which is five (5)
years after the Effective Date.

(c) Tenant may exercise its right to require Landlord to construct Fair
Lakes VI and to lease a minimum of seventy-five percent (75%) of the rentable
space in Fair Lakes VI by giving written notice (the "INITIAL FAIR LAKES VI
NOTICE") to Landlord of its election no later than the last day of the Expansion
Period. Within thirty (30) days after Landlord's receipt of the Initial Fair
Lakes VI Notice, Landlord shall deliver to Tenant an initial estimate of a
budget for the design and construction of Fair Lakes VI (the "INITIAL BUDGET"),
market financing terms available to Landlord to finance the development, design
and construction of Fair Lakes VI, an estimate of the initial Base Rent for the
Fair Lakes VI premises and the proposed location of the Fair Lakes VI Building
(collectively, the "INITIAL TERMS"). Within thirty (30) days after Tenant's
receipt of the Initial

4
<PAGE>

Terms, Tenant shall deliver to Landlord a written notice of its desire to
require Landlord to construct Fair Lakes VI and the amount of rentable space
(not to be less than seventy-five percent (75%) of all rentable space in Fair
Lakes VI) in Fair Lakes VI (the "FINAL FAIR LAKES VI NOTICE"). Upon Landlord's
receipt of the Final Fair Lakes VI Notice, Landlord and Tenant shall use good
faith, diligent efforts (i) to agree upon the size of Fair Lakes VI and the
location of Fair Lakes VI on the Land and (ii) to agree upon the terms of and
execute a lease for Fair Lakes VI (the "FAIR LAKES VI LEASE"). Landlord and
Tenant acknowledge and agree that the Fair Lakes VI Lease shall contain the
business terms set forth in this Article 4 and shall be in substantially the
same form as this Lease. If Landlord and Tenant are unable to agree upon the
base rent (the "FAIR LAKES VI BASE RENT") to be paid by Tenant under the Fair
Lakes VI Lease, then both Landlord and Tenant shall select a qualified
commercial real estate agent or broker with expertise in commercial office
leasing in the Washington, D.C. metropolitan area (an "AGENT") and give written
notice specifying the name and address of the Agent to the other party. If a
party fails to notify the other of the appointment of its Agent, as aforesaid,
within the specified time, then the Agent named by the other party shall proceed
as the sole Agent to determine the Fair Lakes VI Base Rent. The Agents so chosen
shall meet within five (5) days after the second Agent is appointed and if,
within ten (10) days after the second Agent is appointed, such two Agents shall
not agree upon the then current market rent, they shall themselves appoint
within two (2) days a third Agent who shall be a competent and impartial
commercial real estate agent or broker with expertise in commercial office
leasing in the Washington, D.C. metropolitan area. In the event such two Agents
are unable to agree upon such appointment within such two (2) day period, then
either party, on behalf of both, may request such appointment by the American
Arbitration Association in accordance with its rules then prevailing. The
decision of the Agent so chosen shall be given within a period of ten (10) days
after the appointment of such third Agent. The decision in which any two Agents
so appointed and acting hereunder concur, or the decision of the sole Agent, as
applicable, shall be binding and conclusive upon the parties. Each party shall
pay the fees and expenses of the original Agents appointed by such party, and
the fees and expenses of the third Agent, if any, shall be borne equally by both
parties. Notwithstanding anything herein to the contrary, Landlord and Tenant,
together, shall have the right to waive the foregoing "Agent" procedure, and by
mutual agreement instead may utilize such other method to determine the Fair
Lakes VI Base Rent that is acceptable to both parties. If Landlord and Tenant
are unable to agree upon the location of the Fair Lakes VI Building and execute
the Fair Lakes VI Lease by the date which is ninety (90) days after Landlord's
receipt of the Final Fair Lakes VI Notice, then Tenant's rights to require
Landlord to construct Fair Lakes VI and lease space in Fair Lakes VI shall
automatically terminate and be of no further force and effect; provided,
however, that Tenant shall continue to have its right of first refusal with
respect to space in Fair Lakes VI pursuant to the terms of SUBPARAGRAPH (g) of
this ARTICLE 6.

(d) Landlord agrees that Fair Lakes VI shall be between 66,000 rentable
square feet and 88,000 rentable square feet and shall be of similar quality and
materials and have architectural continuity similar to the Fair Lakes III, IV
and V buildings.

(e) Upon execution of the Fair Lakes VI Lease, Landlord agrees to use
good faith, diligent efforts to obtain the building permit, the financing and
the other approvals necessary to construct Fair Lakes VI (the "REQUIRED
APPROVALS"). Landlord agrees to commence construction of Fair Lakes VI within
thirty (30) days after Landlord obtains the Required Approvals, subject to
delays beyond Landlord's reasonable control. The date of delivery of possession
of the space to be leased by Tenant in Fair Lakes VI shall be agreed upon by
Landlord and Tenant.

(f) The terms of the Fair Lakes VI Lease shall include the following:

(i) The term of the Lease shall be either twelve (12) years or
fifteen (15) years;

(ii) The per square foot rent shall be net of operating costs
and real estate taxes, and during the first year of the Fair Lakes VI Lease,
annual rent for space leased by Tenant shall be either of the following:

1. For a twelve (12) year lease term, 11.091% (Rent
Constant) multiplied by the Total Project Cost

5
<PAGE>

2. For a fifteen (15) year lease term, 10.42% (Rent
Constant) multiplied by the
Total Project Cost.

Base rent net of Operating Expenses and Real Estate Taxes
shall escalate by three and one-half percent (3.5%) per annum on each
anniversary of the commencement of the Fair Lakes VI Lease. For purposes hereof,
"TOTAL PROJECT COST" shall mean all normal and customary costs actually expended
by Landlord or its affiliates in connection with the design and construction of
Fair Lakes VI and any related parking structure, including without limitation,
the following:

(i) the land on which Fair Lakes VI is located at
$17.00 per F.A.R. foot (as escalated by five percent (5%) per year from the
Effective Date),

(ii) a development fee to Landlord or its affiliates
equal to three percent (3%) of Total Project Costs excluding land costs and the
development fee,

(iii) the design allowance to be provided by Landlord
to Tenant for Fair Lakes VI,

(iv) Real Estate Taxes attributable to Fair Lakes VI
and the Land commencing on the date on which construction commences on Fair
Lakes VI,

(v) architectural and engineering fees,

(vi) leasing commissions,

(vii) permit fees,

(viii) tenant improvement costs,

(ix) site development and utility costs,

(x) tenant design fees if paid by Landlord, and

(xi) fees paid to Tenant's construction manager,
if any.

Tenant acknowledges that these rental rates stated above are
based upon the following assumptions:

1. On and immediately before the date of execution of
the Fair Lakes VI Lease, Tenant's net worth must be equal to or better than its
net worth on the date of execution of this Lease;

2. Tenant must provide a security deposit for the
Fair Lakes VI Lease in an amount that is proportionally the same as the Security
Deposit under this Lease.

3. The ten (10) year Treasury rate on the date of
execution of the Fair Lakes VI Lease shall be no higher than 6.45% with spreads
over Treasury not greater than 120 basis points and amortization not less than
twenty-five years.

4. Contingencies of five percent (5%) of the base
building construction costs and three percent (3%) of all non-construction
costs, including tenant improvements, shall be included within the estimated
Total Project Cost.

At least thirty (30) days prior to the commencement date for the Fair
Lakes VI Lease, Landlord shall send to Tenant a statement of the estimated
monthly base rent for the premises (the "ESTIMATED BASE RENT"). On the
commencement date, Tenant shall pay the Estimated Base Rent in accordance with
the Fair Lakes VI Lease until such time as Landlord has obtained the actual
Total Project Cost and delivered a notice to Tenant (the "RENT NOTICE") of the
actual base rent to be paid under the Fair Lakes VI Lease (the "ACTUAL BASE
RENT"). Upon receipt of Landlord's Rent Notice, Tenant shall commence paying the
Actual Base Rent to Landlord upon the next rent due date. If

6
<PAGE>

the Actual Base Rent is greater than the Estimated Base Rent, Tenant shall be
obligated to pay to Landlord the difference between the Actual Base Rent and the
Estimated Base Rent for those months in which Tenant paid Estimated Base Rent.
Tenant's payment shall be due to Landlord within thirty (30) days after Tenant
receives Landlord's Rent Notice. If the Estimated Base Rent is greater than the
Actual Base Rent, Landlord shall credit the difference between the Estimated
Base Rent and the Actual Base Rent for those months in which Tenant paid
Estimated Base Rent against the next base rent payments coming due from Tenant.

(iii) Landlord shall provide a design allowance to Tenant for
architectural and engineering costs incurred by Tenant in the design of the
tenant improvements to Tenant's space in Fair Lakes VI. Such design allowance
shall not exceed $2.00 per rentable square foot of space leased by Tenant in
Fair Lakes VI.

(iv) Notwithstanding EXHIBIT "B" to this Lease, Landlord will
construct all tenant improvements to the space to be leased by Tenant (the "FAIR
LAKES VI TENANT IMPROVEMENTS") based upon plans prepared by Tenant or its agent
at its cost (with the design allowance reimbursement) and approved by Landlord
and all costs incurred by Landlord in the design and construction of the Fair
Lakes VI Tenant Improvements shall be included within Total Project Cost. Tenant
shall be permitted to hire a construction manager, who shall be acceptable to
Landlord in its reasonable discretion, to assist Tenant in the planning and
construction of Fair Lakes VI. Landlord shall reimburse Tenant for the
reasonable costs of Tenant's construction manager and all such costs shall be
part of Total Project Costs.

In the event any of the foregoing assumptions are not correct, the base rent to
be paid by Tenant for Fair Lakes VI shall be adjusted either up or down by
Landlord by changing the Rent Constant in accordance with the formula set forth
in EXHIBIT "E" to this Lease to compensate for the then existing conditions.

(g) If Tenant does not exercise its right to require Landlord to
construct Fair Lakes VI and Landlord does construct Fair Lakes VI during the
Term, then provided Tenant is not in Default under this Lease at the applicable
time, Tenant, during the Fair Lakes VI Refusal Period (hereinafter defined),
shall, in the manner described by and in compliance with the terms and
provisions of this Article, have a non-assignable and non-transferable right of
first refusal to lease all or any portion of the Fair Lakes VI Refusal Space
(hereinafter defined).

(i) If at any time during the Fair Lakes VI Refusal Period (as
hereinafter defined), Landlord shall either (i) receive a bona-fide offer from a
third party to lease all or a portion of the Fair Lakes VI Refusal Space, which
Landlord is prepared to accept, or (ii) prepares a proposal pertaining to all or
a portion of the Fair Lakes VI Refusal Space which Landlord is prepared to offer
as a lease proposal to a third party and Landlord has entered into substantive
negotiations with such third party, then in either such event, Landlord shall
send a written notice (the "FAIR LAKES VI OFFER NOTICE") to Tenant of such
proposal. The Fair Lakes VI Offer Notice shall set forth in reasonable detail
the size or portion of the Fair Lakes VI Refusal Space subject to the Fair Lakes
VI Offer Notice (the "OFFERED FAIR LAKES VI REFUSAL SPACE"), and shall contain
(or be deemed to contain) an offer to Tenant to lease the Offered Fair Lakes VI
Refusal Space on the terms set forth in this PARAGRAPH (g) of ARTICLE 4. Tenant
may elect to accept the Fair Lakes VI Offer Notice, by giving written notice to
Landlord of its election not more than five (5) business days after receipt by
Tenant of the Fair Lakes VI Offer Notice. Any election by Tenant shall be
irrevocable.

(ii) In the event Tenant responds within the five (5) business
day period and elects to accept the proposal set forth in the Fair Lakes VI
Offer Notice, then Landlord and Tenant shall execute a lease for the Offered
Fair Lakes VI Refusal Space upon (i) the same terms and conditions as set forth
in this Lease except as may be modified by the terms of this ARTICLE 4,
PARAGRAPH (g) with respect to a lease that commences prior to the beginning of
the tenth (10th) year of the original term of the Fair Lakes V Lease or (ii) the
terms and conditions set forth in the Fair Lakes VI Offer Notice with respect to
a lease that commences after the beginning of the tenth (10th) year of the
original term of the Fair Lakes V Lease. If Landlord and Tenant have previously
executed a lease for space in Fair Lakes VI, then instead of executing a new
lease for the Offered Fair Lakes VI Refusal Space, Landlord and Tenant shall
amend the existing Fair Lakes VI lease to

7
<PAGE>

include the lease of the Offered Fair Lakes VI Refusal Space on the terms and
conditions as set forth in this ARTICLE 4, PARAGRAPH (g).

(iii) Should Tenant either fail to respond within the five (5)
business day period, or elects not to accept the Fair Lakes VI Offer Notice,
then Landlord shall be free to lease the Offered Fair Lakes VI Refusal Space to
the tenant generating the applicable Fair Lakes VI Offer Notice pursuant to the
terms of the Fair Lakes VI Offer Notice and Tenant's rights under this PARAGRAPH
G of ARTICLE 4 with respect to the Offered Fair Lakes VI Refusal Space shall
terminate.

(iv) The terms of the Lease shall be as set forth in
SUBPARAGRAPH (f) of this ARTICLE 4.

(v) As used herein, the term:

(1) "FAIR LAKES VI REFUSAL SPACE" shall mean and
refer to all available leasable area of Fair Lakes VI.

(2) "FAIR LAKES VI REFUSAL PERIOD" shall mean and
refer to the period commencing on the Commencement Date and expiring upon the
earlier of (a) the date on which Tenant's rights under this Lease with respect
to the Fair Lakes VI Expansion Space are terminated pursuant to this
SUBPARAGRAPH (g) of ARTICLE 4, or (b) the commencement date of the last year of
the original Term of this Lease.

ARTICLE 5
RIGHT OF FIRST OFFER TO PURCHASE

Provided that Tenant is not in monetary and material non-monetary
Default under this Lease at the applicable time, Tenant, during the Purchase
Option Period (hereinafter defined), in the manner described by and in
compliance with the terms and provisions of this Article, shall have a
non-assignable and non-transferable right of first offer to purchase the
Building and Fair Lakes VI.

(a) If at any time during the Purchase Option Period, Landlord
shall either (i) receive a bona-fide offer, other than at public auction, from a
third party, who does not have the power of eminent domain, for the purchase of
the Building or Fair Lakes VI, which Landlord desires to accept or (ii) prepares
a sale proposal pertaining to the Building or Fair Lakes VI which Landlord is
prepared to offer as a sale proposal to such third party, Landlord shall send a
written notice (the "PURCHASE OPTION NOTICE") to Tenant of such proposal
including the business terms of such proposal. Tenant may elect to enter into
purchase negotiations with Landlord, by giving written notice to Landlord of its
election not more than fifteen (15) business days after receipt by Tenant of the
Purchase Option Notice. Notwithstanding the foregoing, Tenant shall have an
option to purchase Fair Lakes VI hereunder only if Tenant is leasing more than
fifty percent (50%) of the Rentable Area in Fair Lakes VI and the Building. In
addition, Tenant's right of first offer to purchase hereunder shall apply only
to the Building or Fair Lakes VI or the Building and Fair Lakes VI together
depending on how Landlord determines to market the properties for sale.

(b) In the event Tenant responds within the fifteen (15)
business day period that it desires to enter purchase negotiations, Landlord and
Tenant shall use good faith, diligent efforts for a period of sixty (60) days
after the receipt by Tenant of the Purchase Option Notice, to negotiate and
execute a contract for the sale of the Building and/or Fair Lakes VI to Tenant.

(c) Should (i) Tenant either fail to respond within the
fifteen (15) business day period or elect not to enter into negotiations with
Landlord for the purchase of the Building or Fair Lakes VI or (ii) Landlord and
Tenant fail to execute a contract for the sale of the Building and/or Fair Lakes
VI to Tenant within sixty (60) days of the Purchase Option Notice, then Tenant's
right of first offer to purchase the Building and/or Fair Lakes VI shall
automatically terminate and be of no further force or effect.

(d) The right of first offer described in this ARTICLE 7 shall
be inapplicable to a transfer, by way of sale, gift, or devise, including a
trust, to or for a party affiliated to Landlord, or

8
<PAGE>

to any transfer from one such related party to another, but shall apply to any
such transfer to a third person. For purposes of this ARTICLE 5, "affiliated"
shall mean in control of, controlled by or under common control with Landlord.

(e) As used herein, the "PURCHASE OPTION PERIOD" shall mean
and refer to the period commencing on the Effective Date with respect to the
Building and the commencement date of the Fair Lakes VI Lease with respect to
Fair Lakes VI and expiring on the earlier of (i) the date on which Tenant's
rights under this Lease with respect to this right of first offer to purchase
are terminated pursuant to SUBPARAGRAPH (c) of this ARTICLE 7, or (ii) the
commencement date of the last year of the original Term.

(f) Landlord agrees to include in any Fair Lakes VI Lease the
same right of first offer to purchase provision for the purchase of Fair Lakes
VI.

ARTICLE 6
CONTINGENCY

Landlord enters into this Lease under the assumption that the existing
tenant in the Building (the "EXISTING TENANT") will not elect to renew its
existing lease for space in the Building. As a result, this Lease shall be
terminated and be of no force or effect if Landlord receives a notice from the
Existing Tenant of its desire to renew the Existing Tenant's lease of the
Building on or before August 31, 1998. If Landlord shall receive a legal,
binding letter (the "NON-RENEWAL LETTER") from the Existing Tenant stating that
the Existing Tenant will not renew its lease of the Building, Landlord shall
notify Tenant of the Non-Renewal Letter and the contingency set forth in this
ARTICLE 6 shall be waived.

ARTICLE 7
GENERAL LEASE PROVISIONS

9
<PAGE>

WITNESS the following signatures and seals of Landlord and Tenant made
as of the date first above written.

LANDLORD:

BUILDING V ASSOCIATES L.P.
a Virginia limited partnership

By: Building V Associates, Inc.
a Virginia corporation
its general partner

By:
---------------------------
Name:
---------------------------
Its:
---------------------------

TENANT:

PERFORMANCE ENGINEERING
CORPORATION
a Virginia corporation

By:
-------------------------
Name:
-------------------------
Its:
-------------------------

10
<PAGE>

EXHIBIT "A" TO LEASE

Floor Plan(s) of the Premises

[TO BE ATTACHED.]

A-1
<PAGE>

EXHIBIT "B" TO LEASE

Between

BUILDING V ASSOCIATES L.P.
("LANDLORD")

and

PERFORMANCE ENGINEERING CORPORATION
("TENANT")

LEASEHOLD IMPROVEMENTS

This EXHIBIT "B" is attached to and made a part of that certain Office
Lease Agreement dated ____________________, 19__ (the "LEASE"), between BUILDING
V ASSOCIATES L.P. ("LANDLORD"), and PERFORMANCE ENGINEERING CORPORATION
("TENANT"). The terms used in this Exhibit that are defined in the Lease shall
have the same meanings as provided in the Lease.

The purpose of this EXHIBIT "B" is to set forth the relative rights and
obligations of Landlord and Tenant with respect to the construction and
installation by Tenant of tenant improvements in the Premises.

A. DEFINITIONS

1. "BUILDING STANDARD" means the basic minimum construction
requirements for the materials and finishes and design as generally specified on
SCHEDULE 1.

3. "TENANT'S CONTRACTOR" means the person or firm from time to time
selected by Tenant and approved by Landlord to construct and install the
Leasehold Improvements in the Premises.

4. "LEASEHOLD IMPROVEMENTS" shall mean the aggregate of Building
Standard and Non-Building Standard work in the Premises.

5. "TENANT'S ARCHITECT" shall mean the architect or space planner
engaged by Tenant and approved by Landlord to prepare the plans and
specifications for the Leasehold Improvements.

B. COMPLETION OF PREMISES

1. Unless otherwise agreed to in writing by Landlord and Tenant, all
work involved in the design and construction of the Leasehold Improvements shall
be carried out by Tenant's Architect and Tenant's Contractor under the direction
of and at the sole cost of Tenant and with the approval of Landlord including,
without limitation, any change to the Building Standard improvements resulting
from Tenant's construction of the Leasehold Improvements. Landlord shall
cooperate with Tenant, Tenant's Contractor, and Tenant's Architect to promote
the efficient and expeditious completion of such work so that occupancy of the
Premises may occur on the Commencement Date.

C. DESIGN

1. Tenant shall devote such time in consultation with Tenant's
Architect as necessary to enable Tenant's Architect to develop Tenant's space
plan and complete working drawings and

B-1
<PAGE>

specifications for the Leasehold Improvements. Tenant shall pay for all design
services utilized by Tenant.

2. Tenant shall be responsible for the conformance of all design,
construction, and installation to the requirements of applicable building,
plumbing, and electrical codes and other laws or ordinances, and the
requirements of any authority having jurisdiction over, or with respect to, such
work.

3. All architectural, mechanical, and electrical plans and
specifications must be approved by Landlord. Any changes in the approved plans
and specifications must also be approved by Landlord. Tenant shall not be
permitted to modify the Building in any way, including but not limited to the
structural, mechanical, and electrical systems, except as approved by Landlord
on the final plans and specifications. No alterations by Tenant to the Leasehold
Improvements shall be allowed at any time except as provided in the Lease.

D. PROCEDURES FOR COMPLETION OF LEASEHOLD IMPROVEMENTS

The following procedures shall be followed in completing the Leasehold
Improvements.

1. As soon as reasonably practical after the execution of the Lease,
Tenant shall meet the Tenant's Architect and provide information for design of a
space plan for the Premises.

2. Tenant's Architect shall complete the space plan and submit the same
to Tenant and Landlord for approval.

3. Upon approval of the space plan by Tenant and Landlord, Tenant's
Architect shall be authorized to complete architectural, mechanical, and
electrical working drawings and specifications. Tenant shall provide Tenant's
Architect with any additional information needed for completion of the working
drawings.

4. Tenant's Architect shall complete working drawings and
specifications and submit the same to Tenant and Landlord for approval. Within
five (5) business days after Landlord's receipt of such working drawings and
specifications, Landlord shall notify Tenant in writing as to whether Landlord
approves or disapproves such working drawings and specifications.

5. Upon approval of final plans and specifications by Tenant and
Landlord, Tenant shall seek all necessary permits for construction of the
Leasehold Improvements. As soon as Tenant has obtained the permits required for
construction, Tenant shall authorize Tenant's Contractor to commence
construction of Leasehold Improvements.

6. Upon completion of construction of the Leasehold Improvements,
Tenant shall deliver to Landlord, at Tenant's cost, a full and complete set of
as-built plans and specifications for the Leasehold Improvements and a CAD
diskette containing as-built working drawings.

E. CONSTRUCTION

1. Tenant is permitted to make periodic inspections of the Premises
during construction provided that such inspections are made during reasonable
business hours and Tenant is accompanied by a representative of Landlord. If
Tenant enters the Building or the Premises without being accompanied by a
representative of Landlord, Tenant shall be deemed to be trespassing upon the
Building or the Premises and Landlord shall not be liable for any damage or
injury sustained by Tenant, or any of Tenant's agents, representatives or
employees arising from Tenant's unauthorized entry upon the Building or the
Premises.

2. Tenant's Contractor shall be responsible for obtaining the final
inspections and all necessary governmental approvals which are required for
lawful occupancy of the Premises, including the non-residential use permit.

3. Tenant's Contractor also shall be responsible for obtaining and
delivering to Landlord final lien waivers from all contractors performing work
in the Premises.

B-2
<PAGE>

F. COMMENCEMENT OF RENT

Tenant's obligation for payment of Rent under this Lease shall commence
on the Commencement Date, unless such date has been changed and acknowledged in
writing by Landlord and Tenant.

1. Tenant's failure to comply with the procedures for completion of the
Leasehold Improvements outlined in this Exhibit on a timely basis;

2. Tenant's request for changes or modifications to the work after
approval of the final plans and specifications;

3. Late delivery of or inability to obtain materials required for
Non-Building Standard improvements;

4. Building code problems related to Non-Building Standard design or
construction; and

5. The performance of any work by any person or entity employed or
retained by Tenant.

B-3
<PAGE>

EXHIBIT "B" TO LEASE

SCHEDULE 1

SCHEDULE OF BUILDING STANDARD WORK

RE: Fair Lakes V and VI

A. PARTITIONS

B. DOORS

2. Tenant Interior Doors shall be 3'0" x 7'0" solid core,
painted, with brushed stainless steel lever hardware.

3. All doors shall have building standard hollow metal frames.

C. CEILING

1. Ceiling will consist of a 2' x 2' suspended system with 5/8"
acoustical tile in a Donne Fineline grid. The approximate
finished ceiling height is 8'6".

D. PAINTING

E. FLOORING

1. Carpeting shall be a minimum of 30 ounce face weight cut pile
in a color chosen by Tenant from the manufacturer's standard
pallet and approved by Landlord.

B-1-1
<PAGE>

3. Vinyl wall base will be provided in all areas receiving carpet
or floor tile. One color may be chosen by Tenant from the
manufacturer's standard pallet as approved by Landlord.

F. ELECTRICAL

1. Lighting Fixtures will be the Building Standard 2' x 4'
florescent lights.

2. Electric duplex receptacles and light switches will be black
with brushed stainless steel or plastic cover plates to match
existing.

G. HEATING, VENTILATING, AIR CONDITIONING

1. A variable air volume (VAV) system provides temperature
control to all areas of the Building. Conditioning is provided
through light troffer air boots or ceiling diffusers.

H. SPRINKLERS AND FIRE SAFETY

1. An Automatic Sprinkler and Fire Alarm System will be provided
in accordance with all national and local codes, including
required exit and emergency lights, fire horns, fire hose
cabinets and wall mounted extinguishers as required by local
authorities. All sprinkler heads shall be recessed with white
caps.

I. WINDOW COVERINGS

1. The building has been pre-fitted with thin-line horizontal
blinds to match the base building color pallet. No other
window treatments will be permitted.

B-1-2
<PAGE>

EXHIBIT "C" TO LEASE

Between

BUILDING V ASSOCIATES L.P.
("LANDLORD")

and

PERFORMANCE ENGINEERING CORPORATION
("TENANT")

General Lease Provisions
TABLE OF CONTENTS

PART 1 - DELIVERY OF THE PREMISES TO TENANT; RENTABLE AREA....................1
Section 1.01. COMMENCEMENT DATE.........................................1
Section 1.02. DELIVERY OF THE PREMISES TO TENANT........................1
Section 1.03. RENTABLE AREA.............................................1

PART 2 - ACCEPTANCE OF THE PREMISES AND BUILDING BY TENANT....................1

PART 3 - BASE RENT............................................................1
Section 3.01. BASE RENT.................................................1
Section 3.02. INTENTIONALLY OMITTED.....................................2
Section 3.03. PAYMENT...................................................2
Section 3.04. ACCEPTANCE OF RENT........................................2
Section 3.05. SURVIVAL OF RENT OBLIGATION...............................2
Section 3.06. LATE PAYMENT FEE..........................................3
Section 3.07. INTEREST ON PAST DUE RENT.................................3

PART 4 - ADDITIONAL RENT......................................................3
Section 4.01. OPERATING EXPENSES........................................3
Section 4.02. REAL ESTATE TAXES.........................................7
Section 4.03. PARKING...................................................8
Section 4.04. ADDITIONAL RENT DEFINED...................................8
Section 4.05. RENT DEFINED..............................................8

PART 5 - SERVICES BY LANDLORD.................................................8

PART 6 - UTILITIES............................................................9
Section 6.01. WATER, HEATING, VENTILATING AND AIR CONDITIONING......9
Section 6.02. ELECTRICITY...........................................9

PART 7 - USE.................................................................10

PART 8 - COMPLIANCE WITH LAWS AND BUILDING REGULATIONS.......................10
Section 8.01. COMPLIANCE WITH LAWS.....................................10
Section 8.02. OBSERVANCE OF BUILDING'S RULES AND REGULATIONS...........10
Section 8.03. HAZARDOUS MATERIALS......................................10

PART 9 - ALTERATIONS.........................................................12

C-i
<PAGE>

Section 9.01. APPROVAL OF LANDLORD......................................12
Section 9.02. OWNERSHIP OF IMPROVEMENTS TO PREMISES.....................12

PART 10 - LIENS..............................................................12

PART 11 - REPAIRS............................................................13
Section 11.01. TENANT'S OBLIGATIONS....................................13
Section 11.02. LANDLORD'S OBLIGATIONS..................................13

PART 12 - INSURANCE..........................................................13
Section 12.01. TENANT'S INSURANCE......................................13
Section 12.02. INSURANCE RATING........................................14
Section 12.03. WAIVER OF SUBROGATION...................................15

PART 13 - DAMAGE BY FIRE OR OTHER CASUALTY...................................15
Section 13.01. DAMAGE TO PREMISES......................................15
Section 13.02. DAMAGE TO BUILDING......................................15
Section 13.03. PARTIAL DAMAGE..........................................15
Section 13.04. DAMAGE DURING LAST YEAR OF TERM.........................16
Section 13.05. NO LANDLORD LIABILITY...................................16
Section 13.06. APPORTIONMENT OF RENT...................................16

PART 14 - CONDEMNATION.......................................................16
Section 14.01. ENTIRE BUILDING.........................................16
Section 14.02. PORTION OF BUILDING.....................................16
Section 14.03. PORTION OF PREMISES.....................................16
Section 14.04. TERMINATION OF LEASE....................................17
Section 14.05. LANDLORD'S RIGHT TO AWARD...............................17

PART 15 - ASSIGNMENT AND SUBLETTING..........................................17
Section 15.01. RIGHTS OF TENANT........................................17
Section 15.02. EXCESS RENT.............................................18
Section 15.03. RIGHTS OF LANDLORD......................................19
Section 15.04. AFFILIATE TRANSFER......................................19

PART 16 - INDEMNIFICATION....................................................19

PART 17 - SURRENDER OF THE PREMISES..........................................20
Section 17.01. CONDITION OF PREMISES...................................20
Section 17.02. TENANT HOLDOVER.........................................20

PART 18 - ESTOPPEL CERTIFICATES..............................................20

PART 19 - SUBORDINATION AND ATTORNMENT.......................................21
Section 19.01. EXISTING FINANCINGS.....................................21
Section 19.02. FUTURE FINANCINGS.......................................21
Section 19.03. ATTORNMENT..............................................21

PART 20 - QUIET ENJOYMENT....................................................22

PART 21 - SIGNS; FURNISHINGS; COMMUNICATION EQUIPMENT........................22
Section 21.01. SIGNS AND ADVERTISEMENTS................................22

C-ii
<PAGE>

Section 21.02. FURNISHINGS.............................................22
Section 21.03. COMMUNICATIONS EQUIPMENT................................23

PART 22 - DEFAULTS AND REMEDIES..............................................23
Section 22.01. EVENTS OF DEFAULT.......................................23
Section 22.02. REMEDIES................................................24
Section 22.03. REMEDIES CUMULATIVE.....................................24
Section 22.04. NO ACCEPTANCE OR SURRENDER..............................24
Section 22.05. CUSTOMS AND PRACTICES...................................25
Section 22.06. PAYMENT OF TENANT'S OBLIGATIONS BY LANDLORD.............25
Section 22.07. DEFAULT BY LANDLORD.....................................25

PART 23 - SECURITY DEPOSIT...................................................25
Section 23.01. APPLICATION OF SECURITY DEPOSIT.........................25
Section 23.02. TRANSFER OF SECURITY DEPOSIT............................26
Section 23.03. LETTER OF CREDIT........................................26
Section 23.04. CHANGES TO SECURITY DEPOSIT.............................26

PART 24 - INTENTIONALLY OMITTED..............................................26

PART 25 - ATTORNEYS FEES AND LEGAL EXPENSES..................................26

PART 26 - NOTICES............................................................26

PART 27 - MISCELLANEOUS......................................................27
Section 27.01. NO PARTNERSHIP..........................................27
Section 27.02. BROKERS.................................................27
Section 27.03. SEVERABILITY............................................27
Section 27.04. TRIAL BY JURY...........................................27
Section 27.05. FORCE MAJEURE...........................................27
Section 27.06. CAPTIONS................................................28
Section 27.07. BENEFIT AND BURDEN......................................28
Section 27.08. NO REPRESENTATIONS BY LANDLORD..........................28
Section 27.09. ENTIRE AGREEMENt........................................28
Section 27.10. NO OFFER................................................28
Section 27.11. AUTHORITY...............................................28
Section 27.12. CHANGES REQUESTED BY LENDER.............................29
Section 27.13. GOVERNING LAW AND CONSTRUCTION..........................29
Section 27.14. LANDLORD'S LIABILITY....................................29
Section 27.15. USE OF NAME OF BUILDING.................................29
Section 27.16. CHANGES BY LANDLORD.....................................29
Section 27.17. TIME OF ESSENCE.........................................30

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PART 1 - DELIVERY OF THE PREMISES TO TENANT; RENTABLE AREA

SECTION 1.01. COMMENCEMENT DATE.

The Commencement Date shall be the later of the following: (i) the date
on which Landlord delivers possession of the Premises to Tenant; or (ii) January
1, 2000, provided that the Premises has been vacated by the previous tenant. In
the event the Commencement Date occurs later than February 1, 2000 because of a
holdover by the existing tenant in the Building, Landlord agrees that the Base
Rent shall be abated by an amount equal to one-half (1/2) of the Daily Base Rent
(as hereinafter defined) for each day after February 1, 2000 that Landlord fails
to deliver possession of the Premises to Tenant. For purposes hereof, the "DAILY
BASE RENT" shall mean the Base Rent for the first Lease Year divided by 365.

SECTION 1.02. DELIVERY OF THE PREMISES TO TENANT.

Landlord shall deliver possession of the Premises on or before the
Commencement Date broom clean and with all systems and base building
improvements in good working order and in compliance with all applicable laws
and ordinances. Tenant acknowledges and agrees that Tenant is accepting the
Premises in its "as is" and "where is" condition and that Landlord shall have no
obligation to perform any work to the Premises prior to delivery of possession
thereof to Tenant. Any improvements to be made to the Premises shall be
performed by Tenant, at its sole cost, in accordance with the provisions of
EXHIBIT "B" to this Lease.

SECTION 1.03. RENTABLE AREA.

PART 2 - ACCEPTANCE OF THE PREMISES AND BUILDING BY TENANT

Taking possession of the Premises by Tenant shall be conclusive
evidence that Tenant: (i) accepts the Premises as suitable for the purposes for
which they are leased; (ii) accepts the Building and every part and appurtenance
thereof as being in a good and satisfactory condition; and (iii) waives any
defects in the Premises or the Building except for the completion of those
items, if any, on Landlord's punch list or latent defects which cannot
reasonably be discovered by an inspection of the Premises prior to taking
possession.

PART 3 - BASE RENT

SECTION 3.01. BASE RENT.

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other than the last day of a calendar month, then the Term shall be extended to
the last day of such month.

Base Rent Per Net Base Rent
Lease Year Square Foot Per Square Foot
---------- ----------- ---------------

1 $15.41 $14.52
2 $15.95 $15.06
3 $16.51 $15.62
4 $17.09 $16.20
5 $17.68 $16.79
6 $18.30 $17.41
7 $18.95 $18.06
8 $19.61 $18.72
9 $20.30 $19.41
10 $21.01 $20.12
11 $21.74 $20.85
12 $22.50 $21.61
13 $23.29 $22.40
14 $24.11 $23.22

For purposes hereof, "Lease Year" shall mean a period of twelve (12)
consecutive months commencing on the Commencement date, and each successive
twelve (12) month period thereafter; provided, however, that if the Commencement
Date is not the first day of a month, then the first Lease Year shall commence
on the Commencement Date and shall continue for the balance of the month in
which the Commencement Date occurs and for a period of twelve (12) months
thereafter.

SECTION 3.02. INTENTIONALLY OMITTED.

SECTION 3.03. PAYMENT.

SECTION 3.04. ACCEPTANCE OF RENT.

SECTION 3.05. SURVIVAL OF RENT OBLIGATION.

The obligation of Tenant with respect to the payment of past due Base
Rent and Additional Rent shall survive the termination of this Lease.

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SECTION 3.06. LATE PAYMENT FEE.

SECTION 3.07. INTEREST ON PAST DUE RENT.

PART 4 - ADDITIONAL RENT

SECTION 4.01. OPERATING EXPENSES.

(3) If the Commencement Date occurs on a date other than the
first day of January, or if the Term ends on a date other than the last day of
December, the actual Operating

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(2) All supplies and materials used in the operation, repair,
security, and maintenance of the Building;

(6) All utility costs of the Building (exclusive, however, of
such special utility services as described in PART 6 of the General Lease
Provision, the costs of which special utility services shall be payable as
therein provided), including, without limitation, water, power, fuel, heating,
lighting, air conditioning, and ventilating;

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(8) Landlord's central accounting costs, the cost of an annual
audit and Landlord's legal fees relating to the operation of the Building;

(9) A management fee to the manager of the Building whether or
not related to Landlord not to exceed three percent (3%) of gross rents per
year;

(11) The Fair Lakes League Assessment.

(c) Notwithstanding any other provision of this Lease, Operating
Expenses (as defined in Section 4.01(b) above), shall not include, and Landlord
shall be solely liable for, the following expenses:

(1) Repairs or other work occasioned by insured casualty or by
the exercise of eminent domain, to the extent Landlord is reimbursed by
warranties, service contracts or insurance maintained by Landlord or Tenant
hereof or by the condemning authority;

(3) Costs incurred in improving, decorating, building-out,
painting or redecorating premises for other tenants of the Building;

(4) Expenses in connection with services or other benefits of
a type which are not provided Tenant but which are provided to another tenant of
the Building;

(5) Costs incurred due to violation by Landlord or any other
tenant of the Building of the terms and conditions of any lease of space in the
Building;

(6) Interest or debt or amortization payments on any mortgage
or mortgages;

(7) Payments of rent by Landlord to any ground lessor;

(8) Landlord's general overhead not related to the operation
of the Building (but without limiting Landlord's right to seek reimbursement as
provided in Sections 4.01(b)(1), (8), (9) and (10) above).

(9) Advertising and promotional expenditures with respect to
the Building except for those advertising and promotional expenditures that
directly benefit Tenant;

(10) Any costs, fines or penalties incurred due to violations
of any nature by Landlord of any governmental rule or authority;

(11) Wages, salaries or other compensation paid to any
executive employees;

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(13) Any cost or expense whatsoever arising from or related to
any clean-up of any hazardous or toxic materials, or any governmental penalty of
fines associated therewith, excepting, however, any such cost or expense
resulting from the negligent or intentional acts of Tenant or its employees,
invitees, guests, agents, representatives, contractors, licensees, successors or
assigns. The term "hazardous or toxic materials" as used in this Lease shall
mean those materials identified in The Comprehensive Environmental Response,
Compensation and Liability Act of 1980 of the United States Code and by the laws
of the Commonwealth of Virginia, as such sections may be amended from time to
time;

(14) The cost of excessive use of Building utilities (such as
HVAC) by other tenants of the Building, and/or utility service by other tenants
outside normal Building hours;

(17) Bad debt losses, rent losses or reserves for such losses;
and

(18) Non-cash items, such as deductions for depreciation and
amortization of the Building and the Building equipment.

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SECTION 4.02. REAL ESTATE TAXES.

(2) On the first day of April of each year during the Term or
as soon thereafter as reasonably practical, Landlord shall furnish to Tenant a
statement of the actual Real Estate Taxes for the preceding year. Within thirty
(30) days after the delivery of that statement, a lump sum payment will be made
by Tenant equal to the amount, if any, by which Tenant's Proportionate Share of
the actual Real Estate Taxes exceeds the amount, if any, which Tenant has paid
toward the estimated Real Estate Taxes pursuant to SECTION 4.02(a)(1) above. If
Tenant's Proportionate Share of the actual Real Estate Taxes is less than the
amount Tenant has paid toward the estimated Real Estate Taxes pursuant to
SECTION 4.02(a)(1) above, Landlord shall apply such amount to the next accruing
installment(s) of Rent due hereunder. The foregoing notwithstanding, Landlord
shall have the right once the actual Real Estate Taxes assessment for the
applicable year has been received by Landlord, to notify Tenant in writing of
any change in Landlord's estimate of Real Estate Taxes for the then current
year, in which event Tenant's Proportionate Share of Real Estate Taxes, as
previously estimated, shall be adjusted to reflect the amount shown in such
notice and shall be effective, and due from Tenant, on the first day of each
month following Landlord's giving of such notice. The effect of this SECTION
4.02(a) is that Tenant will pay during each year during the Term Tenant's
Proportionate Share of the actual Real Estate Taxes in excess of the Base Real
Estate Taxes.

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(1) All real estate taxes, including general and special
assessments, if any, which are imposed upon Landlord or assessed against the
Building or the land upon which the Building is situated; and

(2) Any other present or future taxes or governmental charges
that are imposed upon Landlord, or assessed against the Building or the land
upon which the Building is situated, including, but not limited to, any tax
levied on or measured by the rents payable by tenants of the Building which is
in the nature of, or in substitution for, real estate taxes. Any inheritance,
estate, gift, franchise, corporation, income, or net profits tax which may be
assessed against Landlord and/or the Building shall be excluded.

SECTION 4.03. PARKING.

During the initial Term and the first Renewal Term, Tenant and its
employees, invitees, and guests shall have the right to use, free of charge, in
common, with the other tenants of the Building, the parking areas for the
Building, all on an unassigned and unreserved basis. During the initial Term and
the first Renewal Term, provided Tenant leases one hundred percent (100%) of the
Rentable Area in the Building, Tenant shall have the exclusive right to use,
free of charge, reserved parking spaces in such locations requested by Tenant.
Landlord reserves the right to promulgate reasonable rules and regulations of
general application for the use of all parking spaces.

SECTION 4.04. ADDITIONAL RENT DEFINED.

The term "ADDITIONAL RENT" shall include, but not be limited to (i) the
late payment fee, if any, under SECTION 3.06; (ii) Tenant's Proportionate Share
of Operating Expenses as calculated under SECTION 4.01; (iii) Tenant's
Proportionate Share of Real Estate Taxes as calculated under SECTION 4.02; and
(iv) all other costs and expenses which Tenant assumes, agrees or is required to
pay to Landlord pursuant to this Lease. In the event of nonpayment of Additional
Rent, Landlord shall have all the rights and remedies herein provided for in
case of nonpayment of Rent.

SECTION 4.05. RENT DEFINED.

The term "RENT" shall include Base Rent and Additional Rent.

PART 5 - SERVICES BY LANDLORD

While Tenant is occupying the Premises and is not in Default under this
Lease, Landlord shall furnish the Premises with: (i) passenger elevator service
in common with other tenants for access to and from the Premises, provided that
Landlord may reasonably limit the number of elevators to be operated at night
after normal business hours and on Saturdays, Sundays, and holidays and that
Landlord may remove elevators from service for maintenance; (ii) janitorial
cleaning services Monday through Friday (except holidays) as required in
Landlord's reasonable judgment; (iii) replacement, as necessary, of all lamps
and ballasts in Building Standard light fixtures within the Premises; and (iv)
the utility services provided for in PART 6 below. If Tenant

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requires services which are not specified herein and Landlord elects to provide
such services to Tenant, Tenant will pay to Landlord, upon demand, as Additional
Rent, Landlord's charges for providing such services.

PART 6 - UTILITIES

SECTION 6.01. WATER, HEATING, VENTILATING AND AIR CONDITIONING.

SECTION 6.02. ELECTRICITY.

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electricity that may be occasioned by the operation of said equipment or
machinery. Upon reasonable prior notice, Landlord may make periodic inspections
of the Premises at reasonable times to determine that Tenant's electrically
operated equipment and machinery complies with the provisions of Part 6.

PART 7 - USE

PART 8 - COMPLIANCE WITH LAWS AND BUILDING REGULATIONS

SECTION 8.01. COMPLIANCE WITH LAWS.

SECTION 8.02. OBSERVANCE OF BUILDING'S RULES AND REGULATIONS.

SECTION 8.03. HAZARDOUS MATERIALS.

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upon, stored, used or disposed on, in or about the Premises and/or the Building,
or (ii) permit the release, discharge, spill or emission of any substance
considered to be a Hazardous Material from the Premises.

(d) As used in this Lease, the term "HAZARDOUS MATERIALS" shall
include, without limitation:

(i) Those substances included within the definitions of
"hazardous substances", "hazardous materials," toxic substances," or "solid
waste" in the Comprehensive Environmental Response Compensation and Liability
Act of 1980 (42 U.S.C. Section 9601 ET SEQ.) ("CERCLA"), as amended by Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), the Resource Conservation
and Recovery Act of 1976 ("RCRA"), and the Hazardous Materials Transportation
Act, and in the regulations promulgated pursuant to said laws, all as amended;

(iii) Any material, waste or substance which is (A) petroleum,
(B) asbestos, (C) polychlorinated biphenyls, (D) designated as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section
1251 ET SEQ. (33 U.S.C. Section 321) or listed pursuant to Section of the Clean
Water Act (33 U.S.C. Section 1317); (E) flammableT explosives; or (F)
radioactive materials;

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PART 9 - ALTERATIONS

SECTION 9.01. APPROVAL OF LANDLORD.

Tenant shall not, at any time during the Term, without Landlord's prior
written consent, make any alterations (structural or otherwise) to the Premises.
Should Tenant desire any alterations, Tenant agrees to submit all plans and
specifications for same, including complete architectural plans, to Landlord for
Landlord's written approval, before beginning such work and Landlord's approval
shall not be unreasonably withheld, conditioned or delayed. Landlord shall not
be considered as unreasonably withholding its approval by refusing to consent to
any alterations which would (i) alter the exterior appearance of the Building,
or the public lobbies, corridors, or common areas thereof; (ii) causes or are
likely to cause any weakening of any part of the structure of the Premises or
Building or which may cause damage or disruption to any Building system; or
(iii) violate any underlying ground lease or deed of trust or mortgage. Upon
Tenant's receipt of Landlord's written approval, Tenant may proceed with the
construction of the approved alterations, but only so long as they are in
substantial compliance with the plans and specifications and provisions of this
PART 9. Additionally, the construction of any alterations, the alterations
themselves, or any maintenance thereof shall comply with all building, safety,
fire, plumbing, electrical and other codes, governmental requirements (including
but not limited to Title III of the Americans with Disabilities Act of 1990, all
regulations issued thereunder and the Accessibility Guidelines for Buildings and
Facilities issued pursuant thereto, as the same are in effect on the date hereof
and may be hereafter modified, amended or supplemented) and insurance
requirements, and shall not require an amount of water, electricity, gas, heat,
ventilation, or air-conditioning which exceeds Building Standard unless prior
written arrangements satisfactory to Landlord are made with respect thereto. All
alterations shall be made at Tenant's expense, either by Tenant's contractors
which have been approved in advance by Landlord or, at Landlord's option, by
Landlord's contractors on terms reasonably satisfactory to Tenant. If Landlord's
contractor is performing the alterations, Tenant shall pay to Landlord a fee
equal to five percent (5%) of the actual costs of such work, such fee to cover
Landlord's overhead related to the work, including, but not limited to,
Landlord's review of the plans and specifications, coordination of the work,
consultation with professionals regarding the work, and general administration
allocable to the work; provided that, if Landlord is performing the alterations,
the fee that Tenant shall pay to Landlord shall increase to ten percent (10%) of
the actual costs of such work. Any extraordinary third party costs incurred by
Landlord as a result of Tenant's Alterations work shall be paid by Tenant. All
such construction shall be completed promptly and in a good and workmanlike
manner and shall be performed in compliance with PART 10 hereof.

SECTION 9.02. OWNERSHIP OF IMPROVEMENTS TO PREMISES.

PART 10 - LIENS

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lien within such period, then, in addition to any other right or remedy Landlord
may, at its election, discharge the lien by depositing with a court or a title
company, or by bonding, the amount claimed to be due. Tenant shall pay on
demand, as Additional Rent, any amount paid by Landlord for the discharge or
satisfaction of any such lien, and all attorney's fees and other costs and
expenses of Landlord reasonably incurred in defending any such action or in
obtaining the discharge of such lien, together with all necessary disbursements
in connection therewith.

PART 11 - REPAIRS

SECTION 11.01. TENANT'S OBLIGATIONS.

SECTION 11.02. LANDLORD'S OBLIGATIONS.

PART 12 - INSURANCE

SECTION 12.01. TENANT'S INSURANCE.

Tenant, at its sole expense, shall obtain and keep in force the
following insurance:

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(d) During the course of construction of any work performed by
Tenant or on Tenant's behalf pursuant to this Lease or any alterations by Tenant
until completion thereof, Builder's Risk Insurance on a "special causes of loss"
basis (including collapse) on a completed value (non-reporting) form for full
replacement value covering all work incorporated in the Building and all
materials and equipment in or about the Premises;

(e) Auto liability coverage for owned, hired and non-owned
vehicles with a $1,000,000 combined single limit; and

(f) Excess liability coverage in the amount of $5,000,000
which will follow form and respond to and increase the limits of the coverages
described in SECTIONS 12.01(a), (b), (c), AND (d) above.

SECTION 12.02. INSURANCE RATING.

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SECTION 12.03. WAIVER OF SUBROGATION.

All policies covering real or personal property which Tenant obtains
affecting the Premises shall include, if possible, a clause or endorsement
denying the insurer any rights of subrogation against Landlord to the extent
rights have been waived by the insured before the occurrence of injury or loss,
if same are obtainable. Tenant waives any rights of recovery against Landlord
for injury or loss due to hazards covered by policies of insurance containing
such a waiver of subrogation clause or endorsement to the extent of the injury
or loss covered thereby.

PART 13 - DAMAGE BY FIRE OR OTHER CASUALTY

SECTION 13.01. DAMAGE TO PREMISES.

SECTION 13.02. DAMAGE TO BUILDING.

SECTION 13.03. PARTIAL DAMAGE.

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either (i) a default by Tenant or (ii) the negligence or willful act of Tenant,
or Tenant's agents, employees, representatives, contractors, successors or
assigns, licensees or invitees.

SECTION 13.04. DAMAGE DURING LAST YEAR OF TERM.

SECTION 13.05. NO LANDLORD LIABILITY.

SECTION 13.06. APPORTIONMENT OF RENT.

PART 14 - CONDEMNATION

SECTION 14.01. ENTIRE BUILDING.

SECTION 14.02. PORTION OF BUILDING.

SECTION 14.03. PORTION OF PREMISES.

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Further, in such event Tenant's Proportionate Share shall be recomputed based
upon the remaining Rentable Area in the Premises and in the Building.

SECTION 14.04. TERMINATION OF LEASE.

SECTION 14.05. LANDLORD'S RIGHT TO AWARD.

PART 15 - ASSIGNMENT AND SUBLETTING

SECTION 15.01. RIGHTS OF TENANT.

(a) Tenant may not sell, assign, transfer, or hypothecate this Lease or
any interest herein (either voluntarily or by operation of law, and including,
if Tenant is a corporation, partnership or limited liability company, the sale
or transfer of a controlling interest in Tenant), or sublet the Premises or any
part thereof without the prior written consent of Landlord. If Tenant should
desire to assign this Lease or sublet the Premises (or any part thereof) and
provided that Tenant is not then in default hereunder, Tenant shall give
Landlord written notice at least thirty (30) days in advance of the date on
which Tenant desires to make such assignment or sublease. Landlord shall then
have a period of fifteen (15) days following receipt of such notice within which
to notify Tenant in writing that Landlord elects:

(b) Except as may be otherwise expressly set forth to the contrary, no
assignment or subletting by Tenant shall relieve Tenant of Tenant's obligations
under this Lease. Any attempted

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assignment or sublease by Tenant in violation of the terms and provisions of
this SECTION 15.01 shall be void.

(d) Landlord's consent to an assignment or sublease shall not be
unreasonably withheld, conditioned or delayed, provided all of the following
conditions have been satisfied:

(1) if a sublease, the sublease must have provisions which
satisfy subparagraph (e) hereof;

(2) the entity, organization, or individual to which such
space is proposed to be sublet is of a type similar to the existing tenants in
Fair Lakes, is not of a type that would be an undesirable tenant in a
first-class office complex in Fair Lakes, or is of a type that because of its
controversial or unsavory nature, might bring undue notoriety or disruption to
the Building;

(3) if an assignment, the entity to which Tenant desires to
assign has financial credit that is equal to or greater than that of Tenant on
the Effective Date in Landlord's sole discretion;

(4) the entity to which Tenant desires to sublease is not then
a tenant in the Building and is not then in negotiations with Landlord for the
lease of space in the Building; and

(5) the assignment or sublease will not violate any exclusive
or restriction in any other lease of space in Fair Lakes by Landlord or its
Affiliates (as defined in SECTION 15.04).

SECTION 15.02. EXCESS RENT.

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commissions, construction expenses for tenant improvements and legal and
advertising fees) shall be considered Additional Rent owed by Tenant to
Landlord, and shall be paid by Tenant to Landlord in the same manner that Tenant
pays rent under this Lease.

SECTION 15.03. RIGHTS OF LANDLORD.

Landlord may sell, transfer, assign, and convey, all or any part of the
Building and/or the Land and any and all of its rights under this Lease, and in
the event Landlord assigns its rights under this Lease and provides written
notice of such assignment to Tenant, Landlord shall be released from any further
obligations hereunder, and Tenant agrees to look solely to Landlord's successor
in interest for performance of such obligations.

SECTION 15.04. AFFILIATE TRANSFER.

PART 16 - INDEMNIFICATION

Tenant waives all claims against Landlord for damage to any property or
injury to, or death of, any person, in, upon, or about the Building or the
Premises, arising at any time and from any cause except to the extent such
damage is caused by reason of the negligence or willful misconduct of Landlord,
its agents, employees, representatives, or contractors, and Tenant shall
indemnify Landlord and shall hold Landlord harmless from any damage to any
property or injury to, or death of, any person arising from the use of the
Building or the Premises by Tenant or its agents, employees, representatives,
contractors, or invitees, except to the extent such damage, injury or death is
caused by the negligence or willful misconduct of Landlord, its agents,
employees, representatives, or contractors. Tenant's foregoing indemnity
obligation shall include reasonable attorney's fees and all other costs and
expenses reasonably incurred by Landlord from the first notice that any claim or
demand has been made or may be made.

The provisions of this PART 16 shall survive the termination of this
Lease for any reason with respect to any damage, injury, or death
occurring before such termination.

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expenses are not attributable to Landlord's fault, including reasonable
attorneys' fees and court costs, incurred by or imposed upon Landlord because of
any such litigation, and the amount of such costs and expenses, including
reasonable attorneys' fees and court costs, shall be a demand obligation owing
by Tenant to Landlord and shall constitute Additional Rent.

PART 17 - SURRENDER OF THE PREMISES

SECTION 17.01. CONDITION OF PREMISES.

SECTION 17.02. TENANT HOLDOVER.

PART 18 - ESTOPPEL CERTIFICATES

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Lease or of the Rent; and (xi) any other fact pertaining to Tenant's interest in
this Lease which Landlord, or Landlord's mortgagee, may request. Failure to
deliver the certificate within ten (10) calendar days shall be conclusive upon
Tenant for the benefit of Landlord and any successor to Landlord that this Lease
is in full force and effect and has not been modified except as may be
represented by the party requesting the certificate. Any such certificate may be
relied upon by any prospective purchaser, any ground lessor, or any beneficiary
under the deed of trust on the Building, the underlying land, or any part
thereof.

PART 19 - SUBORDINATION AND ATTORNMENT

SECTION 19.01. EXISTING FINANCINGS.

(a) This Lease is subject and subordinate to any deeds of trust or
other security instruments which, as of the date of this Lease, cover the
Building, the underlying land, or any interest of Landlord therein, and to any
advances made on the security thereof, and to any increases, renewals,
modifications, consolidations, and extensions of any of such deeds of trust or
security instruments (the "EXISTING Indebtedness"). Landlord agrees to provide
notice to Tenant of such deeds of trust or other security instruments covering
the Building. This provision is declared by Landlord and Tenant to be
self-operative and no further instrument shall be required to effect such
subordination of this Lease. Upon demand, however, Tenant shall execute,
acknowledge, and deliver to Landlord any further instruments and certificates
evidencing such subordination as Landlord, or the holder of the Existing
Indebtedness may reasonably require.

(b) Landlord agrees to obtain from the holder of the Existing
Indebtedness a Subordination, Non-Disturbance and Attornment Agreement, in form
attached hereto as EXHIBIT "F" (and by this reference incorporated herein),
which provides that, in the event of a foreclosure or a transfer in lieu
thereof, Tenant will not be disturbed in its possession and this Lease shall,
notwithstanding the foreclosure or transfer in lieu thereof, continue in full
force and effect upon and subject to all terms, covenants, conditions, and
obligations of this Lease so long as (i) no Default has occurred on the part of
Tenant under this Lease and (ii) Tenant attorns to the purchaser or transferee
as landlord under this Lease. Landlord agrees to use good faith efforts to
obtain revisions reasonably requested by Tenant to the Subordination,
Non-Disturbance and Attornment Agreement from the lender of the Existing
Indebtedness.

SECTION 19.02. FUTURE FINANCINGS.

SECTION 19.03. ATTORNMENT.

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PART 20 - QUIET ENJOYMENT

Provided Tenant performs all of Tenant's obligations under this Lease,
including the payment of Rent, Tenant shall, during the Term, peaceably and
quietly enjoy the Premises without disturbance from Landlord or any other
persons acting by, through, or under Landlord; subject, however, to (i) the
terms of this Lease; (ii) the deeds of trust, ordinances, restrictive covenants,
leases, easements, and other agreements or encumbrances now or hereafter
affecting the Building or the land on which the Building is situated; (iii) the
right of Landlord to construct on its property any additional buildings or other
improvements now or hereafter permitted by the governmental authorities having
jurisdiction over Landlord's property; and (iv) the right of Landlord to
relocate parking spaces for the Building, conduct renovations to the Building or
make alterations to the Building so long as Landlord's exercise of these rights
does not substantially interfere with Tenant's use of the Premises. This
covenant and all other covenants of Landlord in this Lease shall be binding upon
Landlord and its successors only with respect to breaches occurring during its
and their respective ownership of Landlord's interest hereunder.

PART 21 - SIGNS; FURNISHINGS; COMMUNICATION EQUIPMENT

SECTION 21.01. SIGNS AND ADVERTISEMENTS.

SECTION 21.02. FURNISHINGS.

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promptly from the sidewalks adjacent to the Building any of Tenant's furniture,
equipment, or other material there delivered or deposited.

SECTION 21.03. COMMUNICATIONS EQUIPMENT.

Tenant shall have the right, subject to provisions of this SECTION
21.03 and the License Agreement to be executed by Tenant, to install, operate
and maintain, at Tenant's sole cost and expense, land lines between the Building
and the Fair Lakes IV or Fair Lakes VI buildings (so long as Tenant is leasing
space in such buildings) antennas and other support structures reasonably
required for the conduct of Tenant's day-to-day business ("COMMUNICATIONS
EQUIPMENT"). The Communications Equipment shall be limited to receive-only
antennas and land lines necessary for the conduct of Tenant's normal business
activities and shall not be used for the purpose of transmitting for commerce or
reselling antenna transmissions services or other services for a profit. Prior
to the installation of any Communications Equipment, Tenant shall execute the
License Agreement which shall include, among other things, requirements that (i)
the plans and specifications for the proposed Communications Equipment conform
with all laws and applicable regulations and are subject to Landlord's prior
approval, and (ii) such Communications Equipment shall not interfere with other
satellite or communications equipment previously installed in Fair Lakes or
typically used for general office uses. Tenant shall pay to Landlord a monthly
fee (the "LICENSE FEE") equal to (i) $300.00 per pole-type antenna or satellite
dish with a diameter smaller than thirty-six inches (36") and (ii) $500.00 per
pole-type antenna or satellite dish with a diameter equal or greater than
thirty-six inches (36"). The License Fee amount shall increase by three percent
(3%) per year commencing on the first (1st) anniversary of the Commencement Date
and on each anniversary thereafter.

PART 22 - DEFAULTS AND REMEDIES

SECTION 22.01. EVENTS OF DEFAULT.

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<PAGE>

ordinance or regulation or causes, or could cause a default under any deed of
trust, mortgage, underlying lease, tenant lease or other agreement applicable to
the Building or the land upon which it is situated; (k) it Tenant fails to
perform any term (other than the payment of Rent) of this Lease more than three
(3) times in any period of twelve (12) months, notwithstanding that Tenant has
corrected any previous failures within the applicable cure period; or (l) Tenant
is in Default under any lease for space in Fair Lakes VI or Fair Lakes IV.

SECTION 22.02. REMEDIES.

SECTION 22.03. REMEDIES CUMULATIVE.

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

SECTION 22.04. NO ACCEPTANCE OR SURRENDER.

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<PAGE>

possession of the Premises by Landlord shall constitute an election by Landlord
to terminate this Lease, unless a written notice of such intention is given to
Tenant. Notwithstanding any such reletting or re-entry or taking possession,
Landlord may at any time thereafter terminate this Lease for a previous Default.
Landlord's acceptance of Rent following an Event of Default hereunder shall not
be construed as a waiver of such Event of Default. No waiver by Landlord of any
breach of this Lease shall constitute a waiver of any other violation or breach
of any of the terms hereof. Forbearance by Landlord to enforce one or more of
the remedies herein provided upon a breach hereof shall not constitute a waiver
of any other breach of this Lease.

SECTION 22.05. CUSTOMS AND PRACTICES.

SECTION 22.06. PAYMENT OF TENANT'S OBLIGATIONS BY LANDLORD.

SECTION 22.07. DEFAULT BY LANDLORD.

PART 23 - SECURITY DEPOSIT

SECTION 23.01. APPLICATION OF SECURITY DEPOSIT.

On or before May 1, 1999, Tenant shall deliver to Landlord the sum
stipulated in the Basic Lease Information as a Security Deposit. Landlord shall
be required to maintain such deposit in a separate account if such deposit is
made in cash. The Security Deposit shall be security for the performance by
Tenant of all of Tenant's obligations, covenants, conditions, and agreements
under this Lease. Within thirty (30) days after the expiration of the Term, and
provided Tenant has vacated the Premises and is not in Default hereunder,
Landlord shall return the Security Deposit to Tenant, less such portion thereof
as Landlord shall have appropriated to satisfy any Default by Tenant hereunder.
In the event of any Default by Tenant hereunder, Landlord shall have the right,
but shall not be obligated to use, apply or retain all or any portion of the
Security Deposit for (i) the payment of any Base Rent, Additional Rent or any
other sum as to which Tenant is in Default, (ii) the payment of any amount which
Landlord may spend or become obligated to spend to repair physical damage to the
Premises or the Building pursuant to PART 11 hereof, or (iii) the payment of any
amount Landlord may spend or become obligated to spend or for compensation of
Landlord for any losses incurred by reason of Tenant's Default, including, but
not limited to, any damage or deficiency arising in connection with the
reletting of the Premises. If any portion of the Security Deposit is so used or
applied, within three (3) business days after written notice to Tenant of such
use or application, Tenant shall deposit with Landlord an amount sufficient to
restore the Security Deposit to its original amount, and Tenant's failure to do
so shall constitute a Default under this Lease.

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<PAGE>

SECTION 23.02. TRANSFER OF SECURITY DEPOSIT.

SECTION 23.03. LETTER OF CREDIT.

SECTION 23.04. CHANGES TO SECURITY DEPOSIT.

No later than the Commencement Date, Tenant shall increase the Security
Deposit to $1,200,000.00. Provided that there has been no monetary Default or
material non-monetary Default by Tenant under this Lease at the applicable time,
Tenant shall have the right to reduce the Security Deposit by $200,000.00 on the
commencement date of each of the third Lease Year, fourth Lease Year, fifth
Lease Year and sixth Lease Year. However, in no event shall the Security Deposit
be reduced below $400,000.00.

PART 24 - INTENTIONALLY OMITTED

PART 25 - ATTORNEYS FEES AND LEGAL EXPENSES

PART 26 - NOTICES

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<PAGE>

parties hereto at the respective addresses specified in the Basic Lease
Information, or at such other address as they have subsequently specified by
written notice.

PART 27 - MISCELLANEOUS

SECTION 27.01. NO PARTNERSHIP.

SECTION 27.02. BROKERS.

Landlord recognizes the Broker as the Broker under this Lease and shall
pay the Broker a commission pursuant to a separate agreement between the Broker
and Landlord, Landlord and Tenant each represent and warrant to the other that,
except as provided above, neither of them has employed or dealt with any broker,
agent or finder in carrying on the negotiations relating to this Lease. In the
event of a breach by a party of their foregoing representation and warranty (the
"DEFAULTING PARTY"), the Defaulting Party shall indemnify and hold the other
party harmless from and against any claim or claims, damages or expenses
(including any claims for brokerage or other commissions asserted by any broker,
agent, or finder fees) which may arise as a result of such breach.

SECTION 27.03. SEVERABILITY.

SECTION 27.04. TRIAL BY JURY.

SECTION 27.05. FORCE MAJEURE.

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<PAGE>

SECTION 27.06. CAPTIONS.

The article, part, and section headings contained in this Lease are for
convenience only and shall not enlarge or limit the scope or meaning of the
provisions hereof. Words of any gender used in this Lease shall include any
other gender, and words in the singular number shall be held to include the
plural, unless the context otherwise requires.

SECTION 27.07. BENEFIT AND BURDEN.

SECTION 27.08. NO REPRESENTATIONS BY LANDLORD.

SECTION 27.09. ENTIRE AGREEMENT.

SECTION 27.10. NO OFFER.

SECTION 27.11. AUTHORITY.

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<PAGE>

SECTION 27.12. CHANGES REQUESTED BY LENDER.

If, in connection with obtaining financing for the Building, any lender
shall request reasonable modifications in this Lease as a condition for such
financing, Tenant will not unreasonably withhold, delay, or defer its consent
thereto, provided such modifications do not increase the obligations of Tenant
hereunder or materially adversely affect either the leasehold interest hereby
created or Tenant's use and enjoyment of the Premises.

SECTION 27.13. GOVERNING LAW AND CONSTRUCTION.

SECTION 27.14. LANDLORD'S LIABILITY.

SECTION 27.15. USE OF NAME OF BUILDING.

SECTION 27.16. CHANGES BY LANDLORD.

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<PAGE>

SECTION 27.17. TIME OF ESSENCE.

Time is of the essence in this Lease.

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<PAGE>

EXHIBIT "D" TO LEASE

BETWEEN

BUILDING V ASSOCIATES L.P.
("LANDLORD")

and

PERFORMANCE ENGINEERING CORPORATION
("TENANT")

RULES AND REGULATIONS

This EXHIBIT "D" is attached to and made a part of that Office Lease
Agreement dated_____________________, 19___ (the "LEASE"), between BUILDING V
ASSOCIATES L.P. ("LANDLORD"), and PERFORMANCE ENGINEERING CORPORATION,
("TENANT"). Unless the context otherwise requires the terms used in this Exhibit
that are defined in the Lease shall have the same meanings as provided in the
Lease.

The following rules and regulations have been formulated for the safety
and well-being of all tenants of the Building and to ensure compliance with
governmental and other requirements. Any continuing violation of these rules and
regulations by Tenant shall constitute a Default by Tenant under the Lease.

3. No showcases or other articles shall be put in front of or affixed
to any part of the exterior of the Building, nor placed in the corridor, or
other public areas of the Building.

4. Plumbing fixtures and appliances shall be used only for the purposes
for which they were constructed, and no sweepings, rubbish, rags, or other
substances (including, without limitation, coffee grounds) shall be thrown
therein. The cost of repairing any stoppage or damage resulting from misuse of
such fixtures by a tenant or such tenant's servants, employees, agents,
visitors, or licensees, shall be paid by such tenant.

5. No tenant shall bring or keep, or permit to be brought or kept, any
inflammable, combustible, or explosive fluid, materials, chemical, or substance
in or about its premises.

D-1
<PAGE>

7. No cooking shall be done or permitted in the Building by any tenant,
except for that which is consistent with an employee kitchen within the
premises. No tenant shall cause or permit any unusual or objectionable odors to
emanate from its premises.

12. The normal hours of operation of the Building shall be 7:00 a.m. to
6 p.m. Monday through Friday, and 8 a.m. to 1 p.m. on Saturdays, customary legal
holidays excluded.

13. No tenant shall use or occupy or permit any portion of its premises
to be used or occupied as an employment bureau or for the storage, manufacture,
or sale of liquor, narcotics, or drugs. No tenant shall engage or pay any
employees in the Building, except those actually working for such tenant in the
Building, nor advertise for laborers giving an address at the Building.

15. Each tenant, before closing and leaving its premises at any time,
shall lock all entrance doors and turn off all lights and electrical appliances.

16. No premises shall be used, or permitted to be used, for lodging or
sleeping or for any immoral or illegal purpose.

18. Canvassing, soliciting, and peddling in the Building are
prohibited, and each tenant shall cooperate in seeking their prevention.

D-2
<PAGE>

19. No animals of any kind shall be brought into or kept about the
Building by any tenant.

20. No vending machines for commercial or public use shall be permitted
to be placed or installed in any part of the Building by any Tenant. Tenant may
have vending machines in kitchen or other non-public areas of the Premises so
long as (i) such machines are not available for use by the general public; (ii)
Landlord has approved such machines and (iii) the machines are not visible to
the exterior of the Premises or the Building. Landlord reserves the right to
place or install vending machines in any of the public areas of the Building.

21. No plumbing or electrical fixtures shall be installed by any Tenant
without the written consent of Landlord.

22. Bicycles, motorcycles, or any other type of vehicle shall not be
brought into the lobby or elevators of the Building or into the premises of any
tenant.

23. Landlord has the right to evacuate the Building in event of
emergency or catastrophe.

24. Landlord shall have the right, exercisable without notice and
without liability to any tenant, to change the name and street address of the
Building.

D-3

<PAGE>

Exhibit 10.4

EMPLOYMENT AGREEMENT

This Employment Agreement (this "AGREEMENT") is entered into as of
January 1, 2000, between PEC Solutions, Inc., a Delaware corporation (the
"COMPANY"), and David C. Karlgaard (the "EXECUTIVE").

WHEREAS, the Executive is currently an employee of the Company; and

WHEREAS, the Company and the Executive desire to continue the
Executive's employment with the Company on the terms and conditions of this
Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the legal sufficiency of which is hereby acknowledged, and
intending to be legally bound, the Company and the Executive agree as follows:

1. EMPLOYMENT. The Company hereby agrees to continue to employ the
Executive, and the Executive hereby agrees to continue employment with
the Company, subject to the terms and conditions of this Agreement.

2. TITLE AND DUTIES.

2.1 TITLE. The Executive shall be employed as President and Chief
Executive Officer of the Company.

2.2 DUTIES. During his employment under this Agreement, the
Executive shall have such duties and responsibilities not
materially inconsistent with his title and position as may be
properly assigned to him from time to time by the Company's
Board of Directors (the "BOARD OF DIRECTORS"). The Executive
shall devote full attention and substantially all of his
business time to the business and affairs of the Company while
employed under this Agreement. The Executive shall use his
best efforts to faithfully perform his duties and fulfill his
responsibilities hereunder.

3. TERM. This Agreement shall be effective for a term (the "TERM OF THIS
AGREEMENT") which shall include: (i) an initial period beginning on
January 1, 2000 (the "EFFECTIVE DATE"), and continuing through December
31, 2001, and (ii) immediately after such initial period, successive
12-month renewal periods, through the last day of the renewal period in
which the Executive's employment with the Company is terminated as
provided in Section 5.

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<PAGE>

4. COMPENSATION AND BENEFITS.

4.1 BASE SALARY. During the Executive's employment under this
Agreement, the Executive shall be entitled to receive a base
salary at an annual rate of not less than $276,682, payable in
cash in equal periodic installments not less frequent than the
periodic installments in effect for payment of salaries to the
Company's executives of the same level as the Executive (the
"BASE SALARY"). The Base Salary shall be subject to increases
pursuant to reviews by the Board of Directors, or a committee
appointed by the Board of Directors, at such times as salary
reviews are conducted generally for the Company's executives
of the same level as the Executive, but in no event less
frequent than annually.

4.2 INCENTIVE STOCK COMPENSATION AND BONUS. During the Executive's
employment under this Agreement, the Executive shall be
eligible to participate in any stock incentive plans and any
bonus plans as may be maintained by the Company from time to
time, in whole or in part, for executives of his level. The
Executive's awards under such stock incentive plans, and his
terms of participation in such bonus plans, shall be
determined by the Company, the Board of Directors or such
person or administrative body as provided under such plans.

4.3 BENEFITS. During his employment under this Agreement, the
Executive shall be entitled to: (i) participation in such
employee retirement and welfare benefit plans, programs,
policies and arrangements as maintained by the Company from
time to time, in whole or in part, for executives of his
level, including but not limited to the Company's employee
stock purchase plan (to the extent they become eligible to
participate), supplemental retirement plan, and plans
providing health benefits, disability benefits, life insurance
and sickness and accident insurance; and (ii) paid vacation,
holidays, leave of absence, leave for illness, funeral leave
and temporary disability leave in accordance with the policies
of the Company; and (iii) perquisites as from time to time
provided by the Company to executives of his level.

4.4 EXPENSES. During the Executive's employment under this
Agreement, the Company shall reimburse the Executive for
ordinary and reasonable out-of-pocket expenses incurred by him
in the performance of his duties hereunder, provided that the
Executive shall limit and account to the Company for such
expenses in accordance with the employee business expense
policies and practices of the Company.

5. TERMINATION OF EMPLOYMENT.

5.1 TERMINATION BY THE COMPANY WITHOUT GOOD CAUSE.

5.1.1 TERMINATION BY THE COMPANY WITHOUT GOOD CAUSE. The
Company may terminate the Executive's employment
under this Agreement without Good Cause at any time
by giving notice thereof to the Executive. Upon such
termination, the Executive shall be entitled to such
compensation as provided in Section 5.1.2. For
purposes of this Agreement, "GOOD

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<PAGE>

CAUSE" means any of the following, as determined by a
majority vote of the Board of Directors after notice
to the Executive and an opportunity for the Executive
to be heard by the Board of Directors:

(A) The Executive's conviction of, or plea of
nolo contendere to, a felony or crime
involving moral turpitude;

(B) The Executive's fraud on, or
misappropriation of any funds or property
of, the Company;

(C) Personal dishonesty, incompetence, willful
misconduct, willful violation of any law,
rule or regulation (other than minor traffic
violations or similar offenses), or breach
of fiduciary duty, by the Executive which
involves personal profit;

(D) Willful misconduct by the Executive in
connection with the performance of his
duties, or the Executive's willful failure
to perform his duties and responsibilities
in the best interests of the Company;

(E) The Executive's chronic use of alcohol,
drugs or other similar substances affecting
his work performance; or

(F) Breach by the Executive of any provision of
this Agreement or any non-disclosure,
non-competition, non-solicitation or other
similar agreement executed by the Executive
for the benefit of the Company.

5.1.2 SEVERANCE PAY. If the Executive's employment under
this Agreement is terminated during the Term of this
Agreement by the Company without Good Cause, the
Executive shall be entitled to continuation in
payment of his Base Salary, at the rate in effect
immediately before the date of termination, for a
period equal to the greater of (A) the period from
the day after his last day of employment hereunder
through the last day of the Term of this Agreement,
or (B) one year; provided that the Executive (a)
honors the restrictive covenants as provided in
Section 6 of this Agreement and (b) executes a
release of all claims arising from his employment by
the Company, in such form as may then be used by the
Company respecting termination of employees.

5.2 TERMINATION BY THE COMPANY FOR GOOD CAUSE; DEATH OR
DISABILITY.

5.2.1 TERMINATION BY THE COMPANY FOR GOOD CAUSE. The
Company may terminate the Executive's employment
under this Agreement for Good Cause by giving notice
thereof to the Executive specifying in reasonable
detail the Good Cause based upon which the Company
terminates his employment.

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<PAGE>

5.2.2 TERMINATION UPON DEATH OR DISABILITY. This Agreement
shall terminate upon the Executive's death. If the
Company determines in good faith that the Executive
has a Total and Permanent Disability as defined in
this Section, the Company may terminate his
employment under this Agreement by notifying the
Executive thereof at least 30 days before the
effective date of termination. For purposes of this
Agreement, "TOTAL AND PERMANENT DISABILITY" means the
inability of the Executive to engage in any
substantial gainful activity by reason of any
medically determinable physical or mental impairment
which can be expected to result in death or which has
lasted or can be expected to last for a continuous
period of not less than twelve months. If there is
any dispute between the parties as to the Executive's
Total and Permanent Disability, the Company shall
select or approve a physician whose determination as
to the Executive's Total and Permanent Disability
shall bind the parties hereto.

5.2.3 EFFECT OF TERMINATION BY THE COMPANY FOR GOOD CAUSE
OR TERMINATION UPON DEATH OR TOTAL AND PERMANENT
DISABILITY. If the Executive's employment under this
Agreement is terminated by the Company for Good Cause
or due to the Executive's death or Total and
Permanent Disability, all obligations of the Company
under this Agreement shall terminate, except as
provided in Section 5.3.

5.3 PAYMENT OF BASE SALARY UPON TERMINATION. Upon a termination of
the Executive's employment under this Agreement for any
reason, the Executive shall be entitled to receive his Base
Salary earned but unpaid through the date of termination, on
or before the day on which the Executive would have been paid
such amount if his employment hereunder had not been
terminated.

5.4 NO DUTY TO MITIGATE. The Executive shall not be obligated to
seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any
of the provisions of this Agreement, and such amounts shall
not be reduced whether or not the Executive obtains other
employment.

6. RESTRICTIVE COVENANTS.

6.1 CONFIDENTIAL INFORMATION. The Executive shall at all times
hold in a fiduciary capacity for the benefit of the Company
all secret, confidential or proprietary information, knowledge
or data relating to the Company, and all of its businesses,
which shall have been obtained by the Executive during his
employment by the Company and which shall not be or become
public knowledge (other than by acts by the Executive or his
representatives in violation of this Agreement), including,
but not limited to, information regarding clients and agents
of the Company (the "CONFIDENTIAL INFORMATION"). During the
Executive's employment with the Company under this Agreement
and after the termination of such employment, the Executive
shall not, without the prior written consent of the Company,
communicate or divulge any Confidential Information to any
Person (as defined in Section 6.5) other than the Company and
those designated by it or use any Confidential Information,
except for the benefit of the Company,

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<PAGE>

provided that the Executive may make disclosures to comply
with the law or legal process. Immediately upon termination of
the Executive's employment with the Company at any time and
for any reason, the Executive shall return to the Company all
Confidential Information, including, but not limited to, any
and all copies, reproductions, notes or extracts of all
Confidential Information.

6.2 SOLICITATION OF EMPLOYEES. During the Term of this Agreement
and, if the Executive's employment under this Agreement is
terminated for any reason, for two years after the date of
such termination, the Executive shall not: (i) solicit,
participate in or promote the solicitation of any person who
was employed by the Company, at any time during the
three-month period prior to the Executive's termination of
employment under this Agreement, to leave the employ of the
Company; or (ii) on behalf of himself or any other Person,
hire, employ or engage any such person. The Executive further
agrees that, during such time, if an employee of the Company
contacts the Executive about prospective employment, the
Executive will inform such employee that he cannot discuss the
matter further without informing the Company.

6.3 SOLICITATION OF CLIENTS. During the Term of this Agreement
and, if the Executive's employment under this Agreement is
terminated for any reason, for two years after the date of
such termination, the Executive shall not, directly or
indirectly, solicit, entice or induce any Client (as defined
in Section 6.5) of the Company to become a Client of any
Person other than the Company, or to modify, curtail or cease
its business with the Company, and the Executive will not
assist any Person in taking any such action.

6.4 REMEDIES FOR BREACH. The Executive agrees that damages in the
event of any breach of Sections 6.1 through 6.3 by the
Executive would be difficult to ascertain. The Executive
therefore agrees that, notwithstanding anything in this
Agreement to the contrary, including but not limited to the
provisions of Section 13, the Company, in addition to and
without limiting any other remedy or right it may have, shall
have the right to an injunction or other equitable relief in
any court of competent jurisdiction, enjoining any such
breach. The Executive hereby waives any and all defenses he
may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable
relief. The existence of this right shall not preclude any
other rights and remedies at law or in equity which the
Company may have.

6.5 DEFINITIONS. For purposes of Section 6, the following
definitions shall apply:

6.5.1 "COMPANY." "COMPANY" means PEC Solutions, Inc. and
all of its subsidiaries and affiliates.

6.5.2 "CLIENT." "CLIENT" means any person, entity
(including but not limited to a corporation,
partnership or trust), division, business unit,
department or agency which, at the time of
termination of the Executive's employment hereunder
or at any time within two years prior thereto, shall
have

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<PAGE>

purchased goods or services from the Company or shall
have contacted with the Company to purchase goods or
services from the Company.

6.5.3 "PERSON." "PERSON" means any individual or entity,
including but not limited to any corporation, trust,
sole proprietorship, joint venture or partnership.

6.6 SURVIVAL OF SECTION 6. The Executive agrees that the
nondisclosure, nonemployment and nonsoliciation agreements in
this Section 6 each constitute separate agreements
independently supported by good and adequate consideration
and, notwithstanding anything in this Agreement to the
contrary, shall be severable from the other provisions of, and
shall survive, this Agreement.

7. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if
sent by registered or certified mail to the Executive at the last
address he has filed in writing with the Company or, in the case of the
Company, to the Company's principal executive offices.

8. WITHHOLDING TAXES. The Company shall have the right, to the extent
permitted or required by law, to withhold from any payment of any kind
due to the Executive under this Agreement to satisfy the tax
withholding obligations of the Company under applicable law.

9. SUCCESSORS AND ASSIGNS. The rights, duties and obligations of a party
hereunder may not be assigned, delegated or assumed without the prior
written consent of the other party, provided that the Company may
assign this Agreement to any subsidiary thereof, without the
Executive's consent, and such assignment shall not constitute, a
termination of his employment hereunder. Nothing herein shall cause a
termination of this Agreement upon the acquisition, reorganization, or
merger of the Company. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors or permitted assigns. Nothing herein shall be construed to
confer upon any person not a party hereto any right, remedy or claim
under or by reason of this Agreement.

10. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
of the Executive and the Company with respect to the subject matter
hereof and supersedes and voids any and all prior agreements or
understandings, written or oral, regarding the subject matter hereof.

11. AMENDMENT AND WAIVER. This Agreement may not be changed, modified, or
discharged orally, but only by an instrument in writing signed by the
parties. No waiver of any term or condition of this Agreement shall be
effective unless agreed to in writing between the parties.

12. GOVERNING LAW AND SEVERABILITY. This Agreement shall be governed by the
laws of the Commonwealth of Virginia (without giving effect to choice
of law principles or rules thereof that would cause the application of
the laws of any jurisdiction other than the State of Virginia) and the
invalidity or unenforceability of any provisions hereof shall in no way
affect the validity or enforceability of any other provision. Any
provision of this

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<PAGE>

Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective only to the extent of
such prohibition or unenforceability without invalidating or affecting
the remaining portion of such provision or the other provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.

13. ARBITRATION. disputes regarding the Executive's employment with the
Company, including, without limitation, any dispute UNDER THIS
AGREEMENT which cannot be resolved by negotiations between the Company
and the Executive, but excluding any disputes regarding executive's
compliance with Section 6, shall be submitted to, and solely determined
by, final and binding arbitration conducted by Jams/Endispute, Inc.'s
arbitration rules applicable to employment disputes, and the parties
agree to be bound by the final award of the arbitrator in any such
proceeding. The arbitrator shall apply the laws of the Commonwealth of
virginia with respect to the interpretation or enforcement of any
matter relating to this Agreement; in all other cases the arbitrator
shall apply the laws of the state specified in COMPANY'S alternative
dispute resolution policy as in effect from time to time (if any).
Arbitration may be held in fairfax county, virginia, or such other
place as the parties may mutually agree, and shall be conducted ONLY by
a former judge. Judgment upon the award by the arbitrator may be
entered in any court having jurisdiction thereof.

IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.

PEC SOLUTIONS, INC.

By: /s/ Paul G. Rice
--------------------------------
Title: Chief Operating Officer

EXECUTIVE

/s/ David C. Karlgaard
-------------------------------------
David C. Karlgaard

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<PAGE>

Exhibit 10.5

EMPLOYMENT AGREEMENT

This Employment Agreement (this "AGREEMENT") is entered into as of
January 1, 2000, between PEC Solutions, Inc., a Delaware corporation (the
"Company"), and Paul G. Rice (the "EXECUTIVE").

WHEREAS, the Executive is currently an employee of the Company; and

WHEREAS, the Company and the Executive desire to continue the
Executive's employment with the Company on the terms and conditions of this
Agreement.

2. TITLE AND DUTIES.

2.1 TITLE. The Executive shall be employed as Chief Operating
Officer of the Company.

2.2 DUTIES. During his employment under this Agreement, the
Executive shall have such duties and responsibilities not
materially inconsistent with his title and position as may be
properly assigned to him from time to time by the Company's
Chief Executive Officer. The Executive shall devote full
attention and substantially all of his business time to the
business and affairs of the Company while employed under this
Agreement. The Executive shall use his best efforts to
faithfully perform his duties and fulfill his responsibilities
hereunder.

-1-
<PAGE>

4. COMPENSATION AND BENEFITS.

4.1 BASE SALARY. During the Executive's employment under this
Agreement, the Executive shall be entitled to receive a base
salary at an annual rate of not less than $203,112, payable in
cash in equal periodic installments not less frequent than the
periodic installments in effect for payment of salaries to the
Company's executives of the same level as the Executive (the
"BASE SALARY"). The Base Salary shall be subject to increases
pursuant to reviews by the Board of Directors of the Company
(the "BOARD OF DIRECTORS"), or a committee appointed by the
Board of Directors, at such times as salary reviews are
conducted generally for the Company's executives of the same
level as the Executive, but in no event less frequent than
annually.

5. TERMINATION OF EMPLOYMENT.

5.1 TERMINATION BY THE COMPANY WITHOUT GOOD CAUSE.

-2-
<PAGE>

provided in Section 5.1.2. For purposes of this
Agreement, "GOOD CAUSE" means any of the following,
as determined by a majority vote of the Board of
Directors after notice to the Executive and an
opportunity for the Executive to be heard by the
Board of Directors:

(A) The Executive's conviction of, or plea of
nolo contendere to, a felony or crime
involving moral turpitude;

(B) The Executive's fraud on, or
misappropriation of any funds or property
of, the Company;

(E) The Executive's chronic use of alcohol,
drugs or other similar substances affecting
his work performance; or

5.2 TERMINATION BY THE COMPANY FOR GOOD CAUSE; DEATH OR
DISABILITY.

-3-
<PAGE>

6. RESTRICTIVE COVENANTS.

-4-
<PAGE>

6.5 DEFINITIONS. For purposes of Section 6, the following
definitions shall apply:

6.5.1 "COMPANY." "COMPANY" means PEC Solutions, Inc. and
all of its subsidiaries and affiliates.

-5-
<PAGE>

purchased goods or services from the Company or shall
have contacted with the Company to purchase goods or
services from the Company.

6.5.3 "PERSON." "PERSON" means any individual or entity,
including but not limited to any corporation, trust,
sole proprietorship, joint venture or partnership.

-6-
<PAGE>

13. ARBITRATION. DISPUTES REGARDING THE EXECUTIVE'S EMPLOYMENT WITH THE
COMPANY, INCLUDING, WITHOUT LIMITATION, ANY DISPUTE UNDER THIS
AGREEMENT WHICH CANNOT BE RESOLVED BY NEGOTIATIONS BETWEEN THE COMPANY
AND THE EXECUTIVE, BUT EXCLUDING ANY DISPUTES REGARDING EXECUTIVE'S
COMPLIANCE WITH SECTION 6, SHALL BE SUBMITTED TO, AND SOLELY DETERMINED
BY, FINAL AND BINDING ARBITRATION CONDUCTED BY JAMS/ENDISPUTE, INC.'S
ARBITRATION RULES APPLICABLE TO EMPLOYMENT DISPUTES, AND THE PARTIES
AGREE TO BE BOUND BY THE FINAL AWARD OF THE ARBITRATOR IN ANY SUCH
PROCEEDING. THE ARBITRATOR SHALL APPLY THE LAWS OF THE COMMONWEALTH OF
VIRGINIA WITH RESPECT TO THE INTERPRETATION OR ENFORCEMENT OF ANY
MATTER RELATING TO THIS AGREEMENT; IN ALL OTHER CASES THE ARBITRATOR
SHALL APPLY THE LAWS OF THE STATE SPECIFIED IN COMPANY'S ALTERNATIVE
DISPUTE RESOLUTION POLICY AS IN EFFECT FROM TIME TO TIME (IF ANY).
ARBITRATION MAY BE HELD IN FAIRFAX COUNTY, VIRGINIA, OR SUCH OTHER
PLACE AS THE PARTIES MAY MUTUALLY AGREE, AND SHALL BE CONDUCTED ONLY BY
A FORMER JUDGE. JUDGMENT UPON THE AWARD BY THE ARBITRATOR MAY BE
ENTERED IN ANY COURT HAVING JURISDICTION THEREOF.

-7-
<PAGE>

IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.

PEC SOLUTIONS, INC.

By: /s/ DAVID C. KARLGAARD
----------------------------------------
Title: President and Chief Executive Officer

EXECUTIVE

/s/ PAUL G. RICE
---------------------------------------------
Paul G. Rice

-8-

<PAGE>

Exhibit 10.6

EMPLOYMENT AGREEMENT

This Employment Agreement (this "AGREEMENT") is entered into as of
January 1, 2000, between PEC Solutions, Inc., a Delaware corporation (the
"Company"), and Alan H. Harbitter (the "EXECUTIVE").

WHEREAS, the Executive is currently an employee of the Company; and

WHEREAS, the Company and the Executive desire to continue the
Executive's employment with the Company on the terms and conditions of this
Agreement.

2. TITLE AND DUTIES.

2.1 TITLE. The Executive shall be employed as Chief Operating
Officer of the Company.

2.2 DUTIES. During his employment under this Agreement, the
Executive shall have such duties and responsibilities not
materially inconsistent with his title and position as may be
properly assigned to him from time to time by the Company's
Chief Executive Officer. The Executive shall devote full
attention and substantially all of his business time to the
business and affairs of the Company while employed under this
Agreement. The Executive shall use his best efforts to
faithfully perform his duties and fulfill his responsibilities
hereunder.

-1-
<PAGE>

4. COMPENSATION AND BENEFITS.

4.1 BASE SALARY. During the Executive's employment under this
Agreement, the Executive shall be entitled to receive a base
salary at an annual rate of not less than $177,424, payable in
cash in equal periodic installments not less frequent than the
periodic installments in effect for payment of salaries to the
Company's executives of the same level as the Executive (the
"BASE SALARY"). The Base Salary shall be subject to increases
pursuant to reviews by the Board of Directors of the Company
(the "BOARD OF DIRECTORS"), or a committee appointed by the
Board of Directors, at such times as salary reviews are
conducted generally for the Company's executives of the same
level as the Executive, but in no event less frequent than
annually.

5. TERMINATION OF EMPLOYMENT.

5.1 TERMINATION BY THE COMPANY WITHOUT GOOD CAUSE.

-2-
<PAGE>

(A) The Executive's conviction of, or plea of
nolo contendere to, a felony or crime
involving moral turpitude;

(B) The Executive's fraud on, or
misappropriation of any funds or property
of, the Company;

(E) The Executive's chronic use of alcohol,
drugs or other similar substances affecting
his work performance; or

5.2 TERMINATION BY THE COMPANY FOR GOOD CAUSE; DEATH OR
DISABILITY.

-3-
<PAGE>

6. RESTRICTIVE COVENANTS.

-4-
<PAGE>

6.5 DEFINITIONS. For purposes of Section 6, the following
definitions shall apply:

6.5.1 "COMPANY." "COMPANY" means PEC Solutions, Inc. and
all of its subsidiaries and affiliates.

-5-
<PAGE>

purchased goods or services from the Company or shall
have contacted with the Company to purchase goods or
services from the Company.

6.5.3 "PERSON." "PERSON" means any individual or entity,
including but not limited to any corporation, trust,
sole proprietorship, joint venture or partnership.

-6-
<PAGE>

-7-
<PAGE>

IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.

PEC SOLUTIONS, INC.

By: /s/ David C. Karlgaard
----------------------------------------
Title: President and Chief Executive Officer

EXECUTIVE

/s/ Alan H. Harbitter
---------------------------------------------
Alan H. Harbitter

-8-

<PAGE>

Exhibit 10.7

EMPLOYMENT AGREEMENT

THIS AGREEMENT, made as of this day of December, 1998, by and between
PERFORMANCE ENGINEERING CORPORATION, a Virginia corporation having its principal
office at 3949 Pender Drive, Fairfax, Virginia 22030, hereinafter referred to as
"PEC", and STUART R. LLOYD, hereinafter referred to as "Lloyd", also referred to
below collectively as the "parties."

In consideration of Lloyd's employment by PEC and the other mutual
covenants and obligations hereinafter set forth, the parties hereto agree as
follows:

1. EMPLOYMENT. PEC shall employ Lloyd as its Vice-President and
Chief Financial Officer from the commencement of Lloyd's employment, to occur no
later than December 31, 1998, through December 31, 2001, subject to the terms of
this Agreement. The parties understand and agree that, notwithstanding anything
herein to the contrary, PEC agrees to employ Lloyd for a minimum term of five
(5) years, subject to the terms of this Agreement.

2. RESPONSIBILITIES AND COMMITMENT. As Vice-President and Chief
Financial Officer, Lloyd shall have general responsibility for managing the
finance, accounting, contracts and facilities functions of PEC. Lloyd shall have
such specific duties and responsibilities as may be assigned from time to time
by the President of PEC. Lloyd agrees to faithfully and diligently discharge his
duties and responsibilities under this Agreement and shall devote all of his
business time and attention to the affairs of PEC, except as otherwise provided
in this Agreement or agreed to by the Board of Directors of PEC.

3. COMPENSATION.

(a) PEC shall compensate Lloyd with base salary at the
initial annual rate of One Hundred Forty Thousand Dollars ($140,000.00) through
December 31, 1999. For calendar year ending December 31, 2000, Lloyd's annual
base salary shall be a minimum of One Hundred Fifty-Five Thousand Dollars
($155,000.00). For calendar year ending December 31, 2001, Lloyd's annual base
salary shall be a minimum of One Hundred Sixty Thousand Dollars ($160,000.00).
Thereafter, Lloyd's annual base salary shall be set, effective January 1 of each
year, at such amount deemed appropriate by the Board of Directors of PEC,
considering Lloyd's duties, responsibilities and contributions to PEC.

(b) Base salary as provided above will be payable less
appropriate deductions as required by law and this Agreement and shall be paid
in monthly installments to conform with PEC's regular payroll dates.

(c) Upon execution of this Agreement, PEC shall pay Lloyd
the lump sum of Ten Thousand Dollars ($10,000.00), less appropriate deductions
as required by law. Should Lloyd terminate this Agreement on or before December
31, 1999, a pro-rata portion of said lump sum amount shall be repaid by Lloyd to
PEC.

<PAGE>

(d) Lloyd shall be eligible to participate in the Spring
Bonus Plan (Leadership Award) on the same basis as other members of the PEC
executive staff. Employment on January 1 of each year is a requirement for
participation in the Plan. The maximum bonus available under this Plan is the
prior year PEC net income margin as a percentage of base salary.

(e) Lloyd shall be eligible to participate in the Fall
Bonus Plan on the same basis as other members of the PEC executive staff. Any
bonus under this Plan shall be prorated to reflect Lloyd's employment
commencement date. The maximum bonus available under this Plan is twenty percent
(20%) of an executive's annual base salary.

(f) During the term of this Agreement, PEC shall
pay Lloyd the sum of Five Hundred Ninety-Five Dollars ($595.00) per month to
reflect the fact that Lloyd has elected not to participate in the PEC Health
Insurance Program. PEC shall pay to Contract Consulting Dynamics, Inc. ("CCDI")
a mutually agreed upon amount to provide health insurance for Lloyd and his
family. Said amounts paid by PEC to CCDI shall be deducted monthly from Lloyd's
base salary.

4. OTHER BENEFITS.

(a) Lloyd shall be entitled to an Executive Automobile
Benefit, subject to the terms and conditions of the PEC Executive Automobile
Policy, as such policy may be amended from time to time, on the same basis as
other members of the PEC executive staff. Such policy provides that an eligible
executive may elect a monthly allowance of Five Hundred Dollars ($500.00) in
lieu of an executive automobile.

(b) PEC shall grant Lloyd two (2) Initial Stock Option
Grants to acquire up to two thousand (2,000) and eight thousand (8,000) shares
of PEC's common stock, respectively, at a price determined by the PEC market
price formulation as of Lloyd's employment commencement date. Such price is
calculated at $12.25 per share through December 31, 1998. The options shall be
exercisable during the term they are outstanding, subject to the terms and
conditions of the current PEC Stock Option Plan.

PEC shall take all reasonable steps to cause the
Board of Directors to approve an amendment to the PEC Stock Option Plan and to
recommend the adoption of said amendment by the Shareholders of PEC at the
Spring 1999 Annual Meeting of Shareholders, which amendment shall provide that
all options granted under the said PEC Stock Option Plan shall become
immediately vested upon any "Change in Control" of PEC, as defined within the
terms of this Agreement.

In the event Lloyd determines to exercise either or
both of the two separate Initial Stock Option Grants through the use of proceeds
borrowed from any third party lender, PEC agrees that it shall guarantee the
loan from the third party lender on the condition that it receive a collateral
security interest in the PEC stock thereby acquired.

<PAGE>

(c) Lloyd shall be eligible to participate in the PEC
Non-Qualified Executive Supplemental Retirement Program on the same basis as
other members of the PEC executive staff, subject to the terms and conditions of
the PEC Non-Qualified Executive Supplemental Retirement Program Agreement.

(d) Lloyd shall be eligible to receive additional annual
stock option grants on the same basis as other members of the PEC executive
staff.

(e) Lloyd shall be entitled to participate in any and all
other pensions, retirement, stock purchase, life insurance, cafeteria plan or
any other fringe benefits on the same basis as other members of the PEC
executive staff.

5. TERM AND TERMINATION.

(a) This Agreement shall remain in effect through
December 31, 2003, and thereafter shall automatically renew for additional one
(1) year terms, unless PEC notifies Lloyd in writing of its intent not to renew
the Agreement at least one (1) year prior to its termination date; provided that
Lloyd may terminate this Agreement by giving prior written notice of termination
to PEC not less than ninety (90) days prior to Lloyd's intended date of
termination.

(b) During the term of this Agreement and in the event
Lloyd's employment by PEC is terminated for any reason, except as specifically
provided otherwise in this Subparagraph (b), Lloyd shall not, directly or
indirectly, enter the employ of, or render any service to, any person,
partnership, corporation or other entity engaged in any of the business engaged
in by PEC at the date of termination, for a period of two (2) years after the
termination of employment. Without the permission of PEC, Lloyd further agrees
that during said period he will not become interested in any competing business,
directly or indirectly, as an individual, partner, officer, agent, consultant,
director or principal. Notwithstanding the provisions of this Subsection, PEC
agrees that Lloyd shall be permitted to remain as a member of the Board of
Directors of Eisner, Petrou & Associates.

If Lloyd leaves his employment as a result of PEC's
breach of this Agreement, or if PEC terminates Lloyd's employment in breach of
this Agreement, Lloyd shall be under no restriction whatsoever as to the nature
of the business or employment activities in which he may engage after
termination of his employment.

(1) Upon the death of Lloyd;

(2) In the event of the disability of Lloyd,
resulting in his inability to perform his duties, because of illness or
incapacity, for a period of three (3) consecutive months, or

<PAGE>

for an aggregate period of five (5) months or more, in any twelve (12) month
period during the term of this Agreement;

(3) In the event of Lloyd's termination for
Cause which shall mean a termination of Lloyd's employment only due to Lloyd's
commission of an act of fraud, embezzlement or theft constituting a felony or an
intentional act by Lloyd against the interests of PEC which causes PEC material
injury or damage.

(d) If PEC should terminate Lloyd for any reason other
than one of the three (3) reasons expressly enumerated in Subsection 5(c), it
shall pay to him the compensation he would have received, taking into account
all salary, bonus, benefits, stock options and other benefits granted him under
this Agreement had the contract been performed to term, in one (1) lump sum,
payable within thirty (30) days of his last day of employment. In calculating
the lump sum payment Lloyd may be entitled to pursuant to this Subsection, the
parties shall take into account increases in salary, bonus, benefits, etc. that
Lloyd might have reasonably expected to receive.

6. CHANGE IN CONTROL.

(a) If PEC should terminate Lloyd's employment under this
Agreement for Good Reason as a result of a Change in Control of PEC, PEC, or its
successor, shall pay to Lloyd the greater of (i) the compensation he would have
received taking into account all salary, bonus, benefits, stock options and
other benefits granted him under this Agreement, had the contract been performed
for a full five (5) years; or (ii) the compensation he would have received
taking into account all salary, bonus, stock options and other benefits granted
him under this Agreement, had the contract been performed for a full two (2)
years beyond its initial five (5) year term or any renewal term. In calculating
the amount of compensation Lloyd may be entitled to pursuant to this Subsection,
the parties shall take into account increases in salary, bonus, benefits, etc.
that Lloyd might have reasonably expected to receive. Such payment shall be in
lieu of any other future payments which Lloyd would be otherwise entitled to
receive under this Agreement.

(b) The term "Change in Control" shall mean any one of
the following occurring within a twelve (12) month period:

(1) The acquisition of ownership of, or power to
vote 51% or more of PEC's outstanding voting stock; or

(2) The acquisition of the power to control the
election of a majority of PEC's directors; or

(3) The sale, merger, acquisition or
consolidation of PEC to, with or by any other person or entity in which the
ownership of, or power to vote, 51% or more of PEC's outstanding voting stock
has been transferred; or

<PAGE>

(4) Any other circumstances in which a court
of competent jurisdiction would determine that persons or entities who
controlled PEC at the time this Agreement was entered into were no longer in
control of PEC (for purposes of this Subsection 6(b)(4), "control" shall be
defined as the power to vote 51% or more of PEC's outstanding voting stock or
the power to control the election of a majority of PEC's directors).

(1) A reduction by PEC in Lloyd's base salary as
in effect immediately prior to the Change in Control; or

(2) The failure by PEC to continue in effect any
Plan in which Lloyd is participating at the time of the Change in Control of PEC
(or Plans providing at least substantially similar benefits) other than as a
result of the normal expiration of any such Plan in accordance with its terms as
in effect at the time of the Change in Control, or the taking of any action, or
the failure to act, by PEC which would adversely affect Lloyd's continued
participation in any of such Plans on at least as favorable a basis to Lloyd as
is the case on the date of the Change in Control; or

(3) A material change in Lloyd's status or
position with PEC or a material change in his duties or responsibilities which
is inconsistent with such status or position, or any removal of Lloyd from such
position, except in connection with the termination of Lloyd's employment for
Cause or disability or as a result of death; or

(4) The failure by PEC to obtain from any
successor the assent to this Agreement contemplated by Section 8 hereof; or

(5) Any termination by PEC of Lloyd's
employment not satisfying the requirements of Section 5(c) of this Agreement.

7. OTHER AGREEMENTS.

As a condition of his employment with PEC, Lloyd has also
executed an Employee Confidentiality and Inventions Agreement, a copy of which
is attached hereto and incorporated as a part of this Agreement by this
reference.

8. BINDING EFFECT.

(a) This Agreement shall enure to the benefit of, and be
binding upon, any corporate or other successor or assignee of PEC which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or 51% or more of the stock, business or assets of PEC. PEC shall
require any such successor to expressly assume and agree to perform the
provisions

<PAGE>

of Section 6 in the same manner and to the same extent as PEC would be required
to perform if no such succession had taken place. The parties acknowledge that
this Subsection 8(a) is for the benefit and protection of Lloyd; accordingly,
PEC hereby confers the right on Lloyd, either acting on his own behalf or on
behalf of PEC, to enforce this Agreement and, specifically, this Subsection 8(a)
against any successor or assignee of PEC. PEC further grants Lloyd the right to
intervene or otherwise participate in any litigation or other proceeding against
a successor or assignee. In the event PEC fails for any reason to enforce its
rights under this Subsection 8(a), then Lloyd may take all reasonable, prudent
and diligent action in PEC's place and shall recover all his fees, expenses and
costs from PEC.

(b) This Agreement shall insure to the benefit of, and be
enforceable by, Lloyd's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If Lloyd
should die while any amount would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Lloyd's devisee, legatee
or other designee or, if there is no such designee, to his estate.

9. ENTIRE AGREEMENT. This Agreement and the other instruments
referred to herein contain the entire agreement of the parties relating to the
subject matter hereof and supersede and cancel all prior written and oral
agreements and understandings between the parties relating to the subject matter
of this Agreement, which are not set forth herein. No amendment or modification
of this Agreement shall be valid unless made in writing and signed by the
parties hereto. No term or condition of this Agreement shall be deemed to have
been waived except by written instrument of the party charged with such waiver.

10. GOVERNING LAW. This Agreement will be construed in accordance
with the laws of the Commonwealth of Virginia.

11. NOTICES. All notices to be sent to either party by the other
party hereto pursuant to this Agreement shall be sent by registered mail to the
following respective addresses:

(a) PEC. If to PEC, addressed to it at:

3949 Pender Drive
Fairfax, Virginia 22030

With a required copy to:

David W. Pijor, Esquire
10482 Armstrong Street
Fairfax, Virginia 22030

<PAGE>

(b) LLOYD. If to Lloyd, addressed to him at:

10912 Earlsgate Lane
Rockville, Maryland 20852

IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the day and year first above written.

PERFORMANCE ENGINEERING CORPORATION
a Virginia corporation

ATTEST:
By:
- ----------------------------------[SEAL] --------------------------------
President

- ---------------------------------- -----------------------------------
Witness Stuart R. Lloyd

<PAGE>

Exhibit 10.8

PEC SOLUTIONS

2000 STOCK INCENTIVE PLAN

PEC Solutions, Inc., a Delaware corporation (the "COMPANY"), hereby
establishes this PEC Solutions 2000 Stock Incentive Plan (the "PLAN").

1. PURPOSE

The purpose of the Plan is to promote the success of the Company by (i)
providing employees and other persons with incentives to improve stockholder
value and to contribute to the growth and financial success of the Company and
(ii) enabling the Company to attract, retain and reward the best-available
persons.

2. DEFINITIONS

Unless the capitalized terms used in this Plan are defined in other
Sections, such terms are defined in this Section 2.

(a) "AFFILIATE" means any entity, whether now or hereafter existing,
which controls, is controlled by, or is under common control with, the Company
(including, but not limited to, joint ventures, limited liability companies, and
partnerships). For this purpose, "control" means ownership of 50% or more of the
total combined voting power or value of all classes of stock or interests of the
entity.

(b) "AWARD" means any stock option, stock appreciation right, stock
award, phantom stock award, performance award, or other stock-based award
granted under this Plan.

(d) "CODE" means the Internal Revenue Code of 1986, as amended, and
regulations thereunder.

(e) "COMMON STOCK" means common stock of the Company, par value of
$0.01 per share.

(f) "FAIR MARKET VALUE" shall mean, with respect to a share of the
Company's Common Stock for any purpose on a particular date, the value
determined by the Administrator in good faith. However, if the Common Stock is
registered under Section 12(b) of the Securities Exchange Act of 1934, as
amended, "FAIR MARKET VALUE" shall mean, as applicable, (i) either the closing
price or the average of the high and low sale price on the relevant date, as
determined in the Administrator's discretion, quoted on the New York Stock
Exchange, the American Stock Exchange, or the Nasdaq National Market; (ii) the
last sale price on the relevant date quoted on the Nasdaq SmallCap Market; (iii)
the average of the high bid and low asked prices on the relevant date quoted on
the Nasdaq OTC Bulletin Board Service or by the National Quotation Bureau, Inc.
or a comparable service as determined in the Administrator's discretion; or (iv)
if the Common Stock is not quoted by any of the above, the average of the
closing bid and asked prices on the relevant date furnished by a professional
market maker for the Common Stock, or by such other source, selected by the
Administrator. If no public trading of the Common Stock occurs on the relevant
date, then Fair Market Value shall be determined as of the next preceding date
on which trading of the Common Stock does occur. For all purposes under this
Plan, the term "relevant date" as used in this Section 2(f) shall mean either
the date as of which Fair Market Value is to be determined or the next preceding
date on which public trading of the Common Stock occurs, as determined in the
Administrator's discretion.

<PAGE>

(g) "GRANT AGREEMENT" means a written document memorializing the terms
and conditions of an Award granted pursuant to the Plan.

3. ADMINISTRATION

(a) ADMINISTRATION OF THE PLAN. The Plan is administered by the Board
or by one or more committees as may be appointed by the Board from time to time
(the Board or the committees are referred to herein as the "ADMINISTRATOR").

(b) POWERS OF THE ADMINISTRATOR. The Administrator shall have all the
powers vested in it by the terms of the Plan, such powers to include authority,
in its sole and absolute discretion, to grant Awards under the Plan, prescribe
Grant Agreements evidencing such Awards and establish programs for granting
Awards.

The Administrator shall have full power and authority to take all other
actions necessary to carry out the purpose and intent of the Plan, including,
but not limited to, the authority to: (i) determine the eligible persons to
whom, and the time or times at which Awards shall be granted; (ii) determine the
types of Awards to be granted; (iii) determine the number of shares to be
covered by or used for reference purposes for each Award; (iv) impose such
terms, limitations, restrictions and conditions upon any such Award as the
Administrator shall deem appropriate; (v) modify, amend, extend or renew
outstanding Awards, or accept the surrender of outstanding Awards and substitute
new Awards (provided however, that, except as provided in Section 7(c) of the
Plan, any modification that would materially adversely affect any outstanding
Award shall not be made without the consent of the holder); (vi) accelerate or
otherwise change the time in which an Award may be exercised or becomes payable
and to waive or accelerate the lapse, in whole or in part, of any restriction or
condition with respect to such Award, including, but not limited to, any
restriction or condition with respect to the vesting or exercisability of an
Award following termination of any grantee's employment or other relationship
with the Company; and (vii) establish objectives and conditions, if any, for
earning Awards and determining whether Awards will be paid after the end of a
performance period.

The Administrator shall have full power and authority, in its sole and
absolute discretion, to administer and interpret the Plan and to adopt and
interpret such rules, regulations, agreements, guidelines and instruments for
the administration of the Plan and for the conduct of its business as the
Administrator deems necessary or advisable.

(c) NON-UNIFORM DETERMINATIONS. The Administrator's determinations
under the Plan (including without limitation, determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the Grant Agreements evidencing such Awards) need
not be uniform and may be made by the Administrator selectively among persons
who receive, or are eligible to receive, Awards under the Plan, whether or not
such persons are similarly situated.

(d) LIMITED LIABILITY. To the maximum extent permitted by law, no
member of the Administrator shall be liable for any action taken or decision
made in good faith relating to the Plan or any Award thereunder.

(e) INDEMNIFICATION. To the maximum extent permitted by law and by the
Company's charter and by-laws, the members of the Administrator shall be
indemnified by the Company in respect of all their activities under the Plan.

(f) EFFECT OF ADMINISTRATOR'S DECISION. All actions taken and decisions
and determinations made by the Administrator on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Administrator's
sole and absolute discretion and shall be conclusive and binding on all parties
concerned,

-2-
<PAGE>

including the Company, its stockholders, any participants in the Plan
and any other employee, consultant, or director of the Company, and their
respective successors in interest.

4. SHARES AVAILABLE FOR THE PLAN

Subject to adjustments as provided in Section 7(c) of the Plan, the
shares of Common Stock that may be issued with respect to Awards granted
under the Plan shall not exceed (i) in calendar year 2000, 750,000 shares,
and (ii) in each calendar year thereafter, during any part of which the Plan
is in effect, 6.25% of the total shares of Common Stock outstanding on the
first day of such year, plus the number of shares available for Awards in the
previous calendar year that were not awarded under the Plan; provided that no
more than an aggregate of 7,500,000 shares of Common Stock may be issued
pursuant to incentive stock options intended to qualify under Code section
422.

The Company shall reserve such number of shares for Awards under the
Plan, subject to adjustments as provided in Section 7(c) of the Plan. If any
Award, or portion of an Award, under the Plan expires or terminates unexercised,
becomes unexercisable or is forfeited or otherwise terminated, surrendered or
canceled as to any shares, or if any shares of Common Stock are surrendered to
the Company in connection with any Award (whether or not such surrendered shares
were acquired pursuant to any Award), or if any shares are withheld by the
Company, the shares subject to such Award and the surrendered and withheld
shares shall thereafter be available for further Awards under the Plan;
provided, however, that any such shares that are surrendered to or withheld by
the Company in connection with any Award or that are otherwise forfeited after
issuance shall not be available for purchase pursuant to incentive stock options
intended to qualify under Code section 422.

5. PARTICIPATION

Participation in the Plan shall be open to all employees, officers, and
directors of, and other individuals providing bona fide services to or for, the
Company, or of any Affiliate of the Company, as may be selected by the
Administrator from time to time. The Administrator may also grant Awards to
individuals in connection with hiring, retention or otherwise, prior to the date
the individual first performs services for the Company or an Affiliate provided
that such Awards shall not become vested prior to the date the individual first
performs such services.

6. AWARDS

The Administrator, in its sole discretion, establishes the terms of all
Awards granted under the Plan. Awards may be granted individually or in tandem
with other types of Awards. All Awards are subject to the terms and conditions
provided in the Grant Agreement. The Administrator may permit or require a
recipient of an Award to defer such individual's receipt of the payment of cash
or the delivery of Common Stock that would otherwise be due to such individual
by virtue of the exercise of, payment of, or lapse or waiver of restrictions
respecting, any Award. If any such payment deferral is required or permitted,
the Administrator shall, in its sole discretion, establish rules and procedures
for such payment deferrals.

(a) STOCK OPTIONS. The Administrator may from time to time grant to
eligible participants Awards of incentive stock options as that term is defined
in Code section 422 or nonqualified stock options; provided, however, that
Awards of incentive stock options shall be limited to employees of the Company
or of any current or hereafter existing "parent corporation" or "subsidiary
corporation," as defined in Code sections 424(e) and (f), respectively, of the
Company. Options intended to qualify as incentive stock options under Code
section 422 must have an exercise price at least equal to Fair Market Value as
of the date of grant, but nonqualified stock options may be granted with an
exercise price less than Fair Market Value. No stock option

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<PAGE>

shall be an incentive stock option unless so designated by the Administrator at
the time of grant or in the Grant Agreement evidencing such stock option.

(b) STOCK APPRECIATION RIGHTS. The Administrator may from time to time
grant to eligible participants Awards of Stock Appreciation Rights ("SAR"). An
SAR entitles the grantee to receive, subject to the provisions of the Plan and
the Grant Agreement, a payment having an aggregate value equal to the product of
(i) the excess of (A) the Fair Market Value on the exercise date of one share of
Common Stock over (B) the base price per share specified in the Grant Agreement,
times (ii) the number of shares specified by the SAR, or portion thereof, which
is exercised. Payment by the Company of the amount receivable upon any exercise
of an SAR may be made by the delivery of Common Stock or cash, or any
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator. If upon settlement of the exercise of an SAR a grantee is to
receive a portion of such payment in shares of Common Stock, the number of
shares shall be determined by dividing such portion by the Fair Market Value of
a share of Common Stock on the exercise date. No fractional shares shall be used
for such payment and the Administrator shall determine whether cash shall be
given in lieu of such fractional shares or whether such fractional shares shall
be eliminated.

(c) STOCK AWARDS. The Administrator may from time to time grant
restricted or unrestricted stock Awards to eligible participants in such
amounts, on such terms and conditions, and for such consideration, including no
consideration or such minimum consideration as may be required by law, as it
shall determine. A stock Award may be paid in Common Stock, in cash, or in a
combination of Common Stock and cash, as determined in the sole discretion of
the Administrator.

(d) PHANTOM STOCK. The Administrator may from time to time grant Awards
to eligible participants denominated in stock-equivalent units ("PHANTOM STOCK")
in such amounts and on such terms and conditions as it shall determine. Phantom
stock units granted to a participant shall be credited to a bookkeeping reserve
account solely for accounting purposes and shall not require a segregation of
any of the Company's assets. An Award of phantom stock may be settled in Common
Stock, in cash, or in a combination of Common Stock and cash, as determined in
the sole discretion of the Administrator. Except as otherwise provided in the
applicable Grant Agreement, the grantee shall not have the rights of a
stockholder with respect to any shares of Common Stock represented by a phantom
stock unit solely as a result of the grant of a phantom stock unit to the
grantee.

(e) PERFORMANCE AWARDS. The Administrator may, in its discretion, grant
performance awards which become payable on account of attainment of one or more
performance goals established by the Administrator. Performance awards may be
paid by the delivery of Common Stock or cash, or any combination of Common Stock
and cash, as determined in the sole discretion of the Administrator. Performance
goals established by the Administrator may be based on the Company's or an
Affiliate's operating income or one or more other business criteria selected by
the Administrator that apply to an individual or group of individuals, a
business unit, or the Company or an Affiliate as a whole, over such performance
period as the Administrator may designate.

(f) OTHER STOCK-BASED AWARDS. The Administrator may from time to time
grant other stock-based awards to eligible participants in such amounts, on such
terms and conditions, and for such consideration, including no consideration or
such minimum consideration as may be required by law, as it shall determine.
Other stock-based awards may be denominated in cash, in Common Stock or other
securities, in stock-equivalent units, in stock appreciation units, in
securities or debentures convertible into Common Stock, or in any combination of
the foregoing and may be paid in Common Stock or other securities, in cash, or
in a combination of Common Stock or other securities and cash, all as determined
in the sole discretion of the Administrator.

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<PAGE>

7. MISCELLANEOUS

(a) WITHHOLDING OF TAXES. Grantees and holders of Awards shall pay to
the Company or its Affiliate, or make provision satisfactory to the
Administrator for payment of, any taxes required to be withheld in respect of
Awards under the Plan no later than the date of the event creating the tax
liability. The Company or its Affiliate may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to
the grantee or holder of an Award. In the event that payment to the Company or
its Affiliate of such tax obligations is made in shares of Common Stock, such
shares shall be valued at Fair Market Value on the applicable date for such
purposes.

(b) TRANSFERABILITY. Except as otherwise determined by the
Administrator, and in any event in the case of an incentive stock option or a
stock appreciation right granted with respect to an incentive stock option, no
Award granted under the Plan shall be transferable by a grantee otherwise than
by will or the laws of descent and distribution. Unless otherwise determined by
the Administrator in accord with the provisions of the immediately preceding
sentence, an Award may be exercised during the lifetime of the grantee, only by
the grantee or, during the period the grantee is under a legal disability, by
the grantee's guardian or legal representative.

(i) Upon a stock dividend of, or stock split or reverse stock
split affecting, the Common Stock of the Company, (A) the maximum number of
shares reserved for issuance or with respect to which Awards may be granted
under the Plan, as provided in Section 4 of the Plan, and (B) the number of
shares covered by and the exercise price and other terms of outstanding Awards,
shall, without further action of the Board, be adjusted to reflect such event
unless the Board determines, at the time it approves such stock dividend, stock
split or reverse stock split, that no such adjustment shall be made. The
Administrator may make adjustments, in its discretion, to address the treatment
of fractional shares and fractional cents that arise with respect to outstanding
Awards as a result of the stock dividend, stock split or reverse stock split.

(ii) In the event of any other changes affecting the Company,
the capitalization of the Company or the Common Stock of the Company by reason
of any spin-off, split-up, dividend, recapitalization, merger, consolidation,
business combination or exchange of shares and the like, the Administrator, in
its discretion and without the consent of holders of Awards, shall make: (A)
appropriate adjustments to the maximum number and kind of shares reserved for
issuance or with respect to which Awards may be granted under the Plan, as
provided in Section 4 of the Plan, and to the number, kind and price of shares
covered by outstanding Awards; and (B) any other adjustments in outstanding
Awards, including but not limited to reducing the number of shares subject to
Awards or providing or mandating alternative settlement methods such as
settlement of the Awards in cash or in shares of Common Stock or other
securities of the Company or of any other entity, or in any other matters which
relate to Awards as the Administrator shall, in its sole discretion, determine
to be necessary or appropriate.

(iii) Notwithstanding anything in the Plan to the contrary and
without the consent of holders of Awards, the Administrator, in its sole
discretion, may make any modifications to any Awards, including but not limited
to cancellation, forfeiture, surrender or other termination of the Awards in
whole or in part regardless of the vested status of the Award, in order to
facilitate any business combination that is authorized by the Board to comply
with requirements for treatment as a pooling of interests transaction for
accounting purposes under generally accepted accounting principles.

(iv) The Administrator is authorized to make, in its
discretion and without the consent of holders of Awards, adjustments in the
terms and conditions of, and the criteria included in, Awards in

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<PAGE>

recognition of unusual or nonrecurring events affecting the Company, or the
financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the
Administrator determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan and outstanding Awards.

(d) SUBSTITUTION OF AWARDS IN MERGERS AND ACQUISITIONS. Awards may be
granted under the Plan from time to time in substitution for Awards held by
employees, officers, consultants or directors of entities who become or are
about to become employees, officers, consultants or directors of the Company or
an Affiliate as the result of a merger or consolidation of the employing entity
with the Company or an Affiliate, or the acquisition by the Company or an
Affiliate of the assets or stock of the employing entity. The terms and
conditions of any substitute Awards so granted may vary from the terms and
conditions set forth herein to the extent that the Administrator deems
appropriate at the time of grant to conform the substitute Awards to the
provisions of the awards for which they are substituted.

(e) TERMINATION, AMENDMENT AND MODIFICATION OF THE PLAN. The Board may
terminate, amend or modify the Plan or any portion thereof at any time.

(f) NON-GUARANTEE OF EMPLOYMENT OR SERVICE. Nothing in the Plan or in
any Grant Agreement thereunder shall confer any right on an individual to
continue in the service of the Company or shall interfere in any way with the
right of the Company to terminate such service at any time with or without cause
or notice.

(g) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company and a grantee or any other person. To
the extent that any grantee or other person acquires a right to receive payments
from the Company pursuant to an Award, such right shall be no greater than the
right of any unsecured general creditor of the Company.

(h) GOVERNING LAW. The validity, construction and effect of the Plan,
of Grant Agreements entered into pursuant to the Plan, and of any rules,
regulations, determinations or decisions made by the Administrator relating to
the Plan or such Grant Agreements, and the rights of any and all persons having
or claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with applicable federal laws and the laws of the State
of Delaware without regard to its conflict of laws principles.

(i) EFFECTIVE DATE; TERMINATION DATE. The Plan is effective as of the
date on which the Plan is adopted by the Board, subject to approval of the
stockholders within twelve months before or after such date. No Award shall be
granted under the Plan after the close of business on the day immediately
preceding the tenth anniversary of the effective date of the Plan, or if
earlier, the tenth anniversary of the date this Plan is approved by the
stockholders. Subject to other applicable provisions of the Plan, all Awards
made under the Plan prior to such termination of the Plan shall remain in effect
until such Awards have been satisfied or terminated in accordance with the Plan
and the terms of such Awards.

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<PAGE>

PERFORMANCE ENGINEERING CORPORATION
NONQUALIFIED STOCK OPTION PLAN

1. PURPOSE OF PLAN.

The purposes of this Performance Engineering Corporation
("Corporation") Nonqualified Stock Option Plan are to further enable the
Corporation to continue to attract and retain the most qualified employees and
outside Directors and to further the growth, development and financial success
of the Corporation.

2. TERM OF THE PLAN AND AWARDS.

(a) TERM OF THE PLAN. The Plan shall continue in effect for a
period of ten (10) years from its Effective Date of January 1, 1995. Unless this
Plan is extended, no further options shall be granted hereunder after such date.

(b) TERM OF AWARDS. The term of each option award shall be as
specified by the Committee, subject to earlier termination as provided in
Paragraphs 7 and 8 hereof, but shall not exceed ten (10) years.

3. SHARES SUBJECT TO THE PLAN.

Except as otherwise required by the provisions of Paragraph 10
hereof, the aggregate number of shares of the Corporation's common stock
deliverable pursuant to option awards shall not exceed 300,000 shares. Optioned
shares may either be authorized but unissued shares or shares held in treasury.
If option awards should expire, become unexercisable or be forfeited for any
reason without having been exercised in full, the option shares shall be
available for the grant of additional option awards under this Plan.

4. ADMINISTRATION OF THE PLAN.

(a) COMPOSITION OF THE COMMITTEE. This Plan shall be
administered by a Stock Option Committee ("Committee"), which shall be appointed
by the Board of Directors of the Corporation. In the absence at any time of a
duly appointed Committee, the Plan shall be administered by the entire Board of
Directors of the Corporation.

(b) POWERS OF THE COMMITTEE. The Committee shall have the sole
and absolute authority and discretion (i) to select participants and grant
option awards, (ii) to determine the form, content and timing of any option
award to be issued hereunder, (iii) to prescribe, amend and rescind rules and
regulations relating to the Plan, and (iv) to make all interpretations and
determinations necessary or advisable for the administration of the Plan.

(c) EFFECT OF THE COMMITTEE'S DECISIONS. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.

<PAGE>

(d) INDEMNIFICATION. In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Corporation in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in connection
with the Plan or any option award granted hereunder to the full extent provided
for in the Corporation's Articles of Incorporation with respect to the
indemnification of directors.

5. EXERCISE PRICE FOR OPTIONS.

The exercise price for any option award granted hereunder
shall not be less than the market value of the optioned shares on the date of
grant, as determined by the Committee from time to time ("Annex I value").

6. EXERCISING OPTIONS.

(a) GENERALLY. Any option award granted hereunder shall be
exercisable according to its terms by giving written notice to the Corporation
specifying the option being exercised. An option award may be exercised only as
to the full number of shares granted therein.

(b) PAYMENT. The exercise price of the shares as to which an
option is exercised shall be paid in full at the time of exercise either in cash
or in shares of the Corporation, or by a combination of cash and shares.

(c) PERIOD OF EXERCISABILITY. Any option award granted
hereunder shall not be transferred or assigned in any manner and may be
exercised only if the grantee continues to serve as an employee or director of
the Corporation at the time of exercise.

7. TERMINATION OF STATUS WITH CORPORATION.

In the event that a grantee ceases to serve as an employee or
Director of the Corporation, other than for reasons of death, disability or
retirement at age 65 or later ("termination of status"), all unexercised options
shall immediately terminate. Nothing in the Plan or in any option award granted
hereunder shall confer upon any person any right to continue to serve as an
employee or Director of the Corporation.

In the event of termination of status, for any reason, of a
grantee who has exercised an option award to purchase shares of the Corporation
twelve (12) months or more prior to the termination of status, such shares are
required to be offered for sale to the Corporation by the grantee or personal
representative, at a price equal to the Annex I value as of the date of the
termination of status, in accordance with the terms contained in Section 3.3 of
the Attachment reproduced herein.

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<PAGE>

Should an exercise of an option award occur less than twelve
(12) months prior to the date of the termination of status, such shares are
required to be offered for sale to the Corporation at the exercise price paid
for said shares, in accordance with the terms contained in Section 3.3 of the
Attachment.

Closing on any sale to the Corporation shall take place within
thirty (30) days of the termination of status. Should the Corporation elect not
to purchase the offered shares, then the grantee shall be required to offer the
shares for sale to other stockholders under the terms set forth in Section 3.3
of the Attachment.

8. DEATH, RETIREMENT OR DISABILITY.

If a grantee to whom an option award is outstanding but not
exercised shall die, become disabled or retire at age 65 or thereafter, the
Corporation shall pay said grantee or his personal representative the difference
between the exercise price of the option award and the Annex I value for the
number of optioned shares at the date of death, disability or retirement. For
purposes of this paragraph, disability shall be defined as a condition rendering
the grantee unable to perform any of the material functions of his duties and
responsibilities to the Corporation for a continuous period of five (5) months.

9. AMENDMENT AND TERMINATION OF PLAN.

The Committee may from time to time amend the terms of the
Plan and, with respect to any shares not subject to option awards, suspend or
terminate the Plan. No amendment, suspension or termination of the Plan shall,
without the consent of any affected grantee of an option award, alter or impair
any rights or obligations under an outstanding option award.

10. ADJUSTMENTS UPON CHANGES OR CAPITALIZATIONS.

The number and kind of shares reserved for issuance under the
Plan, and the number and kind of shares subject to outstanding option awards and
the exercise price thereof, shall be proportionately adjusted for any increase,
decrease, change or exchange of shares for a different number or kind of shares
which results from a merger, consolidation, recapitalization, reorganization,
split up, stock split, stock dividend and the like. Any fractional shares
resulting from such adjustments shall be eliminated.

11. CONDITIONS UPON ISSUANCE OF SHARES.

(a) COMPLIANCE WITH SECURITIES LAWS. Shares of common stock
shall not be issued with respect to any award unless the issuance and delivery
of such shares shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the rules and
regulations promulgated thereunder, any applicable state securities law and the
requirements of any stock exchange upon which the shares may then be listed. The
Plan is intended to comply with Rule 16b-3, and any provision of the Plan which
the Committee determines in its sole and absolute discretion to be inconsistent
with said Rule shall, to the extent

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<PAGE>

of such inconsistency, be inoperative and null and void, and shall not affect
the validity of the remaining provisions of the Plan.

(b) COMPLIANCE WITH STOCKHOLDERS AGREEMENT. Any and all shares
acquired pursuant to the exercise of option awards granted hereunder shall be
and are specifically subject to the following restrictions from Performance
Engineering Corporation's Stockholders' Agreement, as amended.

1. Article III, Transfer of Shares (reprinted below).
2. Article IV, Miscellaneous Provisions (reprinted below).

ARTICLE III. TRANSFER OF SHARES

3.1 TRANSFERS UPON DEATH OR DISABILITY OR RETIREMENT. Upon the earlier
of an Initial Stockholder's death or disability or retirement on or after age
65, the withdrawing Initial Stockholder or estate shall have an option to offer
for sale to the Corporation such Initial Stockholder's entire initial Stock
interest, as defined in Article I, INITIAL CAPITALIZATION, Section 1.1 INITIAL
ISSUANCE, hereof, at the price and terms described in Section 3.4. The
withdrawing Initial Stockholder or estate shall be permitted the period of one
hundred twenty (120) days from said death, retirement or determination of
disability to deliver his written request to the Corporation to purchase such
shares. The purchase, or commitment to purchase, as applicable, by the
Corporation, in accordance with the terms of Section 3.4 of said shares shall
take place within sixty (60) days of the delivery to the Corporation of the
written request. In no event shall any offer for sale obligate the Corporation
to accept such offer.

The withdrawing Stockholder or estate shall be granted additional
option(s) to request that the Corporation purchase his entire initial Stock
interest, as defined in Article I, INITIAL CAPITALIZATION, Section 1.1 INITIAL
ISSUANCE, hereof, upon the occurrence of each additional or subsequent event of
withdrawal, defined for this purpose as death, disability or retirement on or
after age 65.

This provision shall not apply to any shares acquired by any
Stockholder, Initial Stockholder or otherwise, by exercise of options granted
under the Performance Engineering Corporation Stock Option Agreement or the
Performance Engineering Corporation Nonqualified Stock Option Plan or any other
means. Disposition of said Stock shall be governed by Article 12 of said Stock
Option Agreement or Article 8 of the Nonqualified Stock Option Plan, whichever
is applicable.

Disability of an Initial Stockholder shall be defined as total
disability under the terms of a Corporation-maintained insurance company
disability policy covering the withdrawing Initial Stockholder, or, if no such
policy exists, disability rendering the withdrawing Initial Stockholder unable
to perform any of the material functions of his employment with the Corporation
for a continuous period of five (5) months. The date of the occurrence of an
event of disability shall be the date of the first determination of total
disability made by the insurance company, if the Corporation has such a policy,
or the Board of Directors, if the Corporation does not.

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<PAGE>

Upon the first occurrence of death, disability or retirement on or
after age 65, the nonwithdrawing Stockholders shall be released from any and all
obligations under this Agreement to continue the withdrawing Initial
Stockholder, or his representative, or successor, as a director and/or officer
of the Corporation, regardless of whether the withdrawing Initial Stockholder,
or his estate, exercises the option to offer the withdrawing Initial
Stockholder's entire Stock interest to the Corporation for purchase and
regardless of whether the Corporation purchases said Stock or portions thereof.

3.2 TRANSFERS UPON TERMINATION FOR CAUSE. Any of the Initial
Stockholders or any other Stockholder may be terminated as a director and/or
employee of the Corporation for cause as determined by the majority of the
Stockholders or of the Board of Directors, as applicable according to the
election privileges accorded to each. For this purpose, cause shall be limited
to intentional malfeasance, repeated gross negligence resulting in significant
damage, loss or exposure to the Corporation or fraud committed by a Stockholder
in his capacity as an officer or employee of the Corporation or in his capacity
as a Stockholder with respect to his obligations to the other Stockholders under
this Agreement. If a Stockholder's employment is terminated for cause, such
Stockholder shall automatically be discharged as a Director and/or officer.

Upon the termination of employment for cause of any Stockholder, said
Stockholder shall offer for sale to the Corporation and the Corporation shall
have the option to purchase his entire Stock interest at the price and terms
established in Section 3.4, except that, for such shares as were obtained
through Stock options, price and terms shall be established in accordance with
Article 10, TERMINATION OF EMPLOYMENT, of the Performance Engineering
Corporation Stock Option Agreement or with Article 7, TERMINATION OF STATUS WITH
CORPORATION, of the Performance Engineering Corporation Nonqualified Stock
Option Plan, whichever is applicable. Should the Corporation decline to purchase
all or any part of any Initial Stockholders' Initial shares hereunder, then such
shares shall be offered according to the sequence outlined in Section 3.3 below,
treating the Corporation's initial option to purchase as the first offering
thereunder. Closing of said purchase, or commitment to purchase, as may be
applicable under Section 3.4, shall take place within sixty (60) days of the
official written determination of termination for cause.

3.3 RIGHT OF FIRST REFUSAL. If for any reason a Stockholder
desires to sell, transfer or otherwise dispose of any portion or all of his
Stock in the Corporation, he shall offer to sell such entire Stock interest or
portion thereof to the Corporation at a price and upon the terms determined in
accordance with the provisions of Section 3.4 of this Agreement; except that for
such shares as were obtained through Stock option exercise, price shall be
established in accordance with the second paragraph of Article 8, VOLUNTARY
SALE, of the Performance Engineering Corporation Stock Option Agreement or
Article 7, TERMINATION OF STATUS WITH CORPORATION, of the Performance
Engineering Corporation Nonqualified Stock Option Plan, whichever is applicable.
Any Stock not purchased by the Corporation within thirty (30) days after receipt
of such offer in writing shall then first be available at the same price and
terms to the other Stockholders, each of whom shall have the right, within ten
(10) days after the expiration of the Corporation's option to purchase, to
purchase such remaining Stock offered for sale in proportion to the ratio that
the number of shares owned by him on the date the offering Stockholder first
offered his Stock to the Corporation bears to the total number of shares of
Stock

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<PAGE>

owned by the Stockholders on such date, excluding the shares of Stock owned by
the offering Stockholder or Stockholders; provided, however, that if any
remaining Stockholder does not purchase his full proportionate share of the
Stock within ten (10) days, the offered Stock may, within five (5) days after
the expiration of said ten (10) day period, be purchased by the other remaining
Stockholders as they shall agree but, failing agreement, in equal shares. If
both the Corporation and the remaining Stockholders fail or refuse to purchase
the offered Stock of the offering Stockholder at the price and upon the terms
and within the times aforesaid, then the offering Stockholder shall offer the
remaining Stock to the non-Stockholder employees of the Corporation, each of
whom shall have the right, within ten (10) days after the expiration of the
Stockholders' option to purchase, to purchase such remaining Stock offered for
sale. If the Corporation, the remaining Stockholders and the employees fail or
refuse to purchase any or all of the offered Stock of the offering Stockholder
at the price and upon the terms and within the times aforesaid, then the
offering Stockholder shall be at liberty to offer his remaining offered Stock to
any other qualified third party (other than the remaining Stockholders), but the
offering Stockholder shall not sell such Stock to any third party without again
offering such Stock first to the Corporation and then to the remaining
Stockholders and employees as provided above, allowing the periods provided
above in each instance for the acceptance thereof, at the lower of (a) such
price and terms aforesaid or (b) at such price and terms offered to any
qualified third party. Prior to any sale of Stock by an offering Stockholder to
any non-Stockholder employee or to such qualified third party, the Corporation
must have received from its counsel the unqualified opinion of such counsel that
the proposed sale will not violate Federal and applicable state securities laws,
including any restrictions placed upon the public offering of such Stock.

3.4 VALUATION AND PAYMENT. The valuation of the Stock of the
Corporation for purposes of establishing the purchase price to be paid for the
Stock of a Stockholder pursuant to Sections 3.1, 3.2 or 3.3 shall be the Annex I
value of the Stock, as determined by this section.

Valuation of Stock acquired as a result of options exercised under the
Performance Engineering Corporation Stock Option Agreement or the Performance
Engineering Corporation Nonqualified Stock Option Plan shall be governed by said
Agreement. Such shares which are disposed of as a result of termination, death,
disability, retirement or choice thereunder shall be disposed of in accordance
with Article 8, Article 10 or Article 12 of the Stock Option Agreement, or
Article 7 or Article 8 of the Nonqualified Stock Option Plan, whichever is
applicable.

The values set forth in Annex I shall be reviewed at least annually by
December 31 of each year or more frequently if agreed to by the board of
Directors. Any changes in such values must be made in a writing signed by all of
the Board of Directors.

If such annual review does not take place or agreement as to change in
valuation cannot be reached, the effective new Annex I value shall be the last
value agreed upon increased by the rate of ten percent (10%) per full year, or
part thereof, from the date of such last agreement.

Payment by the Corporation for the Stock of a Stockholder, whether
Stock shall have been acquired as Initial Shares or through options, or
otherwise, shall be as determined by this section.

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<PAGE>

The purchase price shall be evidenced by a negotiable promissory note
executed by the Corporation bearing interest at the rate of ten percent (10%)
per annum, requiring not more than sixty (60) equal monthly payments of
principal and interest, provided, however, that the minimum monthly payment may
not be less than $2,000.00, excluding final payments which may be less than
$2,000.00. Such note shall provide that, upon default in the payment of any
installment of interest or principal, all remaining installment payments shall,
at the option of the holder of said note, become immediately due and payable.
Said notice shall also give the Corporation the option of prepayment, in whole
or in part, at any time with no penalty. Upon the sale of the Stock to the
Corporation, the withdrawing Stockholder or estate shall be entitled to retain a
security interest in the Stock to secure payment of the Corporation's
obligation, which security interest shall be relinquished upon full payment for
all of the Stock to be purchased under this Agreement. This note shall not be
required, however, should the Corporation elect to pay the purchase price in
full on the date of closing as specified herein.

Notwithstanding the foregoing, however, where such total payment of
principal and interest would exceed the amount of $240,000.00, the Corporation
shall have the option, in the sole discretion of the Board of Directors, to
phase such purchase over a period of between 72 and 120 months, to be phased in
increments of 12 months, under terms as follows: if such purchase option is
elected by the Board of Directors, the withdrawing Stockholder shall be
obligated by the terms of this Agreement to sell the Stock to the Corporation
annually over the period specified by the Corporation in increments of shares to
be determined by the Corporation for each 12-month period of sale, equal
payments to be made each month including interest at the rate of ten percent
(10%), calculated over the 12-month period, at the Annex I value in effect for
the beginning of each such 12-month period; in no case, however, shall payment
to the Stockholder for such Stock be less than $4,000.00 per month, excluding
final payments which may be less than $4,000.00. If at any time the total
payment due the Stockholder for any outstanding shares would exceed $240,000.00
as determined at the beginning of each new 12-month increment, the Corporation
may in its discretion elect a new phased purchase plan under the same terms and
conditions as if the new phased plan were the original election. Upon the sale
of each increment of the Stock to the Corporation, the withdrawing Stockholder
or estate shall be entitled to retain a security interest in that increment of
Stock, to secure payment of the Corporation's obligation, which security
interest shall be relinquished upon full payment for each increment of the Stock
to be purchased under this paragraph. For all Stock obligated to be sold by the
Stockholder under this paragraph but retained by him prior to sale, the
Stockholder shall retain full rights.

3.5 CLOSING DATE. The closing of any purchase under this Agreement
shall take place at 1:00 o'clock p.m. on the day provided in this Agreement at
the offices of Performance Engineering Corporation, 3949 Pender Drive, Fairfax,
Virginia, or at such other time and place as shall be fixed by written agreement
of the parties hereto (the "Closing").

7
<PAGE>

with evidence of payment of all transfer taxes and fees, if any. The Corporation
or the purchasing Stockholders, as the case may be, shall deliver to the selling
Stockholder or his personal representative the payment (by certified or
cashier's check) or the promissory note, as provided in Section 3.4. The
Corporation shall also deliver at Closing to the selling Stockholder or his
personal representative an appropriate release from any and all liabilities of
the Corporation, including any and all secondary liability with respect thereto
by way of personal guarantees of corporate indebtedness and any other
agreements. In connection with the Closing, the Corporation and all Stockholders
and their personal representatives, if any, shall do all things necessary to
accomplish the purchase and sale.

If the selling Stockholder or his personal representative does not
tender the certificates for the shares of Stock to be purchased as provided
herein at the Closing, the Corporation shall cause the transfer books of the
Corporation to reflect that such shares of Stock have been canceled or
transferred, as the case may be, and the Corporation or the purchasing
Stockholders, as the case may be, shall tender to the selling Stockholder or his
personal representative the payment (by certified or cashier's check) or the
promissory note, as provided in Paragraphs (a) and (b) above. After the transfer
books of the Corporation have been so modified and after such tender of payment
has been made (whether or not accepted by the selling Stockholder, his estate or
his personal representative), neither the selling Stockholder, his estate nor
his personal representative shall be considered to own Stock in the Corporation
and shall have no rights under the terms of this paragraph.

Each Stockholder hereby appoints the Corporation as his agent and
attorney-in-fact for the purpose of executing and delivering any and all
documents necessary to convey such Stockholder's Stock pursuant to the
provisions of this paragraph. In the event the Stockholder is not present at the
Closing, any conveyance by such agent and attorney-in-fact shall be a conveyance
of all of the Stockholder's right, title and equity in and to the Stock. This
power of attorney is coupled with an interest and shall not expire upon the
death or incapacity of a Stockholder, nor may this power of attorney be
terminated by any Stockholder as long as this Agreement remains in effect.

3.6 LIFE INSURANCE. The Corporation shall have the right to
purchase insurance on the lives of any or all of the Stockholders to fund its
obligations under this Agreement. The Corporation agrees to pay premiums on said
insurance policies, if any, and shall provide proof of payment of premiums to
any Stockholder who requests such proof. If a premium is not paid within ten
(10) days after its due date, the insured shall have the right to pay such
premiums and be reimbursed therefor by the Corporation. In the event that the
Corporation decides to purchase life insurance on any Stockholder, each
Stockholder hereby agrees to cooperate fully by performing all of the
requirements of the insurer which are necessary conditions precedent to the
issuance of life insurance policies. The Corporation shall be the sole owner of
the policies issued to it and it may apply any dividends toward the payment of
premiums.

Notwithstanding the provisions of this Agreement, any life insurance
company which has issued a policy of life insurance subject to the provisions of
this Agreement is hereby authorized to act in accordance with the terms of such
policy as if the Agreement did not exist, and the payment or other performance
of its contractual obligations required by any such policy shall

8
<PAGE>

completely discharge such company from all claims, suits and demands of all
persons whomsoever.

If, at any time after the death of a Stockholder, the Corporation shall
receive the proceeds from any insurance policy owned by the Corporation on the
life of the deceased Stockholder, the Corporation shall immediately use such
funds to prepay the installment payments owing to the estate or any beneficiary
of the deceased Stockholder, as provided in Section 3.1 hereof. If the
Corporation has elected not to purchase shares offered under Section 3.1 above,
and the Corporation subsequently receives such insurance proceeds, the
corporation shall then be obligated to purchase such shares up to the full
amount of the proceeds received, should an offer for sale be then current, using
such insurance proceeds as outlined in this paragraph above.

3.7 TRANSFER IN VIOLATION OF THIS AGREEMENT. The Stockholders may
not, either singly or collectively, under any circumstances sell or transfer
their Stock in the Corporation other than in accordance with the terms of this
Agreement, and, for Stock acquired under the Performance Engineering Corporation
Stock Option Agreement or Nonqualified Stock Option Plan, whichever is
applicable, in additional accordance with the terms thereunder, nor may they
pledge, assign or otherwise encumber their Stock in the Corporation.

In the event any Stockholder (hereinafter referred to as the "Offending
Stockholder") sells, assigns, transfers, gives, pledges, encumbers or otherwise
disposes of or grants a security interest in any of the Stock owned by him
otherwise than in strict accordance with the terms of this Agreement, then, in
addition to the right to any other remedies hereunder, including specific
performance, the Corporation shall have the option to purchase such Stock from
the person, trust, association, company, firm or corporation (the Transferee")
to whom such Stock has been sold, assigned, transferred, given, pledged,
encumbered or otherwise disposed of, for an amount, in cash, equal to the amount
paid by such Transferee for such Stock or fifty percent (50%) of the value of
such Stock, as determined under Section 3.4 hereof, whichever is less. The
payment of such purchase price shall be by certified or cashier's check at the
Closing described in the following paragraph.

The Corporation may exercise the purchase option provided for in this
Section 3.7 by giving written notice to the Transferee of the Offending
Stockholder at any time within one year after the Corporation receives actual
notice of such sale, assignment, transfer, gift, pledge, encumbrance or other
disposition of Stock otherwise than in accordance with the provisions of this
Agreement or, for Stock acquired under the performance Engineering Corporation
Stock Option Agreement or Nonqualified Stock Option Plan, whichever is
applicable, in additional accordance with the terms thereunder. The Closing of
any purchase under this Section 3.7 shall take place at the offices of
Performance Engineering Corporation, 3949 Pender Drive, Fairfax, Virginia at
2:00 o'clock p.m. on the thirtieth (30th) day after the Corporation delivers
such notice to the Transferee, or at such other time and place as shall be fixed
by written agreement of the Corporation and the Transferee. At such Closing, the
Transferee shall deliver to the Corporation certificates representing the Stock
transferred to him by the Offending Stockholder, duly endorsed in blank for
transfer, or with duly executed blank Stock powers attached, free and clear of
all liens, claims or encumbrances, with evidence of payment for all transfer
taxes and fees, if any, and accompanied by such further instruments as may be
necessary or desirable, in the

9
<PAGE>

opinion of counsel for the Corporation, to effect the transfer of such Stock.
The Corporation shall deliver to the Transferee or his personal representative
the payment (by certified or cashier's check) for the Stock, as provided in this
Section 3.7. Acceptance by any purchaser assignee, transferee, donee, pledgee or
other party of any of the Stock hold by any of the Stockholders shall evidence
conclusively the consent of such party to all the terms and provisions hereof,
and all such parties agree to do all things necessary and appropriate to
accomplish the purchase and sale pursuant to this Section 3.7.

If the Transferee or his personal representative does not tender the
certificates for the shares of Stock to be purchased as provided herein at such
Closing, the Corporation shall cause the transfer books of the Corporation to
reflect that such shares of Stock have been canceled upon the tender by the
Corporation to the Transferee or his personal representative of a certified or
cashier's check for the full amount of the purchase price as provided in this
Section 3.7. After the transfer books have been so modified and after such
tender of payment has been made (whether or not accepted by the Transferee or
his personal representative), neither the Transferee nor his personal
representative shall be considered to own Stock in the Corporation and shall
have no rights as a Stockholder to the extent of the shares of Stock so canceled
under the terms of this Section 3.7.

3.8 CORPORATE ACTION AND STOCKHOLDER GUARANTY. If the Corporation
is unable to make any purchase required of it under this Agreement, or to
fulfill any obligation incurred in connection therewith because of the
provisions of applicable statutes or of its Articles of Incorporation or Bylaws,
the Corporation agrees to take such action as may be necessary to permit it to
make such purchases and the Stockholders agree that they will also take such
action (other than making additional capital contributions to the Corporation or
guaranteeing debts of the Corporation) as may be necessary for the Corporation
to make such purchases when, as and if required.

If the Corporation shall, nevertheless, be unable or refuses to
purchase all of a Stockholder's Stock, or Offending Stockholder's transferred
Stock, or be unable to make payment upon any note given to a Stockholder in the
purchase of his Stock, or to a Transferee for purchase of transferred Stock, the
obligation of the Corporation with respect to the shares of Stock which the
Corporation shall be unable or refuses to purchase shall be deemed assumed by
the remaining Stockholders. The obligation of the Corporation to purchase such
Stock under this Agreement shall be primary and the aforementioned obligation of
the remaining Stockholders shall be secondary and conditional. If the remaining
Stockholders are called upon to purchase such Stock hereunder, each remaining
Stockholder shall be obligated to purchase, on the same terms and conditions as
would be applicable to a purchase by the Corporation, such portion of the Stock
offered for sale in proportion to the ratio that the number of shares owned by
him (on the date on which the Corporation's obligation to purchase such Stock
arose) bears to the total number of shares of Stock owned by the Stockholders on
such date, excluding the Stock which the Corporation is obligated to purchase.

ARTICLE IV. MISCELLANEOUS PROVISIONS

4.1 STOCK LEGEND. The provisions of the Agreement shall apply to
all Stock in the

10
<PAGE>

Corporation now owned or hereafter acquired by the Stockholders, whether
acquired by option exercise or otherwise.

Each certificate evidencing shares of Stock of the Corporation shall
bear the following legend on the face of such certificate:

The shares of Stock represented by this certificate
(and all transfers thereof) are subject to the terms
of a Stockholders' Agreement dated as of September
18, 1992, by and among the Corporation and its
stockholders, a copy of which is on file at the
principal offices of the Corporation and is available
for inspection during reasonable business hours. No
transfer of any share represented by this certificate
shall be valid unless made in accordance with such
Agreement.

In the event such legend cannot practicably be placed on the face of
such certificate, either alone or in conjunction with other legends required by
law or by this Agreement to be placed on the face of such certificate, the
legend shall be set out in conspicuous type on the back of the certificate, and
notice thereof shall be given in conspicuous type on the front of the
certificate.

4.2 AMENDMENT AND TERMINATION. This Agreement may be altered,
amended or terminated at any time only by a written instrument executed by all
of the Stockholders of the Corporation. This Agreement shall terminate upon the
occurrence of any of the following events:

(i) The bankruptcy, receivership or dissolution of the
Corporation; or

(ii) The death or disqualification of all Stockholders within
a period of sixty (60) days, in which case the Agreement shall be deemed to have
terminated immediately preceding the date on which the first such Stockholder
shall have died or become disqualified to practice his respective profession in
the Commonwealth of Virginia. Termination of this Agreement as herein provided
shall have no effect on any obligation of the parties which arose pursuant to
the purchase of Stock under this Agreement prior to its termination under this
Section 4.2.

4.3 INSTRUCTIONS TO EXECUTOR. Each Stockholder shall execute a
will directing his respective executor to perform according to this Agreement
and to execute all documents necessary to effectuate the purposes of this
Agreement. The failure, however, of any Stockholder to execute such a will shall
not affect the rights of any Stockholder or the obligations of his estate, as
provided herein.

4.4 NOTICES AND OTHER COMMUNICATION. Any notice, offer, acceptance
of an offer, or

11
<PAGE>

other communication provided for or required by this Agreement shall be in
writing and shall be deemed to have been given when delivered by hand or when
deposited in the United States mail, certified or registered, return receipt
requested, postage prepaid, properly addressed to the party to whom such notice
or other communication is intended to be given. The proper address of the
Corporation shall be:

Performance Engineering Corporation
3949 Pender Drive
Fairfax, Virginia 22030

and in the case of any other party, shall be such address as such other party
may have previously furnished in writing to the Corporation or such other
party's last known address.

4.5 ENFORCEABILITY. The parties hereto do hereby recognize and
acknowledge that it is impossible to measure in money the damages which would
result to a party or to the personal representative of a deceased party by
reason of a failure of any of the parties to perform any obligations imposed
upon him or it under this Agreement. Therefore, if any party or the personal
representative of any deceased party should institute an action or proceeding to
enforce the provisions hereof, any person against whom such action or proceeding
is brought hereby waives the claim or defense that such party or such personal
representative has an adequate remedy at law, and such person shall not urge in
any action or proceeding the claim or defense that such a remedy at law exists.

4.6 POWER OF ATTORNEY. Each Stockholder hereby appoints the Corporation
as his agent and attorney-in-fact for the purpose of executing and delivering
any and all documents necessary to convey such Stockholder's Stock pursuant to
the provisions of this Agreement. In the event the Stockholder refuses to comply
with the provisions of this Agreement or is not present at the Closing, any
conveyance by such agent and attorney-in-fact shall be a conveyance of all of
the Stockholder's right, title and equity in and to the Stock. This power of
attorney is coupled with an interest and shall not expire upon the death or
incapacity of a Stockholder, nor may this power of attorney be terminated by any
Stockholder as long as this Agreement remains in effect.

4.7 INVALID PROVISIONS. The invalidity or unenforceability of any one
or more of the particular provisions of this Agreement shall not affect the
enforceability of the other provisions hereof, all of which are inserted
conditionally on their being valid in law, and in the event one or more
provisions contained herein shall be invalid, this instrument shall be construed
as if such invalid provisions had not been inserted, and if such invalidity
shall be caused by the length of any period of time, the size of any area or the
scope of activities set forth in any provision hereof, such period of time, such
area or scope or all shall be considered to be reduced to a period, area or
scope which would cure such invalidity.

4.8 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.

12
<PAGE>

4.9 COUNTERPARTS. For the convenience of the parties hereto, any
number of counterparts hereof may be executed, and each such executed
counterpart shall be deemed to be an original instrument.

4.10 ARBITRATION. Any controversy or claim arising out of or
relating directly or indirectly to the provisions of this Agreement shall be
settled by arbitration in accordance with the rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrators may be
entered in any court having jurisdiction hereof.

4.11 GOVERNING LAWS. This Agreement shall be interpreted, construed
and enforced in accordance with the laws of the Commonwealth of Virginia and
agree that any disputes arising out of this Agreement shall be litigated in
those courts.

4.12 AUTHORITY. All provisions, terms and conditions of this
Agreement have been duly consented to, ratified, approved and adopted where
required by the Board of Directors of the Corporation, and appropriate authority
has been delegated to the officers of the Corporation to carry out this
Agreement.

4.13 ARTICLE OR SECTION HEADINGS. The Articles and Section headings
contained in this Agreement are for convenience only and shall in no manner be
construed as part of this Agreement.

4.14 GENDER. Where the context so requires, the masculine gender
shall be construed to include the feminine, a corporation, a trust or other
entity, and the singular shall be construed to include the plural and singular.

4.15 ENTIRE AGREEMENT. This Agreement constitutes the sole and
entire agreement of the parties with respect to the matters contained herein,
and any representation, inducement, promise or agreement, whether oral or
written, which pertains to such matters and is not embodied herein shall be of
no force or effect.

4.16 SECURITIES LAW RESTRICTIONS. As a condition of their
subscriptions and purchases and of the issuance of the Stock of the Corporation,
the parties hereby severally represent, warrant and covenant as follows:

(1) That they understand that the Stock has not been
registered under the Securities Act of 1933, as
amended (the "Act"), in reliance upon exemptions
promulgated thereunder or interpretations thereof,
and cannot be offered for sale, sold or otherwise
transferred unless the Stock is subsequently so
registered or qualifies for exemption from
registration under the Act, that the certificates
representing the Stock shall bear a legend to such
effect, and that any transfer agent employed or
utilized by the Corporation shall be instructed not
to effect transfer of the Stock without prior written
authorization from the Corporation (or, if the
Corporation serves as its own transfer agent, a
notation shall be made in

13
<PAGE>

the Corporation's records indicating the transfer
restriction to which the Stock is subject);

(2) That the Stock is being acquired under this Agreement
by them in good faith solely for their own account,
for investment and not with a view toward resale or
other distribution within the meaning of the Act, and
that the Stock shall not be offered for sale, sold or
otherwise transferred without either registration or
exemption from registration under the Act;

(3) That they have such knowledge and experience in
financial and business matters that they are capable
of evaluating the merits and risks of their
investment in the Stock, and that they understand and
are able to bear any economic risks associated with
such investment (including the necessity of holding
the shares for an indefinite period of time, inasmuch
as the Stock has not been registered under the Act);

(4) That they are personally familiar with and have full
knowledge of the business which is intended to be
conducted by the Corporation, including financial
matters relating to such business, that they have
been given the opportunity to ask questions of, and
receive answers from, each other concerning the
intended business and financial affairs of the
Corporation, and the terms and conditions of their
purchase of the Stock and that they have been given
the further opportunity to obtain any additional
information necessary to verify the accuracy of the
foregoing information; and

(5) That they understand that, notwithstanding any other
provisions of this Agreement regarding sale to third
parties, if an exemption for such sales is not
available, registration of the shares may be
required, but that the Corporation is under no
obligation either to register the shares or to
facilitate compliance or to comply with any
exemption.

The certificates representing the Stock of the Corporation shall bear
the following legend:

The shares represented by this Certificate have not
been registered under the Securities Act of 1933 (the
"Act") and cannot be offered, sold or transferred in
absence of registration or the availability of an
exemption from registration under the Act and the
regulations promulgated thereunder.

<PAGE>

PERFORMANCE ENGINEERING CORPORATION

STOCK OPTION AGREEMENT

1. PURPOSE OF STOCK OPTION AWARDS

Performance Engineering Corporation (the "Corporation") desires to
attract and retain the best available talent and encourage the highest level of
performance in order to continue to serve the best interests of the Corporation,
its customers and stockholders. By affording eligible employees the opportunity
to acquire proprietary interests in the Corporation and by providing incentives
for such employees to put forth the maximum efforts for the success of the
business, the stock option awards should contribute greatly to the attainment of
those objectives.

2. SCOPE AND DURATION OF OPTION PLAN

Awards under this Agreement shall be available for grant beginning
February 1, 1987, through January 31, 2001. Unless this plan is extended, no
further options shall be granted hereunder after that date.

3. ADMINISTRATION OF OPTION PLAN

The Board of Directors of the Corporation will serve as the Option Plan
Committee and shall administer the Option Plan.

The Committee shall have the absolute and sole authority in its
discretion to determine the form of the option, the employees to whom, and the
time or times at which, options shall be granted and the number of shares to be
covered by each option, the purchase price of the shares covered by each option,
and to make all of the determinations deemed necessary or advisable for the
administration or interpretation of the Option Plan.

The interpretation and construction by the Committee of any Plan
provision or any award shall be final. No member of the Committee shall be
personally liable for any action, failure to act, determination or
interpretation made in good faith with respect to the Option Plan or any
transaction hereunder.

4. ELIGIBILITY: FACTORS TO BE CONSIDERED IN GRANTING AWARD

Awards may be granted only to employees (including officers) of the
Corporation who hold, at the time of grant, managerial positions, as determined
by the Committee, or are otherwise deemed by the Committee to be "key employees"
of the Corporation. In determining to whom of the eligible employees awards
shall be granted and the number of shares to be covered by each award, the
Committee shall take into account the duties of the employees, their present and
potential contributions to the success of the Corporation, and such other
factors as they shall deem relevant in connection with accomplishing the
purposes of the Option Plan. Subject to the provisions of Paragraph 2, an
employee who has been granted an award or awards under the option plan may be
granted an additional award or awards irrespective of whether the option so held
was previously exercised, expired, surrendered or still held.

<PAGE>

5. OPTION PRICE

The purchase price of the Common Stock covered by each option shall be
established by the Committee on the date the option is granted, but in no event
shall be less than One Hundred Percent (100%) of the fair market value of the
Common Stock on the date the option is granted. Said price shall be subject to
adjustment as provided in Paragraph 13 hereof. The date on which the Committee
adopts a resolution expressly granting an option shall be considered the date on
which such option is granted.

Notwithstanding the foregoing provisions, however, any stockholder
owning ten percent (10%) or more of the total combined voting power of all
classes of stock of the Corporation shall receive options priced at one hundred
ten percent (110%) of the fair market value of the stock at the time the option
is granted, in order to comply with the Internal Revenue Code Section
422A(c)(6). This section may be amended from time to time as is necessary to
ensure compliance of this Plan with the provision of the Code.

6. TERMS OF OPTIONS

The term of each option shall be as specified by the Committee, subject
to earlier termination as provided in Paragraphs 10 and 11. However, under no
circumstances shall the term of an option be longer than five (5) years.

7. EXERCISE OF OPTIONS

(a) Subject to the provisions of this Agreement, an option granted
hereunder shall become exercisable according to its terms by giving written
notice to the Corporation specifying the option being exercised.

(b) An option may be exercised, subsequent to the second full year after
its grant and at any time, only as to all full shares as to which the option has
become exercisable.

(c) The purchase price of the shares as to which an option is exercised
shall be paid in full at the time of exercise either in cash or in shares
acquired by previous exercise of a prior option, or by a combination of cash and
stock as herein described.

(d) No option may be exercised at any time unless the holder thereof is
then an employee of the Corporation and unless the employee has remained in the
continuous employ of the Corporation, from the date of its grant to the date of
exercise.

(e) Upon the due exercise of an option in accordance with the option
Agreement and such rules and regulations as may be established by the Committee,
the holder thereof shall have the rights of a stockholder with respect to the
shares covered by such option so exercised, subject to the provisions of this
Agreement.

8. VOLUNTARY SALE

In the event that an employee wishes to offer for sale stock acquired as
a result of exercise of a stock option grant, then the following valuation rules
shall apply. In the case of an employee who has exercised his option to purchase
shares of the Corporation more than six (6) months prior to said offer for sale,
such shares are required to be offered for sale to the Corporation by the
employee at a price equal to the Annex I value as incorporated by Attachment
hereto, at the date of sale. Book value shall be determined on an accrual basis,
giving proper consideration for valid and collectible receivables of the

<PAGE>

Corporation. Should the exercise of an option take place less than six (6)
months prior to an offer for sale, such shares are required to be offered for
sale to the Corporation at option purchase price to the employee. Closing on
such sale shall take place within thirty (30) days of the event of termination.
Any payment shall, at the discretion of the Corporation, be in the form of check
or notes payable. Should the Corporation elect not to purchase the shares, then
the employee may offer the shares for sale to other Stockholders and employees,
or qualified third parties, under the terms set forth in Section 3.3 of the
Performance Engineering Corporation Stockholders' Agreement. Nothing in that
Section, however, shall be deemed to alter the valuation of the shares as set
forth herein vis a vis any offer for sale to the Corporation.

9. NON-TRANSFERABILITY OF OPTIONS

Options granted under the Option Plan shall not be transferable, and
options may be exercised, during the lifetime of the employee, only by the
employee.

10. TERMINATION OF EMPLOYMENT

In the event that the employment of an employee to whom an award has
been granted under the Option Plan but not exercised shall be terminated for
reasons other than death, retirement at age 65 or later, or disability, such
award shall forthwith terminate. Awards granted under the Option Plan shall not
be affected by any change of duties or position so long as the holder continues
to be an employee of the Corporation. Any option award may contain such
provisions as the Committee shall approve with reference to the determination of
the date employment terminates for purposes of the Option Plan and the effect of
leaves of absence in accordance with the Corporation's regular policies. Nothing
in the Option Plan or in any award granted pursuant to the Option Plan shall
confer upon any employee any right to continue in the employee of the
Corporation or interfere in any way with the right of the Corporation to
terminate his employment at any time.

In the event of the termination of employment, for any reason, of an
employee who has exercised his option to purchase shares of the Corporation more
than six (6) months prior to said termination, such shares are required to be
offered for sale to the Corporation, by the employee or his personal
representative at a price equal to the Annex I value as incorporated by
Attachment hereto, at the date of termination. Book value shall be determined on
an accrual basis, giving proper consideration for valid and collectible
receivables of the Corporation. Should the exercise of an option take place less
than six (6) months prior to an event of termination, such shares are required
to be offered for sale to the Corporation at the option purchase price to the
employee. Closing on such sale shall take place within thirty (30) days of the
event of termination. Any payment shall, at the discretion of the Corporation,
be in the form of check or notes payable. The Corporation is and shall be
obligated to purchase any and all such shares offered for sale under either
circumstance, and such purchase shall take place according to all of the
processes and procedures herein just as if the purchase were voluntary on the
part of the Corporation. This obligatory purchase applies only to shares offered
at time of termination, and does not apply to any offer at any other time.

11. TERMINATION AND AMENDMENT OF THE OPTION PLAN

The Board of Directors of the Corporation may at any time prior to
January 31, 2001, suspend, terminate, modify or amend the Option Plan provided
that any increase in

<PAGE>

the aggregate number of shares reserved for issue upon the exercise of options,
any increase in the maximum number of shares for which options may be granted or
exercised, or any material modification in the requirements as to eligibility
for participation in the Option Plan, shall be subject to the approval of the
holders of a majority of the shares of Common Stock of the Corporation issued
and outstanding and entitled to vote thereon, except that any such increase,
reduction or change that may result from adjustments authorized by Paragraph 13
do not require such approval. No suspension, termination, modification or
amendment of the Option Plan may, without the consent of the employee to whom an
award shall theretofore have been granted, affect the rights of such employee
under such award. Notwithstanding the foregoing, the Board of Directors of the
Corporation may amend any part of this Option Agreement, without the consent of
any employee, solely to enable the Option Plan and the options and rights
granted to conform to such exemption, if any, as may exist from the effect and
provision of S16(b) of the Securities Exchange Act of 1934, as amended.

12. DEATH, RETIREMENT OR DISABILITY OF AN EMPLOYEE

If an employee to whom an award has been granted under the Option Plan
shall die or become disabled while he is employed by the Corporation, or if he
shall retire at age 65 or after, and prior to the exercise of awards granted
him, the Corporation shall pay the employee or his personal representative the
difference between the option price indicated in the outstanding awards and the
Annex I value, as incorporated by Attachment hereto, of the Corporation's shares
for the number of optioned shares, at the date of death, retirement or
disability. Such payment shall, at the discretion of the Corporation, be in the
form of check, notes payable, or common stock of the Corporation. Retirement
prior to age 65, except for retirement due to disability, shall not constitute
retirement for purposes of this clause. Disability shall be defined as a
disability rendering the employee unable to perform any of the natural functions
of his employment for a continuous period of five (5) months.

13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

Notwithstanding any other provisions of the Option Agreement, each
option award may be modified as the Committee shall determine to be appropriate
for the adjustment of the number and class of shares covered by such option, the
option prices and the numbers of shares as to which options shall be exercisable
at any time, and appropriate changes in the rights related to such options in
the event of changes in the outstanding shares of the Corporation by reason of
split-ups, recapitalizations, mergers, consolidations, combinations or exchanges
of shares, separations, reorganizations, liquidations, stock splits, stock
dividends, and the like. Any fractional shares resulting from such adjustments
shall be eliminated.

14. SHARE RESTRICTIONS

Any and all shares acquired pursuant to exercise of options granted
hereunder shall be and are specifically subject to the following restrictions:

1. Article III. Transfer of Shares of the Stockholders Agreement (copy
follows)

2. Article IV. Miscellaneous Provisions (copy follows).

ARTICLE III. TRANSFER OF SHARES

<PAGE>

Stockholder's entire initial Stock interest, as defined in Article I, INITIAL
CAPITALIZATION, Section 1.1 INITIAL ISSUANCE, hereof, at the price and terms
described in Section 3.4. The withdrawing Initial Stockholder or estate shall be
permitted the period of one hundred twenty (120) days from said death,
retirement, or determination of disability to deliver his written request to the
Corporation to purchase such shares. The purchase, or commitment to purchase, as
applicable, by the Corporation, in accordance with the terms of Section 3.4, of
said shares shall take place within sixty (60) days of the delivery to the
Corporation of the written request. In no event shall any offer for sale
obligate the Corporation to accept such offer.

The withdrawing Initial Stockholder or estate shall be granted additional
option(s) to request that the Corporation purchase his entire initial Stock
interest, as defined in Article I, INITIAL CAPITALIZATION, Section 1.1 INITIAL
ISSUANCE hereof, upon the occurrence of each additional or subsequent event of
withdrawal, defined for this purpose as death, disability or retirement on or
after age 65.

This provision shall not apply to any shares acquired by any Stockholder,
Initial Stockholder or otherwise, by exercise of options granted under the
Performance Engineering Corporation Stock Option Agreement or any other means.
Disposition of said Stock shall be governed by Article 12 of said Stock Option
Agreement.

Disability shall be defined as total disability under the terms of a
Corporation-maintained insurance company disability policy covering the
withdrawing Initial Stockholder, or if no such policy exists, disability
rendering the withdrawing Initial Stockholder unable to perform any of the
material functions of his employment with the Corporation for a continuous
period of five (5) months. The date of the occurrence of an event of disability
shall be the date of the first determination of total disability made by the
insurance company, if the Corporation has such a policy, or the Board of
Directors, if the Corporation does not.

Upon the first occurrence of death, disability or retirement on or after
age 65, the nonwithdrawing Stockholders shall be released from any and all
obligations under this Agreement to continue the withdrawing Initial
Stockholder, or his representative or successor, as a director and/or officer of
the Corporation, regardless of whether the withdrawing Initial Stockholder, or
his estate, exercises the option to offer the withdrawing Initial Stockholder's
entire Stock interest to the Corporation for purchase, and regardless of whether
the Corporation purchases said Stock or portions thereof.

3.2 TRANSFERS UPON TERMINATION FOR CAUSE. Any of the Initial Stockholders
or any other Stockholder may be terminated as a director and/or officer of the
Corporation for cause as determined by the majority of the Stockholders or of
the Board of Directors, as applicable according to the election privileges
accorded to each. For this purpose, cause shall be limited to intentional
malfeasance, repeated gross negligence resulting in significant damage, loss or
exposure to the Corporation, or fraud committed by a Stockholder in his capacity
as an officer or director of the Corporation or in his capacity as a Stockholder
with respect to his obligations to the other Stockholders under this Agreement.
If a Stockholder's employment is terminated for cause, such Stockholder shall
automatically be discharged as a Director and/or officer.

Upon the termination of employment for cause of any Stockholder, said
Stockholder shall offer for sale to the Corporation and the Corporation shall
have the option to purchase his entire Stock interest at the price and terms
established in Section 3.4, except that, for such shares as were obtained
through Stock options, price and terms shall be established in accordance with
Article 10, TERMINATION OF EMPLOYMENT, of the Performance Engineering
Corporation Stock Option Agreement. Should the Corporation decline to purchase
all or any part of any Initial Stockholders' Initial shares hereunder, then such
shares shall be offered according to the sequence outlined in Section 3.3,
below, treating the Corporation's initial option to purchase as the first
offering thereunder. Closing of said purchase, or commitment to purchase, as may
be applicable under Section 3.4, shall take place within sixty (60) days of the
official written determination of termination for cause.

<PAGE>

3.3 RIGHT OF FIRST REFUSAL. If for any reason a Stockholder desires to
sell, transfer, or otherwise dispose of any portion or all of his Stock in the
Corporation, he shall offer to sell such entire Stock interest or portion
thereof to the Corporation at a price and upon the terms determined in
accordance with the provisions of Section 3.4 of this Agreement; except that for
such shares as were obtained through Stock option exercise, price shall be
established in accordance with the second paragraph of Article 8, VOLUNTARY
SALE, of the Performance Engineering Corporation Stock Option Agreement. Any
Stock not purchased by the Corporation within thirty (30) days after receipt of
such offer in writing shall then first be available at the same price and terms
to the other Stockholders, each of whom shall have the right, within ten (10)
days after the expiration of the Corporation's option to purchase, to purchase
such remaining Stock offered for sale in proportion to the ratio that the number
of shares owned by him on the date the offering Stockholder first offered his
Stock to the Corporation bears to the total number of shares of Stock owned by
the Stockholders on such date, excluding the shares of Stock owned by the
offering Stockholder or Stockholders; provided, however that if any remaining
Stockholder does not purchase his full proportionate share of the Stock within
ten (10) days, the offered Stock may, within five (5) days after the expiration
of said ten (10) day period, be purchased by the other remaining Stockholders as
they shall agree but, failing agreement, in equal shares. If both the
Corporation and the remaining Stockholders fail or refuse to purchase the
offered Stock of the offering Stockholder at the price and upon the terms and
within the times aforesaid, then the offering Stockholder shall offer the
remaining Stock to the non-Stockholder employees of the Corporation, each of
whom shall have the right, within ten (10) days after the expiration of the
Stockholders' option to purchase, to purchase such remaining Stock offered for
sale. If the Corporation, the remaining Stockholders and the employees fail or
refuse to purchase any or all of the offered Stock of the offering Stockholder
at the price and upon the terms and within the times aforesaid, then the
offering Stockholder shall be at liberty to offer his remaining offered Stock to
any other qualified third party (other than the remaining Stockholders), but the
offering Stockholder shall not sell such Stock to any third party without again
offering such Stock first to the Corporation and then to the remaining
Stockholders and employees as provided above, allowing the periods provided
above in each instance for the acceptance thereof, at the lower of (a) such
price and terms aforesaid or (b) at such price and terms offered to any
qualified third party. Prior to any sale of Stock by an offering Stockholder to
any non-Stockholder employee or to such qualified third party, the Corporation
must have received from its counsel the unqualified opinion of such counsel that
the proposed sale will not violate Federal and applicable state securities laws,
including any restrictions placed upon the public offering of such Stock.

3.4 VALUATION AND PAYMENT. The valuation of the Stock of the Corporation
for purposes of establishing the purchase price to be paid for the Stock of a
Stockholder pursuant to sections 3.1, 3.2, or 3.3, shall be the Annex I value of
the Stock, as determined by this section.

Valuation of Stock acquired as a result of options exercised under the
Performance Engineering Corporation Stock Option Agreement shall be governed by
said Agreement. Such shares which are disposed of as a result of termination,
death, disability, retirement or choice thereunder shall be disposed of in
accordance with Article 8, Article 10, or Article 12, of the Stock Option
Agreement, whichever is applicable.

The values set forth in Annex I shall be reviewed at least annually by
December 31 of each year or more frequently if agreed to by the Board of
Directors. Any changes in such values must be made in a writing signed by all of
the Board of Directors.

If such annual review does not take place or agreement as to change in
valuation cannot be reached, the effective new Annex I value shall be the last
value agreed upon increased by the rate of ten percent (10%) per full year or
part thereof, from the date of such last agreement.

<PAGE>

Payment by the Corporation for the Stock of a Stockholder , whether Stock
shall have been acquired as Initial Shares, or through options, or otherwise,
shall be as determined by this section.

The purchase price shall be evidenced by a negotiable promissory note
executed by the Corporation bearing interest at the rate of ten percent (10%)
per annum, requiring not more than 60 equal monthly payments of principal and
interest, provided however that the minimum monthly payment may not be less than
$2,000.00, excluding final payments which may be less than $2,000.00. Such note
shall provide that, upon default in the payment of any installment of interest
or principal, all remaining installment payments shall, at the option of the
holder of said note, become immediately due and payable. Said note shall also
give the Corporation the option of prepayment in whole or in part at any time
with no penalty. Upon the sale of the Stock to the Corporation, the withdrawing
Stockholder or estate shall be entitled to retain a security interest in the
Stock to secure payment of the Corporation's obligation, which security interest
shall be relinquished upon full payment for all of the Stock to be purchased
under this Agreement. This note shall not be required, however, should the
Corporation elect to pay the purchase price in full on the date of closing as
specified herein.

Notwithstanding the foregoing, however, where such total payment of
principal and interest would exceed the amount of $240,000.00, the Corporation
shall have the option, in the sole discretion of the Board of Directors, to
phase such purchase over a period of between 72 and 120 months, to be phased in
increments of 12 months, under terms as follows: if such purchase option is
elected by the Board of Directors, the withdrawing Stockholder shall be
obligated by the terms of this Agreement to sell the Stock to the Corporation
annually over the period specified by the Corporation in increments of shares to
be determined by the Corporation for each 12-month period of sale, equal
payments to be made each month including interest at the rate of ten percent
(10%), calculated over the 12-month period, at the Annex I value in effect for
the beginning of each such 12-month period; in no case, however, shall payment
to the Stockholder for such Stock be less than $4,000.00 per month, excluding
final payments which may be less than $4,000.00. If at any time the total
payment due the Stockholder for any outstanding shares would exceed $240,000.00,
as determined at the beginning of each new 12-month increment, the Corporation
may in its discretion elect a new phased purchase plan under the same terms and
conditions as if the new phased plan were the original election. Upon the sale
of each increment of the Stock to the Corporation, the withdrawing Stockholder
or estate shall be entitled to retain a security interest in that increment of
Stock, to secure payment of the Corporation's obligation, which security
interest shall be relinquished upon full payment for each increment of the Stock
to be purchased under this paragraph. For all Stock obligated to be sold by the
Stockholder under this paragraph but retained by him prior to sale, the
Stockholder shall retain full rights.

3.5 CLOSING DATE. The closing of any purchase under this Agreement shall
take place at 1:00 o'clock p.m. on the day provided in this Agreement at the
offices of Performance Engineering Corporation, 3949 Pender Drive, Fairfax,
Virginia or at such other time and place as shall be fixed by agreement of the
parties hereto (the "Closing").

At the Closing, the selling Stockholder or his personal representative
shall deliver to the Corporation or to the purchasing Stockholder, as the case
may be, certificates representing all of the Stock to be purchased, duly
endorsed, free and clear of all liens, claims or encumbrances, with evidence of
payment of all transfer taxes and fees, if any. The Corporation or the
purchasing Stockholders, as the case may be, shall deliver to the selling
Stockholder or his personal representative the payment (by certified or
cashier's check) or the promissory note, as provided in Section 3.4. The
Corporation shall also deliver at closing to the selling Stockholder or his
personal respresentative an appropriate release from any and all liabilities of
the Corporation, including any and all secondary liability with respect thereto
by way of personal guarantees of corporate indebtedness and any other
agreements. In connection with the Closing, the Corporation and all Stockholders
and their

<PAGE>

personal representatives, if any, shall do all things necessary and appropriate
to accomplish the purchase and sale.

If the selling Stockholder or his personal representative does not tender
the certificates for the shares of Stock to be purchased as provided herein at
the Closing, the Corporation shall cause the transfer books of the Corporation
to reflect that such shares of Stock have been canceled or transferred, as the
case may be, and the Corporation or the purchasing Stockholders, as the case may
be, shall tender to the selling Stockholder or his personal representative the
payment (by certified or cashier's check) or the promissory note, as provided in
Paragraphs (a) and (b) above. After the transfer books of the Corporation have
been so modified and after such tender of payment has been made (whether or not
accepted by the selling Stockholder, his estate, or his personal
representative), neither the selling Stockholder, his estate, nor his personal
representative shall be considered to own Stock in the Corporation and shall
have no rights under the terms of this Paragraph.

Each Stockholder hereby appoints the Corporation as his agent and
attorney-in-fact for the purpose of executing and delivering any and all
documents necessary to convey such Stockholder's Stock pursuant to the
provisions of this Paragraph. In the event the Stockholder is not present at the
Closing, any conveyance by such agent and attorney-in-fact shall be a conveyance
of all of the Stockholder's right, title and equity in and to the Stock. This
power of attorney is coupled with an interest and shall not expire upon the
death or incapacity of a Stockholder, nor may this power of attorney be
terminated by any Stockholder as long as this Agreement remains in effect.

3.6 LIFE INSURANCE. The Corporation shall have the right to purchase
insurance on the lives of any or all of the Stockholders to fund its obligations
under this Agreement. The Corporation agrees to pay premiums on said insurance
policies, if any, and shall provide proof of payment of premiums to any
Stockholder who requests such proof. If a premium is not paid within ten (10)
days after its due date, the insured shall have the right to pay such premiums
and be reimbursed therefor by the Corporation. In the event that the Corporation
decides to purchase life insurance on any Stockholder, each Stockholder hereby
agrees to cooperate fully by performing all the requirements of the insurer
which are necessary conditions precedent to the issuance of life insurance
policies. The Corporation shall be the sole owner of the policies issued to it
and it may apply any dividends toward the payment of premiums.

If, at any time after the death of a Stockholder, the Corporation shall
receive the proceeds from any insurance policy owned by the Corporation on the
life of the deceased Stockholder, the Corporation shall immediately use such
funds to prepay the installment payments owing to the estate or any beneficiary
of the deceased Stockholder, as provided in Section 3.1 hereof. If the
Corporation has elected not to purchase shares offered under Section 3.1 above,
and the Corporation subsequently receives such insurance proceeds, the
Corporation shall then be obligated to purchase such shares up to the full
amount of the proceeds received, should an offer for sale be then current, using
such insurance proceeds as outlined in this paragraph, above.

3.7 TRANSFER IN VIOLATION OF THIS AGREEMENT. The Stockholders may not,
either singly or collectively, under any circumstances sell or transfer their
Stock in the Corporation other than in accordance with the terms of this
Agreement, and, for Stock acquired under the Performance Engineering Corporation
Stock Option Agreement, in additional accordance with the terms thereunder; nor
may they pledge, assign, or otherwise encumber their Stock in the Corporation.

<PAGE>

In the event any Stockholder (hereinafter referred to as the "Offending
Stockholder") sells, assign, transfers, gives, pledges, encumbers, or otherwise
disposes of or grants a security interest in any of the Stock owned by him
otherwise than in strict accordance with the terms of this Agreement, then, in
addition to the right to any other remedies hereunder, including specific
performance, the Corporation shall have the option to purchase such Stock from
the person, trust, association, company, firm or corporation (the "Transferee")
to whom such Stock has been sold, assigned, transferred, given, pledged,
encumbered, or otherwise disposed of, for an amount, in cash, equal to the
amount paid by such Transferee for such Stock or fifty percent (50%) of the
value of such Stock, as determined under Section 3.4 hereof, whichever is less.
The payment of such purchase price shall be by certified or cashier's check at
the closing described in the following paragraph.

The Corporation may exercise the purchase option provided for in this
Section 3.7 by giving written notice to the Transferee of the Offending
Stockholder at any time within one year after the Corporation receives actual
notice of such sale, assignment, transfer, gift, pledge, encumbrance or other
disposition of Stock otherwise than in accordance with the provisions of this
Agreement or, for Stock acquired under the Performance Engineering Corporation
Stock Option Agreement, in additional accordance with the terms thereunder. The
closing of any purchase under this Section 3.7 shall take place at the offices
of Performance Engineering Corporation, 3949 Pender Drive, Fairfax, Virginia at
2:00 o'clock p.m. on the thirtieth (30th) day after the Corporation delivers
such notice to the Transferee, or at such other time and place as shall be fixed
by written agreement of the Corporation and the Transferee. At such closing, the
Transferee shall deliver to the Corporation certificates representing the Stock
transferred to him by the Offending Stockholder, duly endorsed in blank for
transfer, or with duly executed blank Stock powers attached, free and clear of
all liens, claims or encumbrances, with evidence of payment of all transfer
taxes and fees, if any, and accompanied by such further instruments as may be
necessary or desirable, in the opinion of counsel for the Corporation, to effect
the transfer of such Stock. The Corporation shall deliver to the Transferee or
his personal representative the payment (by certified or cashier's check) for
the Stock, as provided in this Section 3.7. Acceptance by any purchaser,
assignee, transferee, donee, pledgee or other party of any of the Stock held by
any of the Stockholders shall evidence conclusively the consent of such party to
all the terms and provisions hereof, and all such parties agree to do all things
necessary and appropriate to accomplish the purchase and sale pursuant to this
Section 3.7.

If the Transferee or his personal representative does not tender the
certificates for the shares of Stock to be purchased as provided herein at such
closing, the Corporation shall cause the transfer books of the Corporation to
reflect that such shares of Stock have been canceled upon the tender by the
Corporation to the Transferee or his personal representative of a certified or
cashier's check for the full amount of the purchase price as provided in this
Section 3.7. After the transfer books have been so modified and after such
tender of payment has been made (whether or not accepted by the Transferee or
his personal representative), neither the Transferee nor his personal
representative shall be considered to own Stock in the Corporation and shall
have no rights as a Stockholder to the extent of the shares of Stock so canceled
under the terms of this Section 3.7.

3.8 CORPORATE ACTION AND STOCKHOLDER GUARANTY. If the Corporation is
unable to make any purchase required of it under this Agreement, or to fulfill
any obligation incurred in connection therewith, because of the provisions of
applicable statutes or of its Articles of Incorporation or Bylaws, the
Corporation agrees to take such action as may be necessary to permit it to make
such purchases and the Stockholders agree that they will also take such action
(other than making additional capital contributions to the Corporation or
guaranteeing debts of the Corporation) as may be necessary for the Corporation
to make such purchases when, as and if required.

<PAGE>

Transferee for purchase of transferred Stock, the obligation of the Corporation
with respect to the shares of Stock which the Corporation shall be unable or
refuses to purchase shall be deemed assumed by the remaining Stockholders. The
obligation of the Corporation to purchase such Stock under this Agreement shall
be primary and the aforementioned obligation of the remaining Stockholders shall
be secondary and conditional. If the remaining Stockholders are called upon to
purchase such Stock hereunder, each remaining Stockholder shall be obligated to
purchase, on the same terms and conditions as would be applicable to a purchase
by the Corporation, such portion of the Stock offered for sale in proportion to
the ratio that the number of shares owned by him (on the date on which the
Corporation's obligation to purchase such Stock arose) bears to the total number
of shares of Stock owned by the Stockholders on such date, excluding the Stock
which the Corporation is obligated to purchase.

ARTICLE IV. MISCELLANEOUS PROVISIONS

4.1 STOCK LEGEND. The provisions of the Agreement shall apply to all
Stock in the Corporation now owned or hereafter acquired by the Stockholders,
whether acquired by option exercise or otherwise.

Each certificate evidencing shares of Stock of the Corporation shall bear
the following legend on the face of such certificate:

The shares of Stock represented by this certificate (and all
transfers thereof) are subject to the terms of a Stockholders'
Agreement dated as of September 18, 1992, by and among the
Corporation and its stockholders, a copy of which is on file at
the principal offices of the Corporation and is available for
inspection during reasonable business hours. No transfer of any
share represented by this certificate shall be valid unless made
in accordance with such Agreement.

In the event such legend cannot practicably be placed on the face of such
certificate, either alone or in conjunction with other legends required by law
or by this Agreement to be placed on the face of such certificate, the legend
shall be set out in conspicuous type on the back of the certificate, and notice
thereof shall be given in conspicuous type on the front of the certificate.

4.2 AMENDMENT AND TERMINATION. This Agreement may be altered, amended or
terminated at any time only by a written instrument executed by all of the
Stockholders of the Corporation. This Agreement shall terminate upon the
occurrence of any of the following events:

(i) The bankruptcy, receivership or dissolution of the
Corporation; or

(ii) The death or disqualification of all Stockholders within a
period of sixty (60) days, in which case the Agreement shall be deemed to have
terminated immediately preceding the date on which the first such Stockholder
shall have died or become disqualified to practice his respective profession in
the Commonwealth of Virginia. Termination of this Agreement as herein provided
shall have no effect on any obligation of the parties which arose pursuant to
the purchase of Stock under this Agreement prior to its termination under this
Section 4.2.

4.3. INSTRUCTIONS TO EXECUTOR. Each Stockholder shall execute a will
directing his respective executor to perform according to this Agreement and to
execute all documents necessary to effectuate the purposes of this Agreement.
The failure, however, of any Stockholder to execute such a will shall not affect
the rights of any Stockholder or the obligations of his estate, as provided
herein.

4.4 NOTICES AND OTHER COMMUNICATION. Any notice, offer, acceptance of an
offer, or other communication provided for or required by this Agreement shall
be in writing and shall be deemed to have been given when delivered by hand or
when deposited in the United States mail, certified or registered, return
receipt requested, postage prepaid, properly

<PAGE>

addressed to the party to whom such notice or other communication is intended to
be given. The proper address of the Corporation shall be:

Performance Engineering Corporation
Pender Drive Suite 300
Fairfax, Virginia 22030

and in the case of any other party, shall be such address as such other party
may have previously furnished in writing to the Corporation or such other
party's last known address.

4.7 INVALID PROVISIONS. The invalidity or unenforceability of any one or
more of the particular provisions of this Agreement shall not affect the
enforceability of the other provisions hereof, all of which are inserted
conditionally on their being valid in law, and in the event one or more
provisions contained herein shall be invalid, this instrument shall be construed
as if such invalid provisions had not been inserted, and if such invalidity
shall be caused by the length of any period of time, the size of any area or the
scope of activities set forth in any provision hereof, such period of time, such
area or scope or all, shall be considered to be reduced to a period, area, or
scope which would cure such invalidity.

4.8 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.

4.9 COUNTERPARTS. For the convenience of the parties hereto, any number
of counterparts hereof may be executed, and each such executed counterpart shall
be deemed to be an original instrument.

4.10 ARBITRATION. Any controversy or claim arising out of or relating
directly or indirectly to the provisions of this Agreement shall be settled by
arbitration in accordance with the rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrators may be
entered in any court having jurisdiction hereof.

4.11 GOVERNING LAWS. This Agreement shall be interpreted, construed, and
enforced in accordance with the laws of the Commonwealth of Virginia. The
parties hereby consent to the jurisdiction of the courts of the Commonwealth of
Virginia and agree that any disputes arising out of this Agreement shall be
litigated in those courts.

4.12 AUTHORITY. All provisions, terms and conditions of this Agreement
have been duly consented to, ratified, approved, and adopted where required by
the Board of Directors of the Corporation, and appropriate authority has been
delegated to the officers of the Corporation to carry out this Agreement.

<PAGE>

4.13 ARTICLE OR SECTION HEADINGS. The Articles and Section headings
contained in this Agreement are for convenience only and shall in no manner be
construed as part of this Agreement.

4.14 GENDER. Where the context so requires, the masculine gender shall be
construed to include the feminine, a corporation, a trust, or other entity, and
the singular shall be construed to include the plural and singular.

4.15 ENTIRE AGREEMENT. This Agreement constitutes the sole and entire
agreement of the parties with respect to the matters contained herein, and any
representation, inducement, promise, or agreement, whether oral or written,
which pertains to such matters and is not embodied herein shall be of no force
or effect.

4.16 SECURITIES LAW RESTRICTIONS. As a condition of their subscriptions
and purchases and of the issuance of the Stock of the Corporation, the parties
hereby severally represent, warrant and covenant as follows:

(1) That they understand that the Stock has not been
registered under the Securities Act of 1933, as amended
(the "Act"), in reliance upon exemptions promulgated
thereunder or interpretations thereof, and cannot be
offered for sale, sold or otherwise transferred unless
the Stock is subsequently so registered or qualifies for
exemption from registration under the Act, that the
certificates representing the Stock shall bear a legend
to such effect, and that any transfer agent employed or
utilized by the Corporation shall be instructed not to
effect transfer of the Stock without prior written
authorization from the Corporation (or, if the
Corporation serves as its own transfer agent, a notation
shall be made in the Corporation's records indicating the
transfer restriction to which the Stock is subject);

(2) That the Stock is being acquired under this Agreement
by them in good faith solely for their own account, for
investment and not with a view toward resale or other
distribution within the meaning of the Act, and that the
Stock shall not be offered for sale, sold or
otherwise transferred without either registration or
exemption from registration under the Act;

(3) That they have such knowledge and experience in
financial and business matters that they are capable
of evaluating the merits and risks of their investment
in the Stock, and that they understand and are
able to bear any economic risks associated with
such investment (including the necessity of holding
the shares for an indefinite period of time, inasmuch
as the Stock has not been registered under the Act);

<PAGE>

purchase of the Stock and that they have been given
the further opportunity to obtain any additional
information necessary to verify the accuracy of the
foregoing information; and

(5) That they understand that, notwithstanding any other
provisions of this Agreement regarding sale to third
parties, if an exemption for such sales is not available,
registration of the shares may be required, but that the
Corporation is under no obligation either to register the
shares or to facilitate compliance or to comply with any
exemption.

The certificates representing the Stock of the Corporation shall bear the
following legend:

The shares represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Act") and cannot
be offered, sold or transferred in absence of registration or the
availability of an exemption from registration under the Act and
the regulations promulgated thereunder.

<PAGE>

AMENDED AND RESTATED
PERFORMANCE ENGINEERING CORPORATION
NONQUALIFIED EXECUTIVE SUPPLEMENTAL
RETIREMENT PROGRAM AGREEMENT

THIS AMENDED AND RESTATED AGREEMENT is effective as of the 31st day of
December, 1998 ("Effective Date"), by and between Performance Engineering
Corporation, a Virginia corporation ("PEC"), and each individual employee who
has executed a counterpart of this Agreement ("Employee").

WITNESSETH:

WHEREAS, Employee is a member of a select group of management or highly
compensated employees of PEC; and

WHEREAS, PEC recognizes the valuable services heretofore performed for
it by Employee and wishes to encourage continued employment; and

WHEREAS, the parties desire to specify the terms and conditions under
which the Employee may defer a portion of compensation otherwise payable to him
or her and under which PEC shall pay such deferred compensation to the Employee
or designated beneficiary; and

WHEREAS, the parties intend that the deferred compensation arrangement
created by this Agreement shall be unfunded for federal income tax purposes and
for purposes of the Employee Retirement Income Act of 1974, as amended;

NOW, THEREFORE, in consideration of the mutual premises and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

1. DEFERRED COMPENSATION. Commencing on the Effective Date and for each
calendar year thereafter that this Agreement is in effect and continuing through
the date on which the Employee's employment terminates, PEC shall irrevocably
accrue as deferred compensation on the Employee's behalf an amount equal to the
Employee's Deferral Percentage of any compensation otherwise payable to the
Employee. The accrued deferred compensation shall be credited to the Employee's
Deferred Compensation Account in accordance with Section 4 herein.

2. EMPLOYEE'S DEFERRAL PERCENTAGE. The Employee's Deferral Percentage
shall be that percentage of all regular salary payments payable to the Employee
during the calendar year, up to a maximum percentage, such that the annual
amount to be deferred by the Employee under this Agreement plus the Employee's
401(k) plan annual deferral amount, if any, does not exceed 15%, and that
percentage of any bonus that PEC may award to the Employee during or for any
calendar year, up to a maximum of 100%, which the Employee elects to defer in
accordance with the provisions of this Agreement. In no event shall the actual
amount of regular salary payments deferred by the Employee under this Agreement
plus the Employee's 401(k) plan annual deferral amount exceed 15% of the
Employee's annual salary.

<PAGE>

The Employee's Deferral Percentage shall be elected by the Employee by
written notice filed by said Employee with the payroll department of PEC in
substantially the form attached hereto as Exhibit A, specifying the percentage
of salary payments and/or bonus to be deferred. The Employee's Deferral
Percentage may be changed from time to time by the Employee only by written
notice.

3. PEC VOLUNTARY CONTRIBUTION. PEC may, in its sole and arbitrary
discretion, credit such additional amounts, referred to as a PEC Voluntary
Contribution, to the Employee's Deferred Compensation Account in accordance with
Section 4 herein. Any PEC Voluntary Contribution shall be irrevocable and be
deemed vested for purposes of this Agreement only five (5) years after the date
such PEC Voluntary Contribution is credited by PEC to the Employee's Deferred
Contribution Account.

4. DEFERRED COMPENSATION ACCOUNT. PEC shall maintain on its books a
Deferred Compensation Account in the name of the Employee to which any deferred
amounts under Section 1 and Section 3 shall be credited. PEC shall maintain book
entries to distinguish between the Employee Deferral Percentage and the PEC
Voluntary Contribution, if any, of the Employee's Deferred Compensation Account.
The Deferred Compensation Account shall remain the property of PEC subject to
the claims of its general creditors. The Employee shall have no rights to such
Deferred Compensation Account other than those of a general creditor of PEC.

Any portion of the Employee's Deferred Compensation Account may be
invested by PEC as it may deem appropriate. To the extent the Deferred
Compensation Account is invested in stocks, bonds, mutual funds, money market or
similar accounts, the Deferred Compensation Account shall be credited with the
gains and losses from such investment.

5. RETIREMENT BENEFIT.

(a) PEC shall pay the Employee the Employee's entire Deferred
Compensation Account, at the request of Employee, upon the retirement of the
Employee from employment with PEC upon reaching age sixty-five (65). Such amount
shall be paid in three (3) equal annual payments, as adjusted to reflect
investment gains and losses during the payout period, with the first annual
payment payable within thirty (30) days of the Employee reaching age sixty-five
(65).

(b) The Employee shall have the option, upon attaining age
sixty-five (65), to elect to receive the entire Deferred Compensation Account,
notwithstanding continued employment with PEC after reaching age sixty-five
(65). Employee's election to receive the Deferred Compensation Account
notwithstanding continued employment must be made in writing at least thirty
(30) days prior to Employee reaching age sixty-five (65). Such amount, if
elected, shall be paid in three (3) equal annual payments, as adjusted to
reflect investment gains and losses during the payout period, with the first
annual payment payable within thirty (30) days of the employee reaching age
sixty-five (65). Any such election under this subsection shall be irrevocable
and shall result in the termination of Employee's right to any further deferrals
or PEC voluntary contributions hereunder.

<PAGE>

(c) The Employee shall have the option, upon attaining age
fifty-five (55), to elect to receive the Employee's entire Deferred Compensation
Account on the strict condition that said Employee completely retires from PEC
and agrees, in writing, not to engage, for a period of five (5) years, directly
or indirectly, individually or as an employee, partner, officer, director,
stockholder (other than a Stockholder holding less than a five percent (5%)
interest in stock of any corporation), advisor, consultant or in any other
capacity whatsoever of or to any person, firm, partnership, corporation or other
business which develops or markets products or services similar to those
developed or marketed by PEC at any time during the twelve (12) months
proceeding the Employee's early retirement, in any place or jurisdiction which
PEC developed or marketed its products or services during the twelve (12) months
proceeding the Employee's early retirement. If elected, such amount shall be
paid in three (3) equal annual payments, as adjusted to reflect investment gains
and losses during the payout period, with the first annual payment payable
within thirty (30) days of the employee reaching age fifty-five (55).

6. HARDSHIP WITHDRAWALS. Withdrawal of all or part of the Deferred
Compensation Account may be permitted by PEC at the written request of the
Employee upon the occurrence of an unforeseeable emergency. An unforeseeable
emergency is strictly defined as an unanticipated event beyond the Employee's
control that would cause severe financial hardship to the Employee if early
withdrawal were not permitted. In no event shall any early hardship withdrawal
exceed the amount necessary to enable the Employee to meet the unforeseeable
emergency.

7. DISABILITY RETIREMENT. Notwithstanding any other provision hereof,
the Employee shall be entitled to receive the entire Deferred Compensation
Account prior to retirement in the event that the Employee is determined to be
totally disabled due to ill health or accident by a duly licensed physician
selected by PEC. The term "totally disabled" shall be defined by the terms of
the long-term disability policy then in effect by PEC for the benefit of
Employee. The Employee's entire Deferred Compensation Account shall be payable
in three (3) equal annual payments, as adjusted to reflect investment gains and
losses during the payout period, with the first annual payment payable within
thirty (30) days of the date of the physician's disability determination.

8. DEATH BENEFIT. Notwithstanding any other provision herein, the
Employee's designated beneficiary shall be entitled to receive the entire
Deferred Compensation Account upon the death of the Employee. The Employee's
entire Deferred Compensation Account shall be payable in three (3) equal annual
payments, as adjusted to reflect investment gains and losses during the payout
period, with the first annual payment payable within thirty (30) days of the
date of death of the Employee.

9. TERMINATION BENEFIT. In the event of the Employee's termination of
employment with PEC other than retirement, disability, as defined hereinabove,
or death, PEC shall pay to the Employee, as compensation for services rendered
prior to such termination, that portion of Employee's Deferred Compensation
Account equal only to Employee's Deferral Percentage and the vested portion only
of any PEC Voluntary Contribution. Such amount shall be paid within thirty (30)
days of the Employee's termination of employment.

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<PAGE>

10. OFFSET FOR OBLIGATIONS TO CORPORATION. If, at such time as the
Employee becomes entitled to benefit payments hereunder, the Employee has any
debt, obligation or other liability representing an amount owing to the
Corporation or an Affiliate of the Corporation, and if such debt, obligation or
other liability is due and owing at the time benefit payments are payable
hereunder, the Corporation may offset the amount owing it or an Affiliate
against the amount of benefits otherwise distributable hereunder.

11. BENEFICIARY DESIGNATION. The Employee shall have the right, at any
time, to submit in substantially the form attached hereto as Exhibit B, a
written designation of primary and secondary beneficiaries to whom payment under
this Agreement shall be made in the event of death prior to complete
distribution of the benefits due and payable under the Agreement. Each
beneficiary designation shall become effective only when receipt thereof is
acknowledged in writing by the Corporation.

12. NO CONTRACT OF EMPLOYMENT. Nothing contained herein shall be
construed to be a contract of employment for any term of years, nor as
conferring upon the Employee the right to continue to be employed by the
Corporation in his present capacity, or in any capacity. It is expressly
understood by the parties hereto that this Agreement relates to the payment of
deferred compensation of the Employee's services, payable after termination of
employment with the Corporation and is not intended to be an employment
contract.

13. OTHER BENEFITS. Any payments under this Agreement shall be
independent of, and in addition to, those under any other plan, program or
agreement which may be in effect between PEC and the Employee, or any other
compensation payable to the Employee or any of the Employee's beneficiaries.

14. BENEFITS NOT TRANSFERABLE. Neither the Employee, designated
beneficiary nor any other beneficiary under this Agreement shall have any power
or right to transfer, assign, anticipate, hypothecate or otherwise encumber any
part of all of the amounts payable hereunder. No such amounts shall be subject
to seizure by any creditor of any such beneficiary, by a proceeding at law or in
equity, nor shall such amounts be transferable to operation of law in the event
of bankruptcy, insolvency or death of the Employee, designated beneficiary, or
any other beneficiary hereunder. Any such attempted assignment or transfer shall
be void.

15. AMENDMENT. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto or their respective
successors, and may not be otherwise terminated except as provided herein.

16. INUREMENT. This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns, and the Employee,
successors, heirs, executors, administrators and beneficiaries.

17. NOTICE. Any notice, consent or demand required or permitted to be
given under the

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<PAGE>

provisions of this Agreement shall be in writing and shall be signed by the
party giving or making the same. If such notice, consent or demand is mailed to
a party hereto, it shall be sent by United States certified mail, postage
prepaid, addressed to such party's last known address as shown on the records of
the Corporation. The date of such mailing shall be deemed the date of notice,
consent or demand. Either party may change the address to which notice is to be
sent by giving notice of the change of address in the manner aforesaid.

18. GOVERNING LAW. This Agreement, and the rights of the parties
hereunder, shall be governed and construed in accordance with the laws of the
Commonwealth of Virginia.

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

PERFORMANCE ENGINEERING CORPORATION

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

EMPLOYEE:

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

<PAGE>

EXHIBIT 10.12

PEC SOLUTIONS
EMPLOYEE STOCK PURCHASE PLAN

The PEC Solutions Employee Stock Purchase Plan (the "PLAN") provides
eligible employees of PEC Solutions, Inc., a Delaware corporation (the
"COMPANY"), and certain of its subsidiaries with opportunities to purchase
shares of the Company's Common Stock, $0.01 par value per share (the "COMMON
STOCK"). The Plan is intended to benefit the Company by increasing the
employees' interest in the Company's growth and success and encouraging
employees to remain in the employ of the Company or its participating
subsidiaries. The Plan is intended to constitute an "employee stock purchase
plan" within the meaning of section 423 of the Internal Revenue Code of 1986, as
amended (the "CODE"), and shall be so applied and interpreted.

1. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in
Section 13, the aggregate number of shares of Common Stock that may be made
available for purchase under the Plan is 1,000,000 shares. The shares purchased
under the Plan may, in the discretion of the Board of Directors of the Company
(the "BOARD"), be authorized but unissued shares of Common Stock, shares
purchased on the open market, or shares from any other proper source.

2. ADMINISTRATION. The Plan is administered by the Board or by a
committee appointed by the Board (the "ADMINISTRATOR"). The Administrator has
authority to interpret the Plan, to make, amend and rescind all rules and
regulations for the administration and operation of the Plan, and to make all
other determinations necessary or desirable in administering and operating the
Plan. All actions taken and decisions and determinations made by the
Administrator pursuant to the powers vested in the Administrator under this Plan
shall be in the Administrator's sole and absolute discretion and shall be
conclusive and binding on all parties concerned. No member of the Administrator
shall be liable for any action or determination made in good faith with respect
to the Plan.

3. ELIGIBILITY. All employees of the Company, including directors who
are employees, and all employees of any subsidiary of the Company (as defined in
Code section 424(f)), now or hereafter existing, that is designated by the
Administrator from time to time as a participating employer under the Plan
("DESIGNATED SUBSIDIARY"), are eligible to participate in the Plan, subject to
such further eligibility requirements as may be specified by the Administrator
consistent with Code section 423.

4. OPTIONS TO PURCHASE COMMON STOCK.

(a) Options ("OPTIONS") are granted pursuant to the Plan to each
eligible employee on the first day on which the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system is open for trading
("TRADING DAY") on or after January 1 of each year commencing on or after the
Effective Date (as defined in Section 18), or such other date coincident with or
after the Effective Date as specified by the Administrator. Each Option
terminates on the last Trading Day of a period specified by the Administrator
(each period, an "OPTION PERIOD"). No Option Period may be longer than 27
months. Unless the Administrator determines otherwise, subsequent Option Periods
of equal duration will follow consecutively thereafter, each commencing on the
first Trading Day after the expiration of the preceding Option Period.

(b) An individual must be employed as an eligible employee by the
Company or a Designated Subsidiary on the first Trading Day of an Option Period
in order to be granted an Option for that Option Period. However, the
Administrator may designate any subsequent Trading Day(s (each

<PAGE>

such designated Trading Day referred to herein as an "INTERIM TRADING DAY") in
an Option Period upon which Options will be granted to eligible employees who
first commence employment with, or first become eligible employees of, the
Company or a Designated Subsidiary after the first Trading Day of the Option
Period. In such event, the Interim Trading Day shall constitute the first
Trading Day of the Option Period for all Options granted on such day for all
purposes under the Plan.

(c) Each Option represents a right to purchase, on the last Trading Day
of the Option Period or one or more Trading Days within the Option Period
designated by the Administrator (each, including the last Trading Day of the
Option Period, a "PURCHASE DATE"), at the Purchase Price hereinafter provided
for, whole shares of Common Stock up to such maximum number of shares specified
by the Administrator on or before the first day of the Option Period. All
eligible employees granted Options under the Plan for an Option Period shall
have the same rights and privileges with respect to such Options. The purchase
price of each share of Common Stock (the "PURCHASE PRICE") subject to an Option
will be determined by the Administrator, in its discretion, on or before the
beginning of the Option Period; provided, however, that the Purchase Price for
an Option with respect to any Option Period shall never be less than the lesser
of 85 percent of the Fair Market Value of the Common Stock on the (i) first
Trading Day of the Option Period or (ii) the Purchase Date, and shall never be
less than the par value of the Common Stock.

(d) For purposes of the Plan, "FAIR MARKET VALUE" on a Trading Day
means the average of the high and low sale prices per share of Common Stock as
reflected on the principal consolidated transaction reporting system for
securities listed on any national securities exchange or other market quotation
system on which the Common Stock may be principally listed or quoted or, if
there are no transactions on a Trading Day, then such average for the preceding
Trading Day upon which transactions occurred. However, for the Trading Day that
occurs on the date of the initial public offering of the Common Stock, "Fair
Market Value" shall mean the initial offering price of the Common Stock to the
public as indicated in the Company's final prospectus in connection with such
offering and as such price is negotiated between the Company and the managing
underwriters.

(e) No employee shall be granted an Option under this Plan if such
employee, immediately after the Option would otherwise be granted, would own 5%
or more of the total combined voting power or value of the stock of the Company
or any subsidiary. For purposes of the preceding sentence, the attribution rules
of Code section 424(d) will apply in determining the stock ownership of an
employee, and all stock which the employee has a contractual right to purchase
will be treated as stock owned by the employee.

(f) No employee may be granted an Option which permits his rights to
purchase Common Stock under this Plan and all other stock purchase plans of the
Company and its subsidiaries to accrue at a rate which exceeds $25,000 of the
fair market value of such Common Stock (determined at the time such Option is
granted) for each calendar year in which the Option is outstanding at any time,
as required by Code section 423.

5. PAYROLL DEDUCTIONS AND CASH CONTRIBUTIONS.

To facilitate payment of the Purchase Price of Options, the
Administrator, in its discretion, may permit eligible employees to authorize
payroll deductions to be made on each payday during the Option Period, and/or to
contribute cash or cash-equivalents to the Company, up to a maximum amount
determined by the Administrator. The Company will maintain bookkeeping accounts
for all employees who authorize payroll deduction or make cash contributions.
Interest will not be paid on any employee

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<PAGE>

accounts, unless the Administrator determines otherwise. The Administrator shall
establish rules and procedures, in its discretion, from time to time regarding
elections to authorize payroll deductions, changes in such elections, timing and
manner of cash contributions, and withdrawals from employee accounts. Amounts
credited to employee accounts as of the Purchase Date will be applied to the
payment of the Purchase Price of outstanding Options pursuant to Section 6
below.

6. EXERCISE OF OPTIONS; PURCHASE OF COMMON STOCK. Options shall be
exercised on the close of business on the Purchase Date. In accordance with
rules established by the Administrator, the Purchase Price of Common Stock
subject to an option shall be paid (i) from funds credited to an eligible
employee's account, (ii) by a broker-assisted cashless exercise in accordance
with Regulation T of the Board of Governors of the Federal Reserve System, or
(iii) by such other method as the Administrator shall determine from time to
time. Options shall be exercised only to the extent the Purchase Price is paid
with respect to whole shares of Common Stock. Any balance remaining in an
employee's account on the Purchase Date after such purchase of Common Stock will
be carried forward automatically into the employee's account for the next
Purchase Date, unless the employee is not an eligible employee with respect to
the next Purchase Date, in which case such amount will be promptly refunded.

7. ISSUANCE OF CERTIFICATES. As soon as practicable following each
Purchase Date, certificates representing shares of Common Stock purchased under
the Plan will be issued only in the name of the employee, in the name of the
employee and another person of legal age as joint tenants with rights of
survivorship, or (in the Administrator's sole discretion) in the street name of
a brokerage firm, bank or other nominee holder designated by the employee or the
Administrator.

8. RIGHTS ON RETIREMENT, DEATH, TERMINATION OF EMPLOYMENT, OR
TERMINATION OF STATUS AS ELIGIBLE EMPLOYEE. In the event of an employee's
termination of employment or termination of status as an eligible employee prior
to the Purchase Date (whether as a result of the employee's voluntary or
involuntary termination, retirement, death or otherwise), any outstanding Option
granted to him will immediately terminate, no further payroll deduction will be
taken from any pay due and owing to the employee and the balance in the
employee's account will be paid to the employee or, in the event of the
employee's death, (a) to the executor or administrator of the employee's estate
or (b) if no such executor or administrator has been appointed to the knowledge
of the Administrator, to such other person(s) as the Administrator may, in its
discretion, designate. If, prior to the Purchase Date, the Designated Subsidiary
by which an employee is employed will cease to be a subsidiary of the Company,
or if the employee is transferred to a subsidiary of the Company that is not a
Designated Subsidiary, the employee will be deemed to have terminated employment
for the purposes of this Plan.

9. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an Option to an
employee nor the deductions from his pay will constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.

10. OPTIONS NOT TRANSFERABLE. Options under this Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during the employee's lifetime
only by the employee.

11. WITHHOLDING OF TAXES. To the extent that a participating employee
realizes ordinary income in connection with the purchase, sale or other transfer
of any shares of Common Stock purchased under the Plan or the crediting of
interest to the employee's account, the Company may withhold amounts needed to
cover such taxes from any payments otherwise due and owing to the participating
employee or from shares that would otherwise be issued to the participating
employee hereunder. Any participating

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<PAGE>

employee who sells or otherwise transfers shares purchased under the Plan must,
within 30 days of such sale or transfer, notify the Company in writing of the
sale or transfer.

12. APPLICATION OF FUNDS. All funds received or held by the Company
under the Plan may be used for any corporate purpose until applied to the
purchase of Common Stock and/or refunded to participating employees and can be
commingled with other general corporate funds. Participating employees' accounts
will not be segregated.

13. EFFECT OF CHANGES IN CAPITALIZATION.

(a) CHANGES IN STOCK. If the number of outstanding shares of Common
Stock is increased or decreased or the shares of Common Stock are changed into
or exchanged for a different number or kind of shares or other securities of the
Company by reason of any recapitalization, reclassification, stock split,
reverse split, combination of shares, exchange of shares, stock dividend, or
other distribution payable in capital stock, or other increase or decrease in
such shares effected without receipt of consideration by the Company occurring
after the Effective Date of the Plan, the number and kind of shares that may be
purchased under the Plan shall be adjusted proportionately and accordingly by
the Company. In addition, the number and kind of shares for which Options are
outstanding shall be similarly adjusted so that the proportionate interest, if
any, of a participating employee immediately following such event shall, to the
extent practicable, be the same as immediately prior to such event. Any such
adjustment in outstanding Options shall not change the aggregate Purchase Price
payable by a participating employee with respect to shares subject to such
Options, but shall include a corresponding proportionate adjustment in the
Purchase Price per share.

(b) REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING COMPANY.
Subject to Subsection (c) of this Section 13, if the Company shall be the
surviving corporation in any reorganization, merger or consolidation of the
Company with one or more other corporations, all outstanding Options under the
Plan shall pertain to and apply to the securities to which a holder of the
number of shares of Common Stock subject to such Options would have been
entitled immediately following such reorganization, merger or consolidation,
with a corresponding proportionate adjustment of the Purchase Price per share so
that the aggregate Purchase Price thereafter shall be the same as the aggregate
Purchase Price of the shares subject to such Options immediately prior to such
reorganization, merger or consolidation.

(c) REORGANIZATION IN WHICH THE COMPANY IS NOT THE SURVIVING COMPANY OR
SALE OF ASSETS OR STOCK. Upon any dissolution or liquidation of the Company, or
upon a merger, consolidation or reorganization of the Company with one or more
other corporations in which the Company is not the surviving corporation, or
upon a sale of all or substantially all of the assets of the Company to another
corporation, or upon any transaction (including, without limitation, a merger or
reorganization in which the Company is the surviving corporation) approved by
the Board that results in any person or entity owning more than 50 percent of
the combined voting power of all classes of stock of the Company, the Plan and
all Options outstanding hereunder shall terminate, except to the extent
provision is made in writing in connection with such transaction for the
continuation of the Plan and/or the assumption of the Options theretofore
granted, or for the substitution for such Options of new Options covering the
stock of a successor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kinds of shares and exercise
prices, in which event the Plan and Options theretofore granted shall continue
in the manner and under the terms so provided. In the event of any such
termination of the Plan, the Option Period shall be deemed to have ended on the
last Trading Day prior to such termination, and, unless the Administrator
determines otherwise in its discretion, each participating employee shall have
the

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<PAGE>

ability to choose either to (i) have all monies then credited to such employee's
account (including interest, to the extent any has accrued) returned to such
participating employee or (ii) exercise his Options in accordance with Section 6
on such last Trading Day; provided, however, that if a participating employee
does not exercise his right of choice, his Options shall be deemed to have been
automatically exercised in accordance with Section 6 on such last Trading Day.
The Administrator shall send written notice of an event that will result in such
a termination to all participating employees not later than the time at which
the Company gives notice thereof to its stockholders.

(d) ADJUSTMENTS. Adjustments under this Section 13 related to stock or
securities of the Company shall be made by the Committee, whose determination in
that respect shall be final, binding, and conclusive.

(e) NO LIMITATIONS ON COMPANY. The grant of an Option pursuant to the
Plan shall not affect or limit in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge, consolidate, dissolve or liquidate, or to
sell or transfer all or any part of its business or assets.

14. AMENDMENT OF THE PLAN. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the stockholders of the Company is required by Code section
423, such amendment will not be effected without such approval, and (b) in no
event may any amendment be made which would cause the Plan to fail to comply
with Code section 423 unless expressly so provided by the Board.

15. INSUFFICIENT SHARES. In the event that the total number of shares
of Common Stock specified in elections to be purchased under any Option plus the
number of shares purchased under all Options previously granted under this Plan
exceeds the maximum number of shares issuable under this Plan, the Administrator
will allot the shares then available on a pro rata basis. Any funds then
remaining in a participating employee's account after purchase of the employee's
pro-rata number of shares will be refunded.

16. TERMINATION OF THE PLAN. This Plan may be terminated at any time by
the Board. Except as otherwise provided in Section 13(c) hereof, upon
termination of this Plan all outstanding Options shall immediately terminate and
amounts in the employees' accounts will be promptly refunded.

17. GOVERNMENTAL REGULATIONS.

(a) The Company's obligation to sell and deliver Common Stock under
this Plan is subject to listing on a national stock exchange or quotation on
Nasdaq and the approval of all governmental authorities required in connection
with the authorization, issuance or sale of such stock.

(b) The Plan will be governed by the laws of the State of Delaware,
without regard to the conflict of laws principles thereof, except to the extent
that such law is preempted by federal law.

18. EFFECTIVE DATE. The Plan is effective as of January 1, 2000 (the
"EFFECTIVE DATE"), subject to the approval of the stockholders of the Company
within 12 months of the Effective Date.

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<PAGE>

Exhibit 10.13

NATIONSBANK, N.A.

AMENDED AND RESTATED LOAN AGREEMENT

This Loan Agreement (the "Agreement") dated as of April 30, 1999, by and between
NationsBank, N.A. (the "Bank") and the Borrower described below:

RECITALS
A. The Borrower and the Bank entered into a Loan Agreement (the Original
Agreement) dated April 30, 1995.

B. The Borrower and the Bank entered into a First Amendment to Loan Agreement
("First Amendment") dated April 30, 1996 to extend the maturity,, and
modify certain covenants.

C. The Borrower and the Bank entered into a Second Amendment to Loan
Agreement ("First Amendment") dated April 30, 1997 to extend the maturity,
and modify, certain covenants.

D. The Borrower and the Bank now wish to further amend the Original Agreement
to modify certain covenants, increase the amount of the credit facility
and for certain other matters, as set forth in this Agreement.

In consideration of the Loan or Loans described below and the mutual
covenants and agreements contained herein, and intending to be legally,
bound hereby, Bank and Borrower agree as follows:

1. DEFINITIONS AND REFERENCE TERMS. In addition to any other terms defined
herein, the following terms shall have the meaning set forth with respect
thereto:

A. BORROWER. Performance Engineering Corporation

B. BORROWER'S ADDRESS: 3949 Pender Drive
Suite 300 Fairfax,
Virginia 22030

C. HAZARDOUS MATERIALS. Hazardous Materials include all materials
defined as hazardous wastes or substances under any local, state or federal
environmental laws, rules or regulations. and petroleum, petroleum products, oil
and asbestos.

D. LOAN(S). Loan(s) means collectively any and all loans heretofore
or hereafter made by Bank to the Borrower.

E. LOAN DOCUMENTS. Loan Documents means this Agreement and any and
all promissory notes executed by Borrower in favor of Bank and all other
documents, instruments, guarantees, certificates and agreements executed and/or
delivered by Borrower, any guarantor or third party in connection with any Loan.

<PAGE>

F. NET INCOME. Net profit after tax excluding all gains on the sale
of assets, and any other extraordinary gains.

G. TANGIBLE NET WORTH. Tangible Net Worth means the amount by which
total assets exceed total liabilities in accordance with GAAP, less accounts
receivable from affiliates, any surplus resulting from any write up of assets;
goodwill, patents, trademarks, services marks. trade names and copyrights; other
intangible assets, leasehold improvements; investments in non-marketable
securities or affiliated companies, capitalized development costs; and
capitalized expenses.

H. ACCOUNTING TERMS. All accounting terms not specifically defined
or specified herein hall have the meanings generally attributed to such terms
under generally accepted accounting principles ("GAAP"), as in effect from time
to time, consistently applied, with respect to the financial statements
referenced in Section 3.H. hereof.

2. LOANS.

A. LOAN. Bank hereby agrees to make (or has made) a loan or loans to
Borrower in the aggregate principal amount of $2,700,000.00. The obligation to
repay the loan is evidenced by a promissory note or notes dated April 30, 1999
(the promissory, note or notes together with any other promissory notes
heretofore or hereafter executed by Borrower in favor of Bank and any and all
renewals, extensions or rearrangements thereof being hereafter collectively
referred to as the "Note") having a maturity date, repayment terms and interest
rate as set forth in the Note.

B. REVOLVING CREDIT FEATURE. The Loan provides for a revolving line of
credit (the "Line") under which Borrower may from time to time, borrow, repay
and re-borrow funds.

C. LETTER OF CREDIT SUBFEATURE. As a subfeature under the Line, the
Bank may from time to time up to and including April 30, 2001. issue letters of
credit for the account of Borrower (each, a "Letter of Credit" and collectively,
"Letters of Credit"); provided, however that the form and substance of each
Letter of Credit shall be subject to approval by Bank in its sole discretion;
and provided further that the aggregate undrawn amount of all outstanding
Letters of Credit shall not at any time exceed $1,400,000.00. Each Letter of
Credit shall be issued for a term not to exceed 365 days, provided that no
Letter of Credit shall have an expiration date subsequent to April 30, 2001,
unless the Letter of Credit is secured by Borrower's cash. The undrawn amount of
all Letters of Credit plus any and all amounts paid by Bank in connection with
drawings under any Letter of Credit for which the Bank has not been reimbursed
shall be reserved under the Line and shall not be available for advances
thereunder. Each draft paid by Bank under a Letter of Credit shall be deemed an
advance under the Line and shall be repaid 'In accordance with the terms of the
Line; provided however that if the Line is not available for any reason
whatsoever, at the time any draft is paid by the Bank, or if advances are not
available under the Line in any such amount due to any limitation of borrowing
set forth herein, then the full amount of such drafts shall be immediately due
and payable, together with interest thereon, from the date such amount is paid
by Bank to the date such amount is fully repaid by Borrower, at that rate of
interest applicable to advances under the Line. In such event, Borrower agrees
that Bank, at Bank's sole discretion may debit Borrower's deposit account with
Bank for the amount of such draft. For each Letter of Credit issued on behalf of
the Borrower under this subfeature, the Borrower shall pay a fee of 1.5% of the
face amount of the Letter of Credit per annum, with a minimum fee of $300.00.
Letters of Credit shall automatically renew for a period of one year upon
maturity unless otherwise specified in advance, with a renewal fee of 1.0%
payable upon renewal, unless the Borrower gives notice 60 days prior to
maturity, of their intent to let the Letter of Credit expire, or if the maturity
of the Loan is less than one year hence.

D. ADVANCES. Whenever the Borrower desires that the Bank make an
advance under the Line, the Borrower shall provide a notice to the Bank setting
forth (a) the date, which shall be a Business Day, on which such advance shall
be made and (b) the total principal amount of the advance (the "Standard
Notice"). If Standard Notice is provided, no later than 10:00 a.m., Eastern
Standard Time, on the date specified in such Standard Notice, the Bank will make
available the requested funds by depositing such proceeds in the Borrower's
account No. 7922-5641 maintained at the Bank's office. All advances must be in
minimum amounts of $25,000.00.

<PAGE>

E. INTEREST RATE. The interest rate will float at the option of the
Borrower at the Bank's Prime lending rate, varying as that rate varies from time
to time or the London Inter-Bank Offered Rate plus 250 basis points. Interest
shall be charged and calculated on a 360 day year factor applied to actual days,
and shall be payable monthly. The "PRIME" rate is a reference used by the Bank
in determining interest rates on certain loans and is not intended to be the
lowest rate of interest charged on any extension of credit to any customer.

F. COMMITMENT FEE. Borrower wi11 pay hereafter on July, 31, 1999 and
continuing on the last day of each successive quarter for the periods from and
including the date the Line was established to and including the maturity date
of the Line, a $5,000.00 fee per annum, payable in quarterly payments of
$1,250.00 per quarter.

3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants
to Bank as follows:

A. GOOD STANDING. Borrower is a corporation, duly organized, validly
existing and in good standing under the laws of Virginia and has the power and
authority to own its property and to carry on its business in each jurisdiction
in which Borrower does business.

B. AUTHORITY AND COMPLIANCE. Borrower has full power and authority, to
execute and deliver the Loan Documents and to incur and perform the obligations
provided for therein, all of which have been duly authorized by all proper and
necessary action of the appropriate governing body of Borrower. No consent or
approval of any public authority or other third party is required as a condition
to the validity of any Loan Document, and Borrower is in compliance with all
laws and regulatory requirements to which it is subject.

C. BINDING AGREEMENT. This Agreement and the other Loan Documents
executed by Borrower constitute valid and legallv binding obligations of
Borrower, enforceable in accordance with their terms.

D. LITIGATION. There is no proceeding involving Borrower pending or, to
the knowledge of Borrower, threatened before any court or governmental
authority, agency or arbitration authority, except as disclosed to Bank in
writing and acknowledged by Bank prior to the date of this Agreement.

E. NO CONFLICTING AGREEMENTS. There is no charter, bylaw, stock
provision, partnership agreement or other document pertaining to the
organization. power or authority of Borrower and no provision of any existing
agreement, mortgage, indenture or contract binding on Borrower or affecting its
property, which would conflict with or in any way prevent the execution,
delivery or carrying out of the terms of this Agreement and the other Loan
Documents. F. OWNERSHIP OF ASSETS. Borrower has good title to its assets, and
its assets are free and clear of Liens, except those granted to Bank and as
disclosed to Bank in writing prior to the date of this Agreement.

G. TAXES. All taxes and assessments due and payable by Borrower have
been p 'd or are being contested in good faith by appropriate proceedings and
the Borrower has filed all tax returns -which it is required to file.

H. FINANCIAL STATEMENTS. The financial statements of Borrower
heretofore delivered to Bank have been prepared in accordance with GAAP applied
on a consistent basis throughout the period involved and fairly present
Borrower's financial condition as of the date or dates thereof, and there has
been no material adverse change in Borrower's financial condition or operations
since December 31, 1998. To the best of Borrower's knowledge, all factual
information furnished by Borrower to Bank in connection with this Agreement and
the other Loan Documents is and will be accurate and complete on the date as of
which such information is delivered to Bank and is not and will not be
incomplete by the omission of any material fact necessary to make such
information not misleading.

<PAGE>

I. PLACE OF BUSINESS. Borrower's chief executive office is located at

3949 Pender Drive
Suite 300
Fairfax. VA 22030

J. ENVIRONMENTAL MATTERS. ENVIRONMENTAL LAW COMPLIANCE. The conduct of
Borrower's business operations do not and not violate any federal laws, rules or
ordinances for environmental protection, regulations of the Environmental
Protection Agency and any applicable local or state law, rule, regulation or
rule of common law and any judicial interpretation thereof relating primarily to
the environment or Hazardous Materials and Borrower will not use or permit any
other party to use any Hazardous Materials at any of Borrower's places of
business or at any other property owned by Borrower except such materials as are
incidental to Borrower's normal course of business, maintenance and repairs and
which are handled in compliance with all applicable environmental laws. Borrower
agrees to permit Bank, its agents, contractors and employees to enter and
inspect any of Borrower's places of business or any other property of Borrower
at any reasonable times upon three (3) days prior notice for the purposes of
conducting an environmental investigation and audit (including taking physical
samples) to insure that Borrower is complying with this covenant and Borrower
shall reimburse Bank on demand for the costs of any such environmental
investigation and audit. Borrower shall provide Bank, its agents, contractors,
employees and representatives with access to and copies of any and all data and
documents relating to or dealing with any Hazardous Materials used, generated,
manufactured, stored or disposed of by Borrower's business operations within
FIVE (5) days of the request therefore.

K. YEAR 2000 COMPLIANCE. The Borrower has (1) initiated a review and
assessment of all area within its and each of its subsidiaries' business and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or any of its' subsidiaries (or its suppliers
and vendors) may be unable to recognize or perform properlv date-sensitive
functions involving certain dates prior to and any date after December 3 1,
1999), (ii) developed a plan and timetable for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented that plan in accordance ,with
that timetable. The Borrower reasonably believes that all computer applications
(including those of suppliers and vendors) that are material to its or any of
its subsidiaries' business and operations will on a timely basis be able to
perform properly date sensitive functions for all dates before and after January
1. 2000, except to the extent that a failure to do so could not reasonably be
expected to have material adverse effect.

L. CONTINUATION. OF REPRESENTATION AND WARRANTIES. All representations
and warranties made under this Agreement shall be deemed to be made at and as of
the date hereof and at and as of the date of any future advance under any Loan.

4. AFFIRMATIVE COVENANTS. Until full payment and performance of all
obligations of Borrower under the Loan Documents, Borrower will, unless Bank
consents otherwise in writing (and without limiting any requirement of any other
Loan Document):

A. FINANCIAL CONDITION. Maintain Borrower's financial condition as
follows, determined in accordance with GAAP applied on a consistent basis
throughout the period involved except to the extent modified by the following
definitions:

(i) Maintain a ratio of Total Liabilities to Tangible Net Worth of not
more than 2.00 to 1.0. for each fiscal quarter beginning June 30, 1999 and
each quarter thereafter.

(ii) Maintain a ratio of Earnings before Interest Expense and Taxes
divided by Interest Expense of not less than 2.5 to 1.0 calculated for the
twelve month period ending December 31, 1998 and thereafter, measured
annually.

<PAGE>

B. FINANCIAL STATEMENTS AND OTHER INFORMATION. Maintain a system of
accounting satisfactory to Bank and in accordance with GAAP applied on a
consistent basis throughout the period 'Involved, permit Bank's officers or
authorized representatives to visit and inspect Borrower's books of account and
other records at such reasonable times and as often as Bank may desire, and pay
the reasonable fees and disbursements of any accountants or other agents of Bank
selected by Bank for the foregoing purposes. Unless written notice of another
location .is given to Bank, Borrower's books and records will be located at
Borrower's chief executive office set forth above. All financial statements
called for below shall be prepared in form and content acceptable to Bank and by
independent certified public accountants acceptable to Bank.

In addition, Borrower will:

(i). Furnish to Bank AUDITED financial statements of Borrower for each
fiscal year of Borrower, within 90 days after the close of each such fiscal
year.

(ii). Furnish to Bank SELF PREPARED financial statements attested by an
officer of the Borrower (including a balance sheet and profit and loss
statement) for each quarter end of each fiscal year of Borrower, within 45 days
after the close of each such period.

(iii). Furnish to Bank a compliance certificate, "Exhibit A", for (and
executed by an authorized representative of) Borrower, concurrently with and
dated as of the date of delivery of each of the financial statements as required
in paragraphs (i) and (ii) above, containing (a) a certification that the
financial statements of even date are true and correct and that the Borrower is
not in default under the terms of this Agreement, and (b) computations and
conclusions, in such detail as Bank may request, with respect to compliance with
this Agreement, and the other Loan Documents, including computations of all
quantitative covenants.

(iv). Furnish to Bank promptly such additional information, reports and
statements respecting the business operations and financial condition of
Borrower as Bank may reasonably, request, from time to time, including but not
limited to:

A current status report in a form satisfactory to the Bank, including
listing of new contracts or installations added during the period,
including the name of the contracting officer at the agency, each
certified by an officer of the Borrower within 45 days of each fiscal
quarter end.

An aging of all accounts receivable, submitted quarterly within 45 days of
each fiscal quarter end,

C. INSURANCE. Maintain insurance with responsible insurance companies
on such of its properties, in such amounts and against such risks as is
customarily maintained by similar businesses operating in the same vicinity,
specifically to include fire and extended coverage insurance covering all
assets, business interruption insurance, workers compensation insurance and
liability insurance.

D. EXISTENCE AND COMPLIANCE. Maintain its existence, good standing and
qualification to do business, where required and comply with all laws,
regulations and governmental requirements including, without limitation,
environmental laws applicable to it or to any of its property, business
operations and transactions.

E. ADVERSE CONDITIONS OR EVENTS. Promptly advise Bank in writing of (1)
any condition, event or act which comes to Its attention that would or might
materially adversely affect Borrower's financial condition or operations, the
Collateral, or Bank's rights under the Loan Documents, (ii) any litigation in
which the claim against the Borrower assets and property exceed $1,000,000.00.
filed by or against Borrower, (iii) any event that has occurred that would
constitute an event of default under any Loan Documents and (iv) any uninsured
or partially uninsured loss through fire, theft, liability or property damage in
excess of an aggregate of $1,000,000.

F. TAXES AND OTHER OBLIGATIONS. Pay all of its taxes, assessments and
other obligations, including, but not limited to taxes, costs or other expenses
arising out of this transaction, as the same become due and payable, except to
the extent the same are being contested in good faith by appropriate proceedings
in a diligent manner.

<PAGE>

G. MAINTENANCE. Maintain all of its tangible property in good condition
and repair and make all necessary, replacements thereof, and preserve and
maintain all licenses, trademarks, privileges, permits,franchises, certificates
and the like necessary for the operation of its business.

H. NOTIFICATION OF ENVIRONMENTAL CLAIMS. Borrower shall immediately
advise Bank in writing of any and all enforcement, cleanup, remedial, removal,
or other governmental or regulatory actions instituted, completed or threatened
pursuant to any applicable federal, state, or local laws, ordinances or
regulations relating to any Hazardous Materials affecting Borrower's business
operations, and (ii) all claims made or threatened by any third party against
Borrower relating to damages, contribution, cost recovery, compensation, loss or
Injury resulting from any Hazardous Materials. Borrower shall immediatelv notify
Bank of any remedial action taken by Borrower with respect to Borrower's
business operations.

5. NEGATIVE COVENANTS. Until full payment and performance of all
obligations of Borrower under the Loan Documents. Borrower will not, without the
prior written consent of Bank (and without limiting any requirement of any other
Loan Documents):

A. TRANSFER OF ASSETS OR CONTROL. Sell, lease, assign or otherwise
dispose of or transfer any assets, except in the normal course of its business,
or enter into any merger or consolidation, or transfer control or ownership of
the Borrower or from or acquire any subsidiary.

B. LIENS. Grant, suffer or permit any contractual or noncontractual
lien on or security interest in its assets, except in favor of Bank, or purchase
money obligations, in excess of $500,000.00, for capital expenditures or fail to
promptly pay when due all lawful claims, whether for labor, materials or
otherwise,

C. ADVANCES. Make any advances, except in the ordinary course of
business, to any individual, partnership, corporation or other entity.

D. BORROWINGS. Create, incur, assume or become liable in any manner for
any indebtedness (for borrowed money, deferred payment for the purchase of
assets, lease payments, as surety or guarantor for the debt for another, or
otherwise) other than to Bank, in excess of $500,000.00, except for normal trade
debts incurred in the ordinary course of Borrower's business, and except for
existing indebtedness disclosed to Bank in writing and acknowledged by Bank
prior to the date of this Agreement.

E. PURCHASE OF CAPITAL STOCK. Purchase, redeem or retire any of its
capital stock in excess of $500.000 in the aggregate per annum, or make any
other distribution of property in respect of the Borrower's stock.

F. LOANS. Make any loan to any person, firm or corporation or to their
employees, officers, directors. or stockholders in excess of $25O,000.00 in the
aggregate.

G. GUARANTEES AND ENDORSEMENTS. Assume, guarantee, endorse, lease, or
otherwise become liable on the obligations of any person. firm, or corporation:
except by endorsement, for the purpose of discount or collection. of notes or
other instruments received by the Borrower from customers in the ordinary course
of its business.

H. PLEDGES. Pledge, mortgage, encumber, lease, or sell any of its
assets except in the ordinary course of business and for permitted fixed assets
purchases and leases not to exceed $500,000.00.

I. MERGER AND CONSOLIDATIONS. Be party to any acquisition, merger or
consolidation, or sell or transfer all, or substantially all, their property, to
any person, firm or corporation.

J. CHARACTER OF BUSINESS. Change the general character of business as
conducted at the date hereof, or engage in any type of business not reasonably
related to its business as presently conducted.

<PAGE>

K. 0WNERSHIP. David Karlgaard, Paul Rice and Alan Harbitter shall not
decrease their ownership percentage below 51 % of issued shares and voting
control in the Company in the aggregate and shall not pledge, assets encumber or
cause to be pledged any such ownership or voting control

L. MANAGEMENT. Change the current management of the Borrower without
prior consent from the Bank.

6. SECURITY DOCUMENTATION. On or before the Closing Date the Bank shall
have received:

(a) duly executed and delivered copies of the guarantees, security
agreement, note and all other required documents.

(b) evidence satisfactory to the Bank of the completion of all
recordings, registrations and filings as may be necessary or in the opinion of
the Bank, desirable to perfect or preserve the security interests created by the
security agreement, including without limitation, copies of proper financing
statements on Form UCC-1 duly filed in all jurisdictions as may be necessary or.
in the opinion of the Bank, desirable to perfect the security interests created
by the security agreement.

7. DEFAULT. Borrower shall be in default under this Agreement and under
each of the other Loan Documents if it shall default in the payment of any
amounts due and owing under the Loans or should it fall to timely and properly
observe, keep or perform any term, covenant, agreement or condition in any Loan
Document or in any other loan agreement, promissory note, security agreement,
deed of trust, deed to secure debt, mortgage, assignment or other contract
securing or evidencing payment of any indebtedness of Borrower to Bank or any
affiliate or subsidiary of Nations Bank Corporation.

8. REMEDIES UPON DEFAULT. If an event of default shall occur Bank shall
have all rights, powers and remedies available under each of the Loan Documents
as well as all rights and remedies available at law or in equity.

9. NOTICES. All notices, requests or demands which any party is required
or may desire to give to any other party under any provision of this Agreement
must be in writing delivered to the other party at the following address:

BORROWER:
Performance Engineering Corporation
David Karlgaard, President
3949 Pender Drive
Suite 300
Fairfax, VA 22030

BANK:
NationsBank, N.A.
Commercial Department - Government Contracts & Technology Banking Group
Elaine Eaton, Senior Vice President
8300 Greensboro Dr. Suite 550
McLean, VA 22102

or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows:

A. If sent by hand delivery, upon delivery,

<PAGE>

B. If sent by mail, upon the earlier of the date of receipt or five (5)
days after deposit in the U.S. Mail, first class postage prepaid.

10. COSTS, EXPENSES AND ATTORNEY'S FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of Bank's in-house counsel if permitted by applicable law), incurred by
Bank in connection with (a) negotiation and preparation of this Agreement and
each of the Loan Documents, and (b) Bank's continued administration and
collection thereof.

11. CONDITIONS OF EACH ADVANCE/CONDITIONS ANTECEDENT. Each time the
Borrower requests an advance under the Revolving Line of Credit, the Borrower
will provide a Borrowing Base Certificate, containing a list of the book
value of the Borrower's eligible accounts receivable, unless the last
Borrowing Base Certificate submitted is less than 30 days old.
Notwithstanding the maximum amount of the Loan, the total of advances
outstanding under the Loan at any time shall not exceed an amount equal to
the sum of 80% of the book value of Borrower's eligible accounts receivable.

12. MISCELLANEOUS. Borrower and Bank further covenant and agree as follows,
without limiting any requirement of any other Loan Document:

A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every right granted to
Bank under any Loan Document, or allowed it by law or equity shall be cumulative
of each other and may be exercised in addition to any and all other rights of
Bank, and no delay in exercising any right shall operate as a waiver thereof,
nor shall any single or partial exercise bv Bank of any right preclude any other
or future exercise thereof or the exercise of any other right. Borrower
expressly ,waives any presentment, demand, protest or other notice of any kind,
including but not limited to notice of intent to accelerate and notice of
acceleration. No notice to or demand on Borrower in any case shall, of itself,
entitle Borrower to any other or future notice or demand in similar or other
circumstances.

B. APPLICABLE LAW. This Loan Agreement and the rights and obligations
of the parties hereunder shall be governed by and interpreted in accordance with
the laws of Virginia and applicable United States federal law.

C. AMENDMENT. No modification, consent, amendment or waiver of any
provision of this Loan Agreement, nor consent to any departure by Borrower
therefrom, shall be effective unless the same shall be in writing and signed by
an officer of Bank, and then shall be effective only in the specified instance
and for the purpose for which given. This Loan Agreement is binding upon
Borrower, its successors and assigns, and inures to the benefit of Bank, its
successors and assigns; however, no assignment or other transfer of Borrower's
rights or obligations hereunder shall be made or be effective without Bank's
prior ,written consent, nor shall it relieve Borrower of any obligations
hereunder. There is no third party beneficiary of this Loan Agreement.

D. DOCUMENTS. All documents, certificates and other items required
under this Loan Agreement to be executed and/or delivered to Bank shall be in
form and content satisfactory to Bank and its counsel.

E. PARTIAL INVALIDITY. The unenforceability or invalidity, of any
provision of this Loan Agreement shall not affect the enforceability or validity
of any other provision herein and the invalidity or unenforceability of any
provision of any Loan Document to any person or circumstance shall not affect
the enforceability or validity, of such provision as it may apply to other
persons or circumstances.

F. INDEMNIFICATION. Borrower shall indemnify, defend and hold Bank and
its successors and assigns harmless from and against any and all claims.
demands, suits. losses, damages, assessments, fines, penalties, costs or other
expenses including reasonable attorneys' fees and court costs) arising from or
in any way related to any of the transactions contemplated hereby, including but
not limited to actual or threatened damage to the environment, agency costs of
investigation, personal injury or death, or property damage, due to a release or
alleged release of Hazardous Materials, arising from Borrower's business
operations, any other property owned by Borrower or in the surface or ground
water arising from Borrower's business operations, or gaseous emissions arising
from Borrower's business operations or any other condition existing or arising
from Borrower's business operations resulting from

<PAGE>

the use or existence of Hazardous Materials, whether such claim proves to be
true or false. Borrower further agrees that its indemnity obligations shall
include, but are not limited to, 1iability for damages resulting from the
personal injury or death of an employee of the Borrower, regardless of whether
the Borrower has paid the employee under the workmen' s compensation laws of any
state or other similar federal or state legislation for the protection of
employees. The term "property damage" as used in this paragraph includes. but is
not limited to, damage to any real or personal property of the Borrower, the
Bank, and of any third parties. The Borrower's obligations under this paragraph
shall survive the repayment of the Loan and any deed in lieu of foreclosure or
foreclosure of any Deed to Secure Debt, Deed of Trust, Security Agreement or
Mortgage securing the Loan.

G. SURVIVABILITY. All covenants, agreements, representations and
warranties made herein or in the other Loan Documents shall survive the making
of the Loan and shall continue in full force and effect so long as the Loan is
outstanding or the obligation of the Bank to make any advances under the Line
shall not have expired.

13.ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON
OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN
ACCORDANCE WITH THE FEDERAL ARBITRATION ACT. (OR IF NOT APPLICABLE, THE
APPLICABLE STATE LAW). THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION
OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC.
(J.A.M.S.) AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES
IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.

(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF
THE BORROWER'S DOMICILE AT THE TIME OF THIS AGREEMENT'S EXECUTION AND
ADMINISTERED BY THE JUDICIAL ARBITRATION & MEDIATION SERVICES ("JAMS") OFFICE,
WHO WILL APPOINT AN ARBITRATOR, IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM
ADMINISTRATING THE ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION
("AAA") WILL SERVE. ALL ARBITRATION WILL BE COMMENCED WITHIN 90 DAYS OF THE
DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL, ONLY UPON A SHOWING OF
CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT PERIOD FOR AN ADDITIONAL 60 DAYS.

(B) RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED TO
(I) LIMIT THE APPLICABILITY OF ANY APPLICABLE STATUTES OF LIMITATION OR REPOSE
OR ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY THE BANK OF
THE PROTECTION AFFORDED TO IT BY 12 U.S.C. 91 OR ANY SUBSTANTIALLY EQUIVALENT
STATE LAW- OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP
REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF. OR (B) TO FORECLOSE AGAINST ANY
REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL
OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF
POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF
HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR
ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. NEITHER THE EXERCISE OF SELF HELP
REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.

<PAGE>

14. NO ORAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.

BORROWER: PERFORMANCE ENGINEERING CORPORATION BANK: NATIONSBANK, N.A.

By: /s/ STUART LLOYD (Seal) By: /s/ ELAINE EATON
--------------- ----------------
Stuart Lloyd Elaine Eaton
Chief Financial Officer Senior Vice President

[Corporate Seal]

If the Borrower is a corporation, the signature should be attested by the
Secretary or Assistant Secretary of the corporation and corporate seal affixed.

Attest: /s/ ALAN HARBITTER (Seal)
------------------
Name: Alan Harbitter
Title: Secretary

<PAGE>

Exhibit A

COMPLIANCE CERTIFICATE

This Compliance Certificate is delivered pursuant to Section 4(B)(iii) of
the Amended and Restated Loan Agreement dated as of April 30, 1999 (together
with all amendments and modifications, if any, from time to time made thereto,
the "Agreement"), between Performance Engineering Corporation (the "Borrower")
and NationsBank, N.A. Unless otherwise defined, terms used herein (including the
attachments hereto) have the meanings provided in the Loan Agreement.

The undersigned, being the duly elected, qualified and acting of the
Borrower, on behalf of the Borrower and solely in hi, or her capacity as an
officer of the Borrower, hereby certifies and warrants that:

1. He or she is the of the Borrower and that,as such, he or
she, is authorized to execute this certificate on behalf of th
Borrower.

2. As of . 19 :

(a) The Borrower was not in default of any of the provisions of the
Loan Agreement during the period as to which this Compliance
Certificate relates,

(b) Borrower's ratio of Total Liabilities to Tangible Net Worth was
to 1.0 as computed on Attachment 1 hereto,

(c) Borrower's Earnings before Interest Expense and Taxes divided by
Interest Expense ratio was to 1.0 as computed on Attachment 1
hereto; and

3. The Borrower's loans to employees for the period ending was $
as computed on Attachment 1 hereto.

4. The Borrower's capital stock repurchases for the period ending
was $ as computed on Attachment 1 hereto.

5. The Borrower's Indebtedness incurred for fixed assets for the
period ending was $ as computed on Attachment 1 hereto.

6. The Borrower's Pledges on fixed assets for the period ending was
$ as computed on Attachment 1 hereto.

IN WITNESS WHEREOF, the undersigned has executed and delivered this
certificate,this day of 19.

PERFORMANCE ENGINEERING CORPORATION

By:

Title:

<PAGE>

ATTACHMENT 1

Period ending

RATIO OF TOTAL LIABILITIES TO TANGIBLE NET WORTH

1. Total Liabilities: $

2. Tangible Net Worth: $

Ratio:Total liabilities to Tangible Net Worth (1/2)= to 1.0 required Ratio: 2.00
to 1.0

Measured quarterly

CASH FLOW COVERAGE RATIO
1. Aggregate of earnings before interest expense and taxes $ . 2.
Interest Expense: $
Ratio 1/2 to 1.0 Required Ratio: 2.5 to 1.0

Measured annually at year-end
LOANS
1. Maximum aggregate loans shall not to exceed $250,000.00.
MAXIMUM YEAR TO DATE

ADDITIONAL INDEBTEDNESS
1. Maximum aggregate debt for fixed assets shall not to exceed $500,000.00.
MAXIMUM YEAR TO DATE $

PLEDGE OF ASSETS
1 .Maximum aggregate pledge against fixed assets not to exceed $500,000.00.
MAXIMUM YEAR TO DATE $

CAPITAL STOCK REPURCHASE
1 .Maximum aggregate annual stock repurchase not to exceed $500,000
MAXIMUM YEAR TO DATE $

<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the use in this registration statement on Form S-1
(File No. ___________) of our report dated January 10, 2000, relating to the
financial statements of PEC Solutions, Inc. as of December 31, 1997 and 1998,
and for the three years in the period ended December 31, 1998. We also
consent to the references to us under the heading "Experts" in such
registration statement.

/s/ PricewaterhouseCoopers LLP

McLean, VA
January 25, 2000

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 7,993,310
<SECURITIES> 0
<RECEIVABLES> 12,531,191
<ALLOWANCES> (74,467)
<INVENTORY> 0
<CURRENT-ASSETS> 21,075,309
<PP&E> 3,599,888
<DEPRECIATION> (2,427,917)
<TOTAL-ASSETS> 22,731,894
<CURRENT-LIABILITIES> 8,937,251
<BONDS> 0
0
0
<COMMON> 85,465
<OTHER-SE> 13,476,983
<TOTAL-LIABILITY-AND-EQUITY> 22,731,894
<SALES> 38,593,092
<TOTAL-REVENUES> 38,593,092
<CGS> 22,068,818
<TOTAL-COSTS> 32,321,527
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,412,663
<INCOME-TAX> 2,437,000
<INCOME-CONTINUING> 3,975,663
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,975,663
<EPS-BASIC> 0.47
<EPS-DILUTED> 0.34

</TABLE>